Resourcing for 2021: wider impacts of the present crisis
10 March 2021
The final instalment of our three-part series of articles exploring resourcing challenges, opportunities and trends in 2021 examines a range of employment issues including reward strategy, outsourcing and collective representation.
The first article in our series explored some of the immediate options for responding to the challenges of the pandemic, including government support packages, restructuring, changing terms and alternative contracting options. Our second article looked at the trend towards homeworking and other flexible working arrangements and the growing focus on wellbeing, trust and culture as key to recruiting and retaining staff.
In this final article, we share our thoughts on how the current situation is impacting a range of employment-related areas, from post-termination restrictions and reward packages through to outsourcing and collective representation. We also consider how the impact of Brexit may drive employers to consider new resourcing options.
Retaining and incentivising key staff
In economically uncertain times, retaining experienced and proficient employees becomes even more critical for employers. Those which can retain effective and knowledgeable members of staff will stand a better chance than others of continuing to deliver for their customers and clients, and thereby weathering the economic storm. Training and upskilling employees involves significant cost – an investment that will be lost if you cannot retain highly skilled employees. Most likely, a competitor will benefit from your investment instead, particularly if the skills are scarce and so highly valued.
Most employers will adopt a “carrot and stick” approach in order to encourage employees to stay, while safeguarding key interests in the event they choose to leave.
Until now, the “carrot” has generally been inward-looking, in terms of ensuring an attractive remuneration package. This includes not only salary, benefits and annual bonuses, but also long-term incentive plans (LTIPs) to incentivise loyalty and performance on a more longstanding basis (see our article on long-term employee incentive plans in a recession). Businesses will need to navigate between retaining and motivating key staff and keeping a tight control on cost, so it remains important to ensure remuneration packages are as tax effective as possible.
We have recently seen employers moving away from investing in the pure financial package and instead looking at reward in a more holistic way - including, for example, health and wellbeing related benefits. (This increasing focus on wellbeing, trust and culture, was discussed in the second articlein our series.)
The “stick” approach is likely to involve the inclusion of carefully considered and well-drafted restrictive covenants in employment contracts. In some cases, the purpose of such post-termination restraints is to prevent an employee being able to leave and immediately join a competing business. In other situations, the prime purpose is to manage the commercial risk of an employee leaving - for example, by preventing them from soliciting certain clients, customers or other employees for a set period.
Where long-serving employees are concerned, it is a common scenario that their restrictions have not been reviewed and amended they have been promoted and/or their role has evolved. As that can lead to challenges with enforcement, it is important regularly to review the restrictions of key employees to ensure that they are up to date and relevant to the role the individual undertakes. (See our article on the impact of coronavirus on post-termination restrictions.)
The government has recently launched a consultation on reform of non-compete clauses, observing that Covid-19 has had a “profound impact on the labour market”, creating a need to boost innovation, increase competition and create new jobs. If the government legislates to require employers to pay for non-compete clauses, this could result in a benefit for employers (albeit with a price tag) as it may drive up compliance with this sort of contractual restraint.
Outsourcing, onshoring and disposals
The need to maintain certain outsourced functions has dwindled, especially where offices have been closed, staff footfall has reduced dramatically and/or supply chains and orders have been disrupted. This is leading to the renegotiation of outsourcing contracts, and in some cases their termination, alongside discussions over which party will bear the costs of redundancies arising from reduced service levels. We are increasingly being asked to advise on disputes in this area.
Meanwhile, there is a focus on insourcing, as well as outsourcing. The trend of outsourcing to lower-cost countries was beginning to reverse even before the pandemic, with more companies reported to have started onshoring production. The combined impact of Brexit and the pandemic may accelerate this trend as companies seek to increase their agility, reduce lead times and protect their supply chains. Onshoring can also form part of the responsible business agenda, as companies move to take greater control over labour standards and environmental impact.
At the same time, some companies are continuing to hive-off and dispose of certain activities in order to raise capital or refocus the business on account of significantly changed circumstances. From a buyer’s perspective, this potentially creates opportunities for advantageous deals.
We therefore expect the combined impacts of Covid-19 and Brexit to be felt in various ways in this area throughout 2021.
The rise of collective representation?
The Covid pandemic has meant that many employers have had to engage in a collective redundancy consultation for the first time. Some of those had not previously set up an employee forum, or else had established one with such an informal and limited remit that it was insufficient to make it a “standing body” with which they could engage for this purpose. In contrast, other employers have benefited from having already created a more substantive body. Almost as a by-product, this has enabled them quickly to engage with experienced representatives, rather than delaying consultation to allow employees first to elect who should represent them.
In most cases, employers who were reluctant to consider collective forums have found them to be very useful. In many cases, employers have engaged with them more regularly and extensively than they had originally contemplated and intend to continue doing so as they look to transform resourcing for the post-Covid future.
This may therefore be an opportune time for employers who have not yet gone down this road to consider whether a standing body for collective consultation would be helpful and, if so, what form it should take and what remit it should have. In particular, it would be sensible to consider whether any new forum should have a sufficiently strong remit to engage in consultation “with a view to reaching agreement”, as must take place in the context not only of collective redundancies but also TUPE transfers involving measures.
Last year’s exceptional events have also led to an increase in trade union membership. This coincided with a lowering of the thresholds for requesting a statutory information and consultation body that can legally enforce its rights at the Central Arbitration Committee. Putting in place an appropriately tailored forum might assist employers in resisting moves by unions seeking to interfere in their direct relationships with their own employees. It could thereby help to allow employee relations to continue developing other than under the “shadow of the law” and potential legal complaints.
The impact of Brexit
Brexit is another factor raising major resourcing issues unlike anything employers had to contend with before. Although the UK and EU reached a last-minute trade deal, this does not replicate all of the business advantages of being in the single market. Some firms will be looking to set up an EU base (in Ireland, for example), meaning that some UK employees may be required to relocate. Other employees may ask to relocate to new or existing operations within the EU.
The new immigration system in place from January 2021 is going to make it much more expensive to bring EEA or Swiss workers into the UK, which could have a significant impact on the UK labour market. Employers that agreed temporary overseas remote-working arrangements with employees stuck abroad in the early months of the pandemic are now beginning to consider whether they could rely on remote workers carrying out their role from their home country, without ever needing to work in the UK (an issue we explored in the second article in our series).
Labour market changes brought about by Brexit are also likely to result in employers falling back on some of the more flexible alternative contracting options discussed in the first article in our series.
A final thought
While the combined effect of the Covid-19 pandemic and Brexit is creating unprecedented resourcing challenges for business, there are nonetheless numerous opportunities for employers to exploit. These include changing terms or using alternative contracting options, embracing agile working and initiatives on wellbeing, trust and culture, and reviewing reward packages, post-termination restrictions and collective representation structures (as discussed above).
Above all, this is a moment to be proactive and reassess traditional workplace models and outdated approaches to employment relations. That’s the key to helping protect your business and make it sufficiently adaptable and resilient to withstand whatever might be coming next.
Following the UK’s departure from the EU, the Trade and Cooperation Agreement sets out the shape of the ongoing future relationship between the UK and the EU and provides some degree of certainty for UK businesses.
Reshaping your workforce
The lasting effects of the pandemic, the impact of the war in Ukraine, the national cost of living crisis and the war for talent are currently major factors driving the need for organisations to change and adapt.
Acquisitions, disposals and outsourcings
The M&A market has bounced back from the earlier challenges of the pandemic. Strategic investors are looking to expand or divest businesses that do not fit the ESG footprint.
Retaining and incentivising staff
In the war for talent, retaining key employees and maintaining a stable and successful workforce has never been more critical.
Industrial action and collective representation
Inflation, other cost increases and economic uncertainty are resulting in strike action.