Many employers are wracking their brains at the moment to work out what alternatives are there to redundancies. With the current COVID pandemic and the economic crisis that it’s created there’s a need to review costs. The knee-jerk reaction is often to consider job cuts rather than considering what alternatives are there to redundancies?
Redundancies aren’t a cheap option. If you make mistakes in the way you handle redundancies, they can prove expensive if you lose tribunal claims. The cost that’s not as easy to quantify is the loss of valuable skills and experience that you’ve invested in. These very skills and experience are what allows your business to bounce back more easily. There’s also an odd impact of redundancy. Those remaining in the business can experience a level of guilt because they are still in a job but their friends aren’t.
So here are six alternatives to redundancies that may be worth considering
Changing terms and conditions
Not without risk. An obvious way to reduce business costs without making people redundant is to change employees’ contractual terms and conditions. For example, an across-the-board pay cut.
You must remember that working hours and rates of pay are express terms of an employee’s contract of employment. Any major change to express terms needs managing appropriately, the employees’ contracts of employment need to be “varied”.
If you’re thinking about pay freezes, changes to commission levels or a restriction on overtime you’d be wise to check employment contracts. Don’t assume that you can just change these, there are some pretty hefty penalties if you get things wrong. We advise consultating on proposed changes, or negotiation on specific changes. You need to gain agreement rather than imposing changes unilaterally which are the nightmare scenario for constructive dismissal claims.
Pension scheme changes
Another option for employers that may appear attractive is to change its pension arrangements. If you are paying a larger employer contribution than you are required to do by law, you could reduce your contribution. This could be either temporarily or permanently.
You should consult with employees on changes. Some of the changes may require consultation to comply with pension regulations.
Lay-off and short-time working
Employers looking for alternatives to making people redundant may consider laying staff off temporarily or reducing their working week. We’ve shared more detail about these schemes and how they differ from redundancy here.
Reducing use of agency workers or temporary staff
On the face of it this looks an easy win, a relatively low-risk way to reduce employment costs without making ‘permanent’ staff redundant. But you need to check the employment status of these individuals in case they legally qualify as ‘employees’ with statutory rights such as statutory redundancy pay and unfair dismissal.
You should take great care 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 it can be objectively justified by the employer.
Employment contracts often describe bonuses and other benefits as “non-contractual” or “discretionary”, implying that the employer can stop or reduce them. You are not necessarily immune from legal challenge.
You need to demonstrate that you haven’t been arbitrary, that you have a sound business case for taking this action. The concept of “custom and practice” can rear its head with changes like this.
Introducing part-time working or job-sharing can sometimes be a way of reducing costs. Some employees may welcome the chance to work more flexibly. If not suggested by the employee, you should work to secure the employee’s agreement to any changes like this and document the agreement in writing.
If you are considering redundancies, lay-offs or salary reductions you should assess whether this will affect the immigration status of any of the employees affected. Any of them holding a Tier 2 or 5 visa will have reporting requirements that are likely to be triggered, which may then have knock-on implications for whether or not they can keep their visa.
We understand that if you have lost a lot of business, you may feel that redundancies the way to achieve the significant cost reduction that you need. But,
If you would like to discuss with us what alternatives are there to redundancies, give us a call on 01706 565332, email us on firstname.lastname@example.org or complete the contact form. We make no charge for an initial 30 minute consultation.
Metis HR is a professional HR Consultancy based in the North West of England supporting clients across the country. We specialise in providing outsourced HR services to small and medium-sized businesses. Call us now on 01706 565332 to discuss how we may help you.