How to reduce the impact of Redundancy on your business

It’s inevitable that there will be redundancies as a result of the current crisis. Experts are warning that hundreds of thousands of jobs could be lost.

Most businesses will want to avoid redundancies and retain their best staff for when it’s business as usual again. Rehiring staff can be costly and inefficient (particularly if you have made people redundant – employees don’t have to pay that back), which can lead to the business taking longer to get back on its feet. 

However, in the current environment, limiting redundancies is a big challenge for businesses. Therefore developing and implementing a combination of cost cutting and different workforce management strategies is essential.

Contingency & Financial Planning For Cutting Costs

Sound financial and contingency planning is at the core of any successful business, but even businesses with strategies in place to deal with unexpected scenarios will struggle given the unprecedented scale of the current crisis. Most redundancies come about as a result of the need to reduce business cost, so firstly, it’s important to look at other ways of cutting costs.

Initially, this means examining what you can do to adapt your business model or work processes to stay in business throughout the crisis.  

Here are the actions in the order I would advise a client to follow, if they said to me,  “I need to reduce staff NOW!”

1. Furlough and flexible furlough employees wherever possible and remember that this needs to be agreed in writing and that you need to retain records for at least 6 years in case of audit by the HMRC or potential employment law claims.

2. Ban overtime and any other enhanced payments, unless business critical and make sure it is ALWAYS authorised in advance.

3. Look at any agency workers or consultants first – In the current crisis, this usually has been done – only business critical roles should be retained.

4. Another option is to offer unpaid sabbaticals or unpaid leave. You might be surprised how many employees are willing to take up the offer of unpaid leave to spend quality time with their families or on a personal project.  Taking annual leave entitlement is a longer term cost reduction, as you still have to pay holiday pay therefore no immediate cost saving.

5. Look at any temporary or fixed term employees, 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.

6. 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.

7. 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 4 weeks and on the guaranteed payment of maximum £29 per day for a maximum of 5 days in a 3 month period. Don’t do lay-of or short time working for more than 4 weeks continuously or call us if you are thinking of any other time period or part time lay off’s. If no, its not an option for you in this crisis – come and speak to us about re-designing your contracts of employment.

8. 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 pay cut, reduction in hours of work or days of work for a temporary period or permanently. This means that you can keep going with the goodwill of your current employee base. Make sure you gain all employees concerned explicit consent in writing.  

9. Redundancy.  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 carrying out the process and of course, in the short term, a redundancy payment bill.  There is also the potential of Tribunal claims if you don’t do it properly. Of course, if you call us we can make sure you handle it all correctly.

If redundancy is ultimately a route you need to take, it’s important to ensure it’s done correctly to minimise the

 impact on your employees. 

Breathing Space HR offers a Redundancy Support Package £400+VAT 

For more information contact admin@breathingspacehr.co.uk.