US President Donald Trump’s 90-day pause on trade tariffs may have only provided a stay of execution for many Irish businesses, the Irish Business and Employers’ Confederation (Ibec) has warned.
Without any official guidance from the government, Littler’s Niall Pelly warns that contracts are key for businesses considering working hour reductions to ease the burden.
“Economic uncertainty does not absolve employers from adhering to contracts of employment or employment rights generally. Before taking any action, employers need to review employment contracts to assess whether there is flexibility built into them,” he tells IEL.
“In the absence of contractual flexibility, employee agreement to a reduction in working hours is required,” he adds, referencing the varying working hours, temporary layoffs or having employees work less than 50% of their normal working hours.
Since it is still unclear whether Trump’s threat of tariffs are permanent or simply a short-term negotiation strategy, Pelly explains it is vital to keep employees updated on all developments and not make any knee-jerk decisions.
“Establishing a line of communication with employees will be key, along with an identification and implementation of strategies on a ‘least worst’ alternative basis,” he says.
For example, a reduction in working hours, though unwelcome, may be construed by employees as being better than temporary layoffs; with the latter also construed as being better than redundancies.
“While economic turmoil could be used as a justification for mass redundancies, it certainly would not be beneficial for the treatment to kill the patient.”
Pelly suggests the government implement support programmes like the wage subsidy scheme introduced during the pandemic as a means of avoiding mass redundancies.
“An overlooked aspect of those supports was that, in tandem with the wage subsidies, the legal right of employees to claim redundancy because of being placed on lay-off or short time was suspended,” he says.
“This meant that employers could maintain their workforce, without fear of exposure to substantial redundancy costs in the meantime. The financial cost of these supports was considerable, but likely pales in comparison to the long-term costs that would otherwise arise through inaction.”
Ideally, says Pelly, the stark choices employers will face will be softened by government supports, similar to that provided during the pandemic, to avoid the doomsday scenario of large-scale redundancies across sectors most exposed to US tariffs.
“In the absence of support for both employer and employee, that allow some space to assess the true impact of these tariffs, the concern is that employers will have little option but to reach for the starker solution of mass redundancies faster,” he warns.
