Brexit – when the worst comes to the worst: Reducing employee costs

8 Aug
by Suzie Business Owner & Senior HRBP

I am not going to “pussyfoot” around this topic – just give the advice I would give a client in real trouble.  This is not going to be soft and fluffy.
As we head to 31st October there are going to be impacts to SME’s, which have been under-prepared.  This means usually means a huge cost cutting exercise and FAST.
Here are the actions in order of what I would advise a client, saying – I need to reduce staff NOW.

  1. Ban overtime and any other enhanced payments, unless business critical and make sure it is ALWAYS authorised in advance.
  2. Look at any agency workers or consultants first – these are the generally the highest cost and the easily to lose in an emergency. I would check first if they are doing anything critical to the business. Make sure you look at the termination clause to ensure that you either pay out the notice or make them work it to close down any work.
  3. Look at any temporary workers, these generally have the lowest service and are on a contractual notice of one week.  Again, check the contract and either get them to work the notice or pay it out.  Be aware they might have some accrued holiday which you can make them take for the period of the notice – making a further cost saving in not paying out holiday pay and making better use of the notice period.
  4. Employees under 2 years service.  These employees do not have the right to “fair dismissal”.  This means that they don’t have to go through a disciplinary process, redundancy process or similar.  You have to be careful of potential discrimination claims but you can terminate them with only their notice (worked or paid in Lieu) and any accrued holiday pay.
  5. Do you have a lay-off clause in your contract of employment? If yes, then look at the potential for laying off staff for the maximum period of xx weeks and on the guaranteed payment of max. £25 per day for a max. of 5 days in a 3 month Don’t do this or short time working for more than 4 weeks continuously or call us if you are thinking of any other time period. If no, its not an option for you in this crisis – come and speak to us about re-designing your contracts of employment.
  6. Negotiate with employees for short time working or pay reductions. Most employees want to keep earning at least something and if you have treated them well in the past, you are more likely to gain agreement for a reduction in hours of work or days of work for a temporary period.  This means that you can keep going with the goodwill of your current employee base.  Make sure you gain all employees concerned explicit consent to short time working/days in writing. 
  7. Those employees with over 2 years service have a right to a fair dismissal – a redundancy process and a redundancy payout.  This is a strict process of consultation, fair selection for redundancy and notice of redundancy.  This is the final choice for you as a business owner as  there is a major long term impact of loss of experienced staff, pain of actually caring out the process and short term a redundancy payment bill. Potentially Tribunal claims if you don’t do it properly.  Of course, if you call us we can make sure you handle it all correctly.

Got people off sick or on Maternity? Unless your are considering a redundancy process don’t worry about those on long term absence – either sickness or Maternity, paternity etc.  If your contracts of employment are written well they are cost neutral until they return.  Let them know what is going on however.

Remember this are hard decisions, you will be affecting peoples lives.  But remember this, if your entire business goes down – everyone is out of work.


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