New Ways of Working

Explore and keep track of key legal and compliance considerations for multinational employers as new ways of working become increasingly embedded as the pandemic begins to recede. Learn more about the response taken in specific countries or build your own report to compare approaches taken around the world.

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17. To what extent have employers been able to make changes to their organisations during the pandemic, including by making redundancies and/or reducing wages and employee benefits?

17. To what extent have employers been able to make changes to their organisations during the pandemic, including by making redundancies and/or reducing wages and employee benefits?

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Argentina

  • at MBB Balado Bevilacqua
  • at MBB Balado Bevilacqua
  • at MBB Balado Bevilacqua

Employers were limited  in making changes to their organisations until 31 December 2021 because since the covid-19 outbreak, terminations without cause, regular terminations, terminations based on a scarcity of work, and suspensions due to force majeure or scarcity of work were forbidden since 31 March 2020. Such measures are not in force anymore, because Decree No. 413/2021expired at the end of 2021. Therefore, since 1 January 2022, employers have the power to dismiss and suspend employees without fair cause.

However,  according to Decree No. 886/2021, the obligation to increase the severance compensation remains in force until 30 June 2022, in cases where an employee is dismissed without fair cause or claims constructive dismissal, according to the parameters mentioned in question. 6.

Last updated on 24/01/2022

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Australia

  • at People + Culture Strategies

Employers are entitled to consider ways their business can be restructured to maximise efficiency, including where this may involve redundancies and changes to how remuneration is structured. This basic right has not changed during the pandemic, and for many Australian employers impacted by covid-19 it has been necessary to consider making such changes to their business to ensure they have the most optimal structure in place to manage the impacts of covid-19 and are best placed to meet the changed economic environment.

However, the pandemic has not seen any “relaxing” of the rules that govern how an employer must go about introducing changes that affect employees. In relation to redundancies, employers must have a genuine business case and are required to consult with employees before making any decision. In relation to reducing employee wages and salaries, employers will still generally need to obtain an employee’s consent before making such changes in the normal manner.

Last updated on 21/09/2021

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Austria

  • at Littler
  • at Littler
  • at Littler

Regarding changes in the organisational structure itself, large employers, in particular, are relying heavily on home offices and are already planning for a time after the pandemic. Desk-sharing models are increasing0 being considered and actively implemented. This is accompanied by a (partial) return of leased property. In the internal organisation, there is a noticeable departure from rigid hierarchies and a shift towards increased network thinking, in which decision-making processes take place jointly using digital work equipment.

The government and legislature have been very careful to minimise layoffs as much as possible and at least to counteract pandemic-related redundancies. This was achieved, on the one hand, through direct support of the economy in the form of aid packages (compensation for loss of sales, subsidies for monthly fixed costs, etc) and, on the other hand, through the widespread use of short-time work, which was largely financed through state aid. The short-time work subsidy is accompanied by a retention obligation placed on employers, so that there have been relatively few redundancies during the pandemic so far, as the companies have accepted this aid well.

 
Last updated on 21/09/2021

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Belgium

  • at Van Olmen & Wynant

In the Belgian legal system, employers can use the system of “temporary unemployment due to force majeure” during the pandemic. This is a simplified procedure to ensure that employees whose work has become impossible or redundant during the pandemic can receive temporary unemployment compensation. When the job becomes viable again, for example, because of the reopening of restaurants, employees can resume their activities, without redundancy.

Furthermore, working hours can be temporarily reduced in the context of the pandemic. The Act of 27 March 2020 added a new section 8/1 in the Programme Act (I) of 24 December 2002, regarding measures for companies facing financial difficulties in the context of the pandemic. Specifically, the option was given to companies to reduce the working time of employees, thus reducing wage costs without having to terminate employees, with the reduction in social security contributions acting as compensation. Furthermore, the reduction in working hours implies a pro-rata reduction in gross pay. Therefore, a collective labour agreement (or work regulation) must provide for salary compensation. It should be noted, however, that even after the introduction of a reduction in working hours, full-time workers will remain full-time workers. The minimum wages set out in CBA No. 43, as well as sectoral minimum wages, must still be respected.

Last updated on 21/09/2021

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Brazil

  • at Pinheiro Neto
  • at Pinheiro Neto Advogados

Employers have adopted different approaches to tackle Covid-19, including by terminating employees, shifting to a remote-working model or adopting one (or more) of the measures implemented by the Federal Government to help companies survive through the pandemic and avoid, to the most extent possible, layoffs. Examples of such measures would include: reducing employees’ working hours and salaries, suspending employment contracts temporarily, shifting to a remote model (with less requirements than those outlined in the CLT) and delaying the collection of certain labour charges. The union’s involvement in the implementation of these measures would depend on the measure itself (as some of them would not require the union’s ratification or participation). 

Last updated on 21/09/2021

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France

  • at Proskauer Rose
  • at Proskauer Rose
  • at Proskauer Rose

During the pandemic, employers were able to carry out reorganisations involving collective redundancies for economic reasons (subject to justifying a real and serious economic reason as defined by article L.1233-3 of the labour code).

They were also able to negotiate collective performance agreements to meet the needs linked to the operation of the company or to preserve or develop employment by adjusting the working hours of employees, remuneration, and determining the conditions of professional or geographical mobility within the company.

Employers may also have to negotiate or renegotiate agreements or charters on remote status or review their organisation by developing a co-working space, different from the company’s premises, on a regular or occasional basis or in case of exceptional circumstances or force majeure.

Last updated on 21/09/2021

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Germany

  • at CMS Hasche Sigle

Termination for operational reasons requires the absence of a permanent need for employment. If this is only temporary, in general, this does not justify terminating the employee's employment. This also applies to temporary closures ordered by the authorities. Termination for operational reasons should be a last resort, even in times of a pandemic. The employer must introduce short-time work or a reduction in vacation days before giving notice.

Short-time work can temporarily shorten working hours and reduce the employee's entitlement to remuneration. The aim of ordering short-time work is to prevent redundancies and to preserve jobs. The employer has a unilateral right to order short-time work if it is permitted to do so by a collective-bargaining agreement, works council agreement or employment contract. Due to the covid-19 pandemic, various special regulations apply in the area of short-time work. That includes the payment of social security contributions. Special regulations in force for short-time allowance allow the employer to be reimbursed for 100% of their social security contributions up to 30 September 2021.

The employer cannot unilaterally reduce salaries just because workers cannot be employed during the crisis outside of short-time work. The employer bears the risk of employing workers even in a crisis and is required, if necessary, to pay the full salary even without employment.

Last updated on 21/09/2021

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Greece

  • at Kyriakides Georgopoulos Law Firm
  • at Kyriakides Georgopoulos Law Firm
  • at Kyriakides Georgopoulos Law Firm

Companies that made use of the government’s state aid measures could not proceed with redundancies or salary reductions for as long as the measures were applied. Companies that did not make use of said measures were able to proceed with redundancies or agree on salary reductions with their employees.

Last updated on 21/09/2021

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Hong Kong

  • at Lewis Silkin
  • at Lewis Silkin
  • at Lewis Silkin

During the peak of the pandemic in Hong Kong (mid-2020), as many businesses were forced to suspend services for covid-19-related reasons, the government introduced the Employment Support Scheme (ESS). The ESS gave all eligible employers in the city the right to claim a subsidy of 50% of their employees’ wages for up to six months (with a cap of 9,000 Hong Kong dollars per employee per month). Employers who received subsidies under the ESS were prevented from making redundancies during the subsidy period, or else the subsidies would be clawed back.

In March 2022, the government announced that a new round of ESS will be launched in response to the fifth wave of covid outbreak in Hong Kong. Based on the government’s announcement, unlike the ESS in 2020, certain industries which are deemed to be less affected by the pandemic (such as supermarket and pharmacy chains, banks and financial institutions), would be excluded from participating in this round of ESS. The full details of this new around of ESS are yet to be announced, though it is expected that it will be open for application in April 2022.

The government has often reiterated that employers should try to avoid making redundancies during this difficult period, and that employers may wish to consider alternative options such as unpaid leave or reduced working hours instead. That said, the government has not legislated to prevent redundancies or changes to employees’ terms and conditions during covid-19, and so employers have had relative freedom to make such changes, subject to the normal rules regarding needing employee consent to make contractual changes (other than immaterial ones where the contract contains a right to make changes).

Last updated on 06/04/2022

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India

  • at Nishith Desai
  • at Nishith Desai

There were certain central and state government restrictions on employment termination in the form of government advisories during the first and second phases of covid-19-induced lockdown in India. Orders were passed by state and central governments on mandatory payment of wages to all employees during the period of such lockdown. As a result, several employers were left with no choice but to restructure their workforces through redundancies. Owing to the same, based on certain government orders as aforesaid (the constitutional validity of which are debatable and currently sub judice), employee unions in some Indian states such as Maharashtra (Mumbai and Pune) and Karnataka (Bangalore) have been actively taking up the cause of employees who have been retrenched or whose working conditions such as wages have been adversely impacted by employers during the pandemic. However, courts have upheld the employer’s rights in certain cases to deduct wages or pay reduced compensation to employees during lockdown in case of any default attributable to the employee (such as an employee’s inability to attend the workplace in an operating establishment, owing to any voluntary action) or with employee consent.

Last updated on 18/11/2021

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Ireland

Ireland

  • at Littler

There has been no change to underlying employment legislation or rights, save for the suspension of the right of an employee who has been temporarily laid off for more than four weeks to claim an entitlement to a redundancy payment. This suspension, introduced as part of a suite of emergency measures at the outset of the pandemic, has now come to an end.

Any unilateral reduction of salary or benefits by an employer without the consent of an employee can be challenged by way of a breach of contract claim, an unlawful deduction of wages claim, or a claim of constructive dismissal on the part of an employee.

Last updated on 18/11/2021

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Italy

  • at Toffoletto De Luca Tamajo

During the pandemic and up to 30th June 2021 (and in some circumstances, until 31st December 2021) a dismissal ban was in force under which neither collective nor individual redundancies were possible.

On the other hand, in some cases, employers were able to reach agreements with their employees – mostly executives – for a reduction, or a deferral of the payment of the bonus due.

The main organizational changes that have been largely implemented are linked to (i) the implementation of a new working model base on the remote working and (ii) the massive use of the new social shock absorbers that has been granted by the Italian Government to the employers. Specifically, employers, through the so-called social shock absorbers, could suspend the activity of their employees without paying them and the employees received an indemnity from INPS (the Italian Social Security Body).

©Toffoletto De Luca Tamajo, ©Ius Laboris

Last updated on 21/09/2021

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Mexico

  • at Marván, González Graf y González Larrazolo
  • at Marván, González Graf y González Larrazolo
  • at Marván, González Graf y González Larrazolo

The federal government have reinforced the protective labour laws that prohibit redundancies and salary reduction as a general rule, stating that that the pandemic would not give legal cause for suspension of employment or dismissal. However, many employers managed to negotiate directly with unions or employees and introduced reduced temporary terms and conditions of employment that enabled companies to remain in business.

Last updated on 21/09/2021

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Netherlands

  • at Rutgers & Posch
  • at Rutgers & Posch

In principle, regular rules on redundancy due to business or economic reasons remain applicable during the pandemic. However, if an employer has been applying for one or more of the different tranches of the Temporary Emergency Bridging Measure to Preserve Employment (the NOW scheme), which provide a payroll subsidy in a given period and is based on the employer’s (expected) loss of revenue, making redundancies could have consequences for the total amount of subsidies received. For each tranche of the NOW-scheme, different rules apply. Under the most recent NOW 6.0, which could be applied for until 13 April 2022, employers can reduce their loan costs (e.g., by reducing a maximum of 15% of its payroll) without affecting the subsidy received. However, this cost-saving method must be determined in consultation with employees or the works council or staff representation.

Employers can, in principle, only reduce employees’ wages and benefits with the consent of the employee, as this would concern a unilateral amendment of their employment conditions. Employers, furthermore, cannot unilaterally force employees to take unpaid leave or vacation days.

More information on NOW 6.0 can be found here

Last updated on 08/03/2022

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Poland

  • at Bird & Bird
  • at Bird & Bird

At the beginning of the pandemic in 2020, an employer could decrease working time by 50% and salaries by 20% and receive state aid to protect employees from redundancies; there was also temporary relief from paying contributions to the Social Security Institution (health and rent contributions). These programmes are no longer in force.

Last updated on 21/03/2022

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Portugal

  • at Cuatrecasas
  • at Cuatrecasas

During the pandemic, the government created a special and simplified lay-off system, aimed at maintaining jobs in companies that were totally or partially closed due to the imposition of the law. Under this system, employers could, in short, reduce the normal working time (daily or weekly) or suspend employment contracts.

Within this system, employers could reduce remuneration within certain limits: employees could earn at least two-thirds of their regular monthly remuneration, with a minimum amount of 635 euro in 2020 and 665 euro in 2021 and a maximum limit of 1,905.00 euro in 2020 and 1,995.00 euro in 2021.

Payments to employees were made by the employer, who received aid from Social Security corresponding to 70% of the costs. Employers were also exempt from social security contributions regarding employees under the simplified lay-off regime.

Other measures allowed for the reduction of salaries, namely extraordinary support for the progressive resumption of activity for companies with a temporary reduction of normal working times, which applied to companies not subject to facility closures, but that still had losses of 25% or more in a calendar month prior to the calendar month of the initial application or extension, compared with the same month of the previous year or 2019, or compared with the six-month average prior to that period.

Regarding the hours not worked under this scheme, employees were entitled to compensation of 80% of their gross pay paid by employers. If this sum represented a monthly amount lower than the employee's normal gross pay, the amount paid by Social Security would increase to cover the difference, capped at 1,995 euro.

Seventy per cent of the said compensation was borne by Social Security, with the employer responsible for the remaining 30%. Where the reduction in working time was more than 60%, Social Security support corresponded to 100% of compensation.

Please note that accessing these and other state support measures – not only labour and social security-based relief, but also some tax measures and tenancy benefits – meant employers could not terminate employment contracts based on collective or individual dismissal during the period they availed of said benefit and within 60 or 90 days after its end. Some support measures also forced employers to maintain current employment levels, and also limited, among other things, the right to terminate employment contracts by agreement (ie, in such cases, employers would have to repay the benefit that they were granted, either partially or entirely, depending on the situation).

Last updated on 07/03/2022

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Qatar

  • at Clyde & Co
  • at Clyde & Co

Generally, employers have the right under the Qatar Labour Law to terminate employment contracts. Any termination must be carried out in compliance with the terms of the Qatar Labour Law and the employment contract (including the notice period if applicable and the payment of all pending entitlements).  At the start of the pandemic, the MADLSA published guidance notes on their website that reiterated this and also stated that employers may mutually agree that workers take unpaid leave or use their annual leave if the business has been halted and the worker is not assigned any work. In such instances, employers were required to continue to provide all other benefits.

Last updated on 08/11/2021

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Saudi Arabia

  • at Clyde & Co
  • at Clyde & Co

On 6 April 2020, Ministerial Resolution 142906 was published amending the implementing regulations to the Labour Law (last issued in January 2019) by adding a new clause 41 providing for the following:

  • In the event the Kingdom adopts measures as recommended by an international organisation to provide for adjusted working hours or to avoid a situation falling under article 74(5) of the Labour Law, which provides for termination of employment because of force majeure, an employer will be able to agree to any of the following measures with an employee for a six-month period following the introduction of such measures:
    • reducing the employee's salary in correspondence with a reduction in the employee's working hours;
    • putting the employee on annual leave as part of his annual leave entitlement;
    • putting the employee on exceptional leave under Article 116 (unpaid leave) of the Labour Law.
       
  • Termination of employment following the implementation of such measures will not be justified if the employer received assistance from any government programmes during this period (ie, furlough programme). Furthermore, nothing in this resolution prevents or inhibits employees' rights to terminate their employment contract.

The Ministry of Human Resources and Social Development further issued an explanatory memorandum providing that the employer may unilaterally implement the measures introduced by article 41.  The above measures came to an end in January 2021.

Last updated on 15/03/2022

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Spain

  • at Cuatrecasas
  • at Cuatrecasas

Since March 2020, under article 2 Royal Law-Decree 9/2020, employers cannot dismiss employees because of the covid-19 situation, and it is assumed that any dismissal since then is due to the pandemic. This means that employers must have strong reasons to justify dismissals to avoid them being somehow associated with covid-19. This prohibition is still in force.

The law does not specify whether breaching this prohibition should lead to the dismissal being deemed null or unfair. This has resulted in dissimilar high court resolutions: on the one hand, some have deemed dismissals null (forcing the employer to reinstate the worker and pay accrued salaries since the dismissal); and, on the other hand, some resolutions have deemed dismissals unfair (the employer can choose to pay severance for unfair dismissal or reinstate the employee and pay the salaries accrued since the dismissal). Until the Supreme Court rules on this matter, the consequences of breaching this prohibition are not clear.

Unlike dismissals, no other regulations specifically limit or prevent employers from changing employees’ labour conditions due to covid-19. Therefore, to implement any changes, employers should follow the ordinary procedure, which consists of justifying the change on business-related grounds and, if the decision affects at least 10 employees in companies employing less than 100 people; 10% of employees in companies employing between 100 and 300 people; or 30 employees in companies employing more than 300 people, then they must schedule a 15-day negotiation period with the workers’ representatives, although it is not mandatory to reach an agreement.

Most companies, however, have not made changes to their staff’s labour conditions, except for contract suspensions or recoverable paid leave.

Additionally, the government has passed several regulations since March 2020 (eg, Royal Law-Decrees 8/2020, 24/2020, 30/2020, 2/2021 and 11/2021) to provide specific and easier temporary contract suspensions for force majeure due to covid. These new regulations have mainly eased the ordinary procedure on temporary contract suspensions, and they have also allowed certain companies to obtain social security exemptions or reductions, subject to their commitment to not dismiss any employees whose contracts were suspended for six months after they resume work.

The Spanish government also passed Royal Law-Decree 10/2020, entitling certain employees to a recoverable paid leave between 30 March and 9 April 2020, which was the worst period of the pandemic. Workers were exempt from working without any impact on their salary, but they had to make up that time between the end of the state of alert and the end of the year.

Last updated on 21/09/2021

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Sweden

  • at DLA Piper
  • at DLA Piper
  • at DLA Piper

In April 2020, new legislation enabled employers affected by temporary and serious financial difficulties that could not reasonably have been foreseen or avoided (eg, due to the coronavirus situation) to reduce their employees' working hours and receive financial support from the Swedish government. The government covered three-quarters of the cost for the reduced working hours and the employer and employee shared the cost of the remaining quarter. For employers to receive support, the employer must have made use of other available measures for reducing labour costs, such as terminations of personnel not permanently employed and not regarded as being critical to business operations. The  possibility of receiving financial support under this legislation ceased to exist in September 2021.

New legislation on financial support has been proposed to apply from December 2021 to March 2022 for employers that have lost at least 30% in revenue. Affected employers will be able to receive support of 70% or 90 % (depending on the size of the company) of their fixed costs, such as salaries and rent, that they are unable to cover.  

The rules for termination of employment are the same regardless of the covid-19 situation. To terminate an “employment until further notice” under Swedish law, "just cause" is required. Just cause can either be related to personal reasons (eg, poor performance and misconduct) or redundancy. It is significantly more difficult to terminate an employee due to personal reasons (reasons relating to the individual employee) than due to redundancy. In general, termination due to personal reasons is considered a last resort by the courts. Redundancy on the other hand is deemed, as a main rule, to constitute just cause for termination of employment and there is no general obligation under the Employment Protection Act (EPA) to justify the redundancy (eg, with financial information or similar). The employer, however, must observe material and formal rules laid down by the EPA concerning redundancy terminations (as well as termination due to personal reasons).

Last updated on 24/01/2022

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Switzerland

  • at Lenz & Staehelin

Regarding wages, authorities have extended the use of pre-existing "reduced working hour allowances". This measure is intended to avoid dismissals following a brief but unavoidable absence from work. According to the system now in place, under certain conditions, employers have the right to (fully or partially) reduce the working hours of their employees and apply for allowances for reduced working-hour allowances. Those allowances cover up to 80% of wages related to the reduced hours. The hours effectively worked still are fully remunerated by the employer.

The Swiss Federal Council has decided to keep in place a procedure for a simplified calculation of the allowances for reduced working-hour allowances until 31 December 2022.

In addition, employees infected by covid-19 and unable to work due to illness are entitled to the payment of their salary under the same conditions as for any other illness-related incapacity. In particular, the salary would not be paid if an employee voluntarily travels to an area at risk or disregarded basic rules of caution and hygiene. If employees are stranded abroad because the authorities ordered a quarantine or return flights were cancelled, employers may refuse to pay their salary.

Last updated on 20/01/2022

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Turkey

  • at Gün + Partners
  • at Gün + Partners
  • at Gün + Partners

In the scope of covid-19-related measures, the termination of employment contracts by employers was prohibited for three months from 17 April 2020, with certain exceptions. With further extensions, this ban was extended to 30 June 2021. Therefore, redundancies have been prohibited from 17 April 2020 to 30 June 2021, and any breach of this ban has been met with a fine. On the other hand, employers have been granted the authority to impose unpaid leave (without employee consent), partially or in full, on employees during this period. Up until the end of the termination ban, employees on unpaid leave have received a daily allowance from the Unemployment Insurance Fund.

Also, many companies chose to introduce salary reduction due to the economic pressure arising from covid-19 at the beginning of the pandemic by obtaining the written consent of employees.

In addition to the above, certain arrangements have been introduced to facilitate the requirements of short-time working applications, filed on the grounds of circumstances arising from covid-19.

Last updated on 21/09/2021

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UAE

  • at Clyde & Co
  • at Clyde & Co

In general, the UAE Labour Law does not recognise the concept of redundancy and as such where an employee is terminated for reasons of redundancy, this could give rise to a claim of arbitrary dismissal. However, in response to the covid-19 pandemic, in March 2020 the Ministry of Human Resources and Emiratisation issued Resolution No. 279/2020 concerning employment stability in private sector establishments. The resolution encouraged employers to implement a range of measures to mitigate the financial impact of covid-19 to avoid or reduce the need for layoffs and mutually agree the following measures gradually and in turn with their non-UAE national employees:

  • remote working;
  • paid leave;
  • unpaid leave;
  • temporary reduction of salary; and
  • permanent reduction of salary.

Consistent with normal contractual principles, the resolution required that, in all cases, employee consent to the arrangement is obtained, which should be recorded in writing by way of an addendum to the contract signed by the employer and the employee. In the case of a permanent salary reduction, the resolution required that permission be obtained in advance from the Ministry of Human Resources and Emiratisation.   

The resolution encouraged many employers to implement alternatives to termination where possible.  

While the resolution is no longer being enforced by the Ministry, nevertheless it is a helpful reminder of the possible alternatives to redundancy that an employer ought to consider.

However, termination of an employee’s employment in the UAE is a unilateral decision (meaning the employer and the employee do not need to agree to the termination for it to be effected), and as such an employee’s employment can be terminated at any time by the employer. Notwithstanding this, where the employee’s employment is terminated for a reason considered unfair or arbitrary by a court, the court can award compensation as a result.

Last updated on 08/11/2021

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United Kingdom

  • at Littler

There has been no change to underlying employment legislation or rights relating to redundancies.

In theory, any unilateral suspension from duties, reduction in hours and/or any reduction in pay by an employer, without employee or union agreement (or a pre-existing employer right to make such changes), can be challenged by the employee or a relevant union. Such a challenge would most likely be by way of a breach of contract claim, an unlawful deduction of wages claim, and/or a claim of constructive dismissal (by the employee) or some form of industrial dispute (by a union). In practice, with the alternative to such action often being outright redundancy, legal claims by affected employees or unions have been relatively rare.

There are no special restrictions on employers being able to implement redundancies, in line with existing laws and subject to the usual safeguards of employees’ rights.

In early 2020, the UK government introduced a paid furlough scheme – called the Coronavirus Job Retention Scheme (CJRS) – allowing employers temporarily to suspend employees from work but still receive payment of part of their wages (supported by a government allowance to the employer). The scheme has now closed (it ended on 30 September 2021). Details of the scheme (now of historic relevance only) can be found here.

Last updated on 13/01/2022

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United States

  • at Littler
  • at Littler
  • at Littler

The pandemic has caused many companies to have to re-evaluate employee salaries and wages, and to make staffing changes. Where required by collective-bargaining agreements, these changes have resulted in bargaining with unions.

Up-to-date information on the USA’s response to the pandemic, including State-level news and developments, can be found at Littler’s covid hub here.

Last updated on 21/09/2021