The decision to make an employee(s) redundant is a difficult one which is why businesses should consider alternative options before moving forward with any redundancies.
It could be more advantageous to pursue alternative options as it can save you the time and hassle of the redundancy process, improve employee morale as it will show them that you are keen to retain staff, and it means you won’t have to go through an extensive recruitment process should business pick up again later.
What is a redundancy?
A redundancy is a dismissal due to the actual or intended closure of the whole business, the actual or intended closure of the business at a particular workplace or a reduction in the need of employees to carry out work of a particular kind.
If you are contemplating redundancies due to the loss of a contract or the sale of a business or part of the business, this may be a relevant transfer for the purposes of the Transfer of Undertakings (Protection of Employment) Regulations 2006 instead under which your staff may have the legal right to have their employment transferred. If such staff members are made redundant where there has been a transfer that is covered by this legislation, then such redundancies could be automatically unfair.
You should always consider ways to avoid redundancy by looking at viable alternatives such as the following:
Staff Redeployment as an Alternative to Redundancy
Staff redeployment is the process of taking a/some members of staff from their current position or department and placing them in another.
There may be vacant roles in different areas of the business that need filling which opens the opportunity to redeploy workers.
When carrying this out as an alternative to redundancy, you will need to have a discussion with staff and get their consent before moving forward, unless there is an express term in their contract, such as mobility clause or job duties flexibility, as they do have the right to reject this offer.
If staff do not consent, then this would be considered part of the redundancy process and the new position can be classed as a suitable and reasonable alternative and the staff can forfeit any redundancy pay.
Staff redeployment may require some retraining; however, it is a considerably easy to manage process when compared to redundancy.
An instant and easy money saver for businesses is a blanket recruitment freeze. The average hire can cost £4,000, so if you are employing two or three new people every year then you could save yourself at least £8,000 by pressing pause on recruitment.
Reducing Overtime to Avoid Redundancies
If the reason for redundancy is a cost cutting exercise, then it may be prudent to review the current circumstances in relation to overtime i.e. do you need to introduce an overtime ban.
Additionally, if you pay enhanced rates for overtime you may wish to try and negotiate with your employees a reduction in the over time rate. However, if this is a contractual right or established custom and practice then you will need to ensure that go through the correct consultation process to obtain consent to avoid any potential tribunal claims.
Make sure you fully understand your employees’ rights when it comes to paid overtime before removing it altogether.
Reducing Working Hours in the Workplace
You could ask employees to volunteer for reduced working hours every week to cut costs for the business. Some employees may prefer this if they have young kids or a dependent to care for, so this could work well.
However, if you have the contractual right you could look to enforce lay-off or short time working, whereby you only pay your employees a reduced amount, statutory guaranteed pay, for the first 5 work-less days. However, you must ensure this is done fairly.
A popular alternative is to offer flexible working across the business – a practice that is taking place more and more within UK companies.
Flexible working arrangements, such as part-time work, job sharing, and home-working can help businesses save money on wages and resources and significantly improve employee morale.
Career Breaks as an Alternative to Redundancies
A career break, or sabbatical, is an agreed period of absence from work that is usually unpaid. Most employees use it to go travelling, have a family, take care of sick relatives or take on a hobby and it can prove popular, especially for millennials.
This option enables you to save on salary for a fixed period of time whilst retaining valuable members of staff. Not to mention, they will probably be happier and more productive when they return.
The best way to set this up is by opening an application process for your employees and putting together a written policy which sets out the terms of this arrangement for those who have their application accepted.
Pay freezes and cuts
It may be a practice for your business to provide employees with an annual salary review, but this does not automatically entitle them to a salary increase every year.
Hence, you can decide not to make any changes to wages for a specified period stating cutbacks as your reason.
Though you may fear that this will scare some employees away, there are other more affordable benefits you can offer them as mentioned in our post ‘Advice on Common HR Issues Part 2’.
Alternatively, you may consider making pay cuts, but this can be difficult to implement as, understandably, employees will be very unhappy with this news.
It’s best to have private conversations with your employees and see if anyone is willing to take the cut as, without going through extensive consultation to obtain employee consent, enforcing pay cuts could lead to constructive dismissal claims and unlawful deduction of wages claims – so tread very carefully with this one and consult a HR professional beforehand.
Senior management should not be exempt and lead by example, taking pay cuts and waiving their bonuses too.
Terminating Contractors and Short Serving Employees
If you find that you’re going to have to make staff cuts and there is no way around this then pull back on the number of agency workers, self-employed consultants and other contractors before considering permanent employees. However, you will have to fully review what areas of the business can sustain cuts and what areas are essential to the ongoing operation.
Do ensure that you comply with any notice provisions before terminating these arrangements.
If it proves that you do need to make cuts from permanent employees and you have identified the areas of the business you need to make the cuts from, you may want to give consideration to dismissing short-serving employees (i.e. anyone with under 2 years’ service with no discriminatory issues that can be cited) in the first instance as they will not cost your business as much as the longer serving workers; only notice pay, instead of notice and redundancy pay.
If you need professional support or advice in dealing with redundancies, then our HR consultants have the experience and knowledge to help you every step of the way, as there may be a prescriptive process that needs to be adhered to. Call us today on 0845 2626 260 for further details.