We supported SHL to run a compliant collective consultation process, following the need to...
No employer wants to run a redundancy procedure but sometimes it may be the only choice a business has to reduce its cost. Running a redundancy process isn’t cheap and if the correct process isn’t followed, employers can find themselves facing unfair dismissal claims and additional costs to resolve the problem.
Before starting a redundancy process, it’s important to consider how you can reduce costs in other ways. This will help you retain skilled and experienced staff that you recruited and avoid the impact redundancies can have on staff morale.
Below are some suggestions to consider you may consider to reduce costs in alternative ways. In order to protect your business, care must be taken, the correct process must be followed and the arrangement should be carefully documented.
Reduce headcount
Restricting recruitment/withdrawing job offers/deferring new joiners
If you have employees who have handed their notice in and are exiting the business, you can save cost by not replacing them.
You could consider withdrawing employment offers. You may withdraw an offer of employment at any point before it is accepted, without having to give notice or make a payment in lieu of notice.
A softer alternative to withdrawals is to ask anyone about to join the business to defer their start date by a period of time.
Redeployment and retraining
If one area of the business has been harder hit than another, it may be possible to retrain an employee/s with transferable skills to take up a new role/s in the busier part of the business on a temporary or permanent basis. Any significant changes will need to be agreed in writing with each affected employee.
Any redeployed employees will also need to be given training to ensure that they are properly equipped to perform the new role.
Reduce non-permanent staff
Ending arrangements with casual workers, agency staff and self-employed consultants may be a relatively low-risk way to reduce employment costs without making ‘permanent’ staff redundant.
The employment status of such individuals should be carefully assessed in case they do, in fact, legally qualify as employees with statutory rights, such as the right not to be unfairly dismissed.
Employers should also be careful when terminating part-time or fixed-term staff. They are protected from less favourable treatment in comparison to (respectively) full-time and permanent colleagues, unless the employer can rely on objective justification.
Secondments
Internal or client secondments can work well to either train an employee in a certain area, or provide a specific service to a client. This may help to consolidate client relations and/or develop the employee’s knowledge and skills, ultimately benefiting the employer’s business when the employee returns to their original role. This will need to be done with the employee’s consent in the absence of an express right to second in the contract of employment.
Voluntary career breaks/sabbaticals
Arranging unpaid sabbaticals/career breaks can be a great way to save on the costs of salary for a fixed period of time, whilst retaining valuable staff and giving them the opportunity to do something for themselves such as travel, study or voluntary work.
Reduce remuneration – Reduce pay or benefits/pay freezes
Adjusting employees’ contractual entitlements is perhaps the most obvious way to reduce business costs without resorting to compulsory redundancies. Any proposal affecting pay is going to be difficult to market to staff but a pay cut across-the-board for example, will be easier to digest if the alternative will result in dismissals.
Any significant change to working arrangements is likely to involve the variation of employees’ contracts of employment. This can be a risky exercise itself and employers should proceed with caution and take legal advice.
Reduce hours - flexible working/job shares/overtime bans
Employees can be invited to make flexible working requests with a view to reducing their hours or days of work. The incentive of improved work-life balance may mean some employees welcome the opportunity to enter into such arrangements.
Employers could also request volunteers for job-shares. This arrangement enables two (or more) employees to split a full-time job between them, whilst entering into an agreement regarding hours and days of work and split of role and duties. This cuts costs for the business without letting anyone go.
Where there is no contractual entitlement to overtime, employers can stop offering it. Where a contractual right to overtime work is in place (for example, under a collective agreement), the business will need to obtain employees’ consent to stop offering overtime.
Look to make savings elsewhere
Before turning to compulsory redundancies, employers should consider how budgets can be cut and costs can be saved in other areas of the business. For example, can contracts with suppliers of goods and services be reviewed with a view to reducing costs? Can other expenses and outgoings be reduced, for example.
If you decide redundancies can’t be avoided then seeking volunteers at an early stage might reduce the need to make compulsory redundancies.
Although offering voluntary redundancy can take some control away from the employer in terms of selecting roles for redundancy, it is the employer’s final decision as to whether or not to grant an application for voluntary redundancy.
A note of caution however - employees can be left feeling resentful if having taken the decision to opt for voluntary redundancy and it is turned down. This then has to be managed moving forwards.
