How I Saved a Business Owner £9,000

A few weeks ago, I was chatting with one of my long-term retainer clients. During our conversation, they mentioned another business owner who was dealing with a staffing issue but wasn’t sure what steps to take next. I offered to have a chat with him to see if I could help.

We were introduced, and he explained the situation.

He had received a letter from an employee claiming that, because he hadn’t worked his normal hours for 10 weeks, he was entitled to redundancy pay. The employee had calculated this entitlement at £9,000.

The business owner said, “I’m about to pay it, but I thought I should run it past you first.”

Understanding the Situation

I started by asking a few key questions:

• Had the business experienced a downturn in work?
  No in fact, they were very busy.

• Had there been a reduction in work specifically for this employee?
  Yes but, there was a story behind that.

I asked him to elaborate.

He explained that the employee was a delivery driver who had been with the business for 10 years. Historically, he delivered to a range of customers. However, over the past 3 years, the company had secured a large contract with one key customer, meaning most of his work was focused with that customer, although he was still expected to deliver to other customers when required.

Around 10 weeks prior, the employee had requested to work exclusively with this main customer. The business owner explained that he couldn’t guarantee enough work from that single source to fill a full working week.

The employee accepted this and agreed to move onto a variable hours arrangement, where work would be assigned only when orders came in from that specific customer. At this point the business owner had written confirmation of this agreement but it would have been better if they had issued a contract amendment. 

What Happened Next

For the first three weeks, the arrangement worked well. Then, the customer stopped placing orders, meaning there was no work available.

The business owner contacted the employee and offered alternative work with other customers. The employee declined, choosing instead to remain off work until work became available with his preferred customer.

When work did resume, it amounted to around 7 hours per week which was a significant drop from his usual 40 hours.

Shortly after, the employee submitted a letter referencing short-time working and claimed redundancy pay of £9,000.

Key Questions

To assess the situation, I asked:

• Does the employee’s contract state 40 hours per week?
  Yes.

• Was the change to variable hours agreed?
  Yes this was agreed verbally and confirmed via supporting text messages.

• Was the contract formally updated?
  No.

My Advice

I explained that, ideally, the contract should have been formally updated at the point the employee requested to work exclusively for one customer. A variable-hours contract would have reflected the reality of the arrangement more clearly.

However, the text message exchange still provided useful evidence of the agreement.

Most importantly, I clarified that this situation did not constitute short-time working.

Short-time working applies when an employer enforces reduced hours due to a lack of work. In such cases, employees may be entitled to redundancy pay if they receive less than half a week’s pay for 6 or more weeks within a 13-week period.

In this case, however, the reduction in hours was voluntary. The employee had chosen to limit his work to one client, fully aware that this might reduce his hours.

As a result, he was not entitled to redundancy pay.

The Outcome

I advised the business owner to present the employee with two clear options:

1. Return to working 40 hours per week across a variety of customers (as per the original contract), or

2. Move onto a revised contract reflecting the reality of only working when tasks were available from the chosen client.

The business owner had the relevant facts and was able to discuss this with the employee to clarify this was not a redundancy situation. 

Taking advice and fully understanding the situation saved this business owner a significant amount of money. 

If you have an HR challenge you would like to discuss then please feel free to get in touch.