When dealing with an unexpected downturn in business, employers will naturally be thinking about redundancies to cut costs.
There are, in fact, many alternatives to making redundancies that are worth considering before you decide to lose valuable staff.
Here are eight key strategies:
In the tough times, you will need to halt all external recruitment for new roles apart from key roles that can’t be covered internally.
Employers should be cognizant of the fact that recruitment freezes may put a strain on current employees and cause their performance and engagement levels to wane. This is why it is important do all you can to boost staff morale, for example, give praise for good work, have one to one meetings, recognise those employees with long service and celebrate team successes.
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 otherwise there is a risk of facing a claim for breach of contract. If you have any doubts about whether the overtime is compulsory or voluntary, speak to your Employment Law Adviser for guidance.
You can offer your employees the option of voluntary redundancy.. Remember employers can say no to someone who makes an application for voluntary redundancy.
It’s essential to remember that this still counts as a dismissal therefore employer must still follow a fair procedure to terminate their employment.
Employers need to be careful about offering voluntary redundancy only to certain groups as it could constitute unlawful discrimination. For example, if you only offer voluntary redundancy to older workers, this could be considered discrimination on the basis of age.
Allowing a career break or sabbatical may also be a good alternative to redundancy if your business is experiencing financial difficulty. While the employee is away, they may do things which actually benefit your business when they return, for instance, they may learn some new IT skills or brush up on foreign languages.
You will need to agree with the employee how the career break or sabbatical will work. When ironing out the terms and conditions, take care about making promises. Guaranteeing a person their job back when they may be away for a year or two may put you in a difficult position because realistically, you cannot predict how the market or your business will have evolved in that time. What happens if you have restructured and their job no longer exists?
As with a career break, you may benefit for temporarily assigning an employee to another organisation as they can learn some new skills which will be of great use when they return to your organisation.
In these cases, you will need a secondment agreement, which sets out the rights of the secondee and the obligations of the employer and the host business.
Another option you could consider if reviewing your employee benefits and make savings by removing those generating huge costs. You must take care with this approach. If, for example, you want to take away a staff bonus, you need to understand whether it is a contractual or discretionary.
If the bonus is contractual, the employer must make these payments 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.
If the bonus is discretionary, it means the employer can choose when to pay the bonus, how to calculate it and the total amount that will be paid out. However, case law has made it clear that employers must not use their discretion in an irrational or perverse way.
Remember a benefit may become contractual. For example, if you pay a Christmas bonus over a number of years. Although the contract does not say this specifically and the employer has never sat down with the employee to specifically agree to it, it can form part of the contract. To discuss this further, seek advice from your Employment Law Adviser.
If you are experiencing a dip in business, one option may be to lay them off. It will be considered a lay off if the employee is told to stay at home for at least one working day.
You can only lay them off if there is an express provision in the employee’s contract of employment which permits you to do so.
If you do not have such a provision in the employee’s contract, you can see if there are any collective agreements in place which allows lay offs. Alternatively, you can obtain the written agreement of the employee. An employee may be more receptive if they understand that it is an alternative to redundancy and it is only a temporary measure.
The employee’s pay will be set out in their contract of employment. If the employee is not paid, they may be able to claim ‘guarantee pay’. Subject to certain eligibility requirements, guarantee pay consists of a maximum of £28 a day for 5 days in any 3 month period.
If they have been laid off for 4 weeks in a row or 6 weeks in a 13 week period, they can give written notice that they are going to claim a redundancy payment. The employer can reject the claim if there is a reasonable chance that normal working hours will be resumed within four weeks.
Short-time working is when you cut their hours and reduce their wages accordingly. For example, they are sent home early each day.
Again, you can only put an employee on short-time working if their contract of employment expressly permits this or there is a collective agreement in place or they provide their written consent.
If your business finds itself in these circumstances, it is useful to keep talking to employees. They are likely to be more cooperative and understanding when they understand you are trying to find ways to avoid job losses.