In the current economic climate redundancy is a word becoming all too familiar. Whilst some businesses try and ride the storm of increased costs, they may feel redundancies are their only option. Whilst this may be an inevitable outcome, there are other alternatives which should be explored first.
It is generally in the organisation’s interests to exhaust all alternatives to redundancy, given the legal risks and impact on workforce morale that inevitably come with undertaking a redundancy process. Our latest article looks at strategies to avoid redundancies and consider all options.
You can invite employees to make a flexible working request to reduce their hours, or days worked. Alternatively, you can consider introducing a reduction in hours or days worked for certain groups of employees on a temporary or permanent basis. You would firstly need to obtain consent from your employees to mitigate any risk of a breach of contract and claims for constructive dismissal.
This may not be a popular move amongst your employees, but it is a simple way to cut costs. Remember that you must continue any compulsory overtime to avoid risking claims for breach of contract.
Lay off means that the employer stops providing their employees with work for a while and doesn’t pay them. Short time means that the employer can reduce employees’ hours to less than 50% and reduce their pay accordingly. An employer can only lay off or reduce hours if the employment contract allows them to do so. It is a good way for the employer to reduce the wage bill on a temporary basis but the law doesn’t allow the employer to use it as a long-term solution.
Although voluntary redundancies are not a way of avoiding redundancies altogether, they do avoid the need for compulsory redundancies. If there are sufficient volunteers, the employer can avoid the redundancy selection procedure, which can be time-consuming and distressing, both for the company and its staff.
Another option you could consider is reviewing your employee benefits package, as you may be able to make savings by removing those that are generating huge costs or being underutilised. You must take care with this approach. If, for example, you want to take away a staff bonus, you will need to understand whether it is a contractual or discretionary. If the bonus is contractual, these payments must be made if the employee meets the required criteria. For example, if you set clear performance targets and the employee meets them, you will need to pay out the bonus.
It usually takes a few weeks to a month to see the benefit of this option in reducing wage costs. In all cases it’s necessary to get the employee’s agreement, so better to ask for volunteers in the first instance. This is a good short-term measure which may suit both parties while also protecting employment. While not legally required, it’s best practice to put any agreement in writing.
A good place to start when looking for alternatives to redundancy is a recruitment freeze — simply not recruiting anybody and taking advantage of natural wastage. This saves on recruitment costs, and existing staff can be retrained. Linked to that is withdrawing job offers. If the offer hasn’t been accepted, then it can be withdrawn without cost to the employer. If it has been accepted, then withdrawing can expose the employer to making a small payment, but it’s usually only that for minimum notice.
Many businesses may find themselves looking at what they need to do to adapt and help to safeguard their future. For further information and advice on strategies to avoid redundancies, please contact us here.
