Expert View
CONSIDER ALL THE ALTERNATIVES
by Sally Eastwood Associate partner, Farleys
In the current economic climate, many businesses need to reduce costs but wish to avoid making compulsory redundancies as this could result in losing valuable skills and negatively impacting the morale of the workforce.
Pausing recruitment will ensure that your wage bill doesn’t increase. Whilst recruitment is frozen, you could look to redeploy and / or retrain employees at risk of redundancy to other roles in the business that are needed.
If the current workload can be completed without the need for overtime, you could reduce the amount of overtime employees are allowed to take to avoid paying out additional unnecessary wages.
There may be the potential to offer some staff the option to reduce their hours if
they wish to. These could be particularly attractive options for employees with additional caring responsibilities or those looking to reduce their hours as they approach retirement.
You might wish to consider the possibility of reducing hours or days worked for a certain team of employees on a temporary or permanent basis.
You would need to obtain the consent of the employees to avoid the risk of constructive dismissal and breach of contract claims.
If you feel like redundancies are your only option, consulting with your employees on the possibility of taking voluntary redundancy or early retirement could be a smoother process than compulsory redundancies.
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redundancy. Employees may also have various contractual entitlements and some claims can still arise without two-years’ service.
“The use of settlement agreements as an alternative to compulsory redundancies can result in prompt, amicable and advantageous employee exits and outcomes for your business.
“Settlement agreements can also be used to fast-track employee redundancies and remove the risk of grievances and claims, including those arising from disputed redundancies, against a company and its directors and officers.”
Gill Molloy, group tax partner at Champion Accountants, says: “There’s a good reason that the saying often associated with redundancies is ‘last in, first out’; because every year of service an employee has given to a company is a cost to the business if they are made redundant.
“As an employer, you have an obligation to pay a week’s notice for every year an employee has worked for you, up to a maximum of 12 years.
“This, however, only applies to those with two or more years’ service, with employers only required to give one week’s notice for those employed between one month and two years. Often, the discussion around the financial implications of redundancies is not simply ‘can I afford to keep employee X’, but ‘can I afford to make employee X redundant’.”
She adds: “Lots of companies have been built on a mantra of ‘our people are our biggest asset’ and it’s worth remembering that philosophy when it comes to redundancies.
“Yes, make the tough decisions early, before challenging finances spiral, but also be mindful of the importance of looking after good people.
It is always wise to hang on to valuable talent and those who are operationally critical to the company’s financial future.”
Louise O’Rourke says communication is vital. “You should think of how to support your staff at risk, think about offering counselling or financial wellbeing sessions, or offer more face-to-face meetings to keep the communication going.
“Redundancies don’t only affect those at risk, but they can have a knock-on effect on the business as a whole. The employees who remain may be unsettled and feeling vulnerable and if they think you’ve treated their colleagues insensitively or without respect you may create a negative work culture.
“Ultimately, if redundancies are necessary then consider how you would feel in the employee’s shoes, be understanding, be open and honest and don’t make any promises which are unrealistic and can’t be kept.”
Lisa Kennery, director of Blackburn accountancy firm Pearce, says: “Redundancies within any business is a stressful time and should be dealt with delicately.
“There is a process to follow and I would recommend all businesses to follow this no matter what size. One step in this process is to consult with staff and ask for alternative suggestions.
“Until these conversations take place you won’t know how flexible your staff will be. If redundancies do happen, you as the employer could link with similar businesses in the area to attempt to place staff in new roles. The key is having those open and honest conversations and communicating at every stage.”
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LEGAL VIEW
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