Five possible alternatives to redundancy when you need to cut costs

September 21, 2020

Current levels of business uncertainty are difficult to ignore. As lockdown eases and the furlough system comes to an end, redundancy is the next consideration which many company owners and managers may have to make.

Redundancy is not something which businesses enter into lightly and it is a last resort when costs need to be cut significantly, and rapidly.

However, for some there are alternatives which merit further investigation, each achieving substantial cost reduction whilst saving jobs in the longer term.

Here are just 5 which we think businesses could consider: -

  • Reducing employee pay

Whether through cutting salary or cutting hours (or both), you must have a specific clause in your employee contracts to allow this and ultimately you will need to obtain employees consent through consultation (a step which we thoroughly recommend anyway for smooth implementation and which will be a legal requirement in certain circumstances). However, we urge caution when considering this particular route as it involves changing employee terms and conditions and can have wider legal implications.

  • Withdrawing perks

This may be the removal of employee incentives or the revision of contractual schemes such as enhanced sick pay or maternity pay. Whilst more subtle than a straight-forward reduction in monthly pay, it will still reduce longer-term outgoings. Again, this route requires there to be provision within the original employee contract to be able to implement changes, and there should be discussion and consultation with those affected before it is applied.

  • Revising job roles

You may have employees who are underused or could be much more productively employed in another role. You may even be understaffed in busier areas which has lead you to consider costly recruitment. A full review of staff roles will identify if existing employees could be smartly redeployed– providing of course that they have the right skills and are open to the arrangement!

  • Revisiting outstanding job offers

If you previously had vacancies to fill and have issued offers of employment to successful candidates you may want to review these. The working landscape probably looked totally different when interviewing and the role may no longer be a priority. If a formal offer has been sent (and verbal agreement made) tread carefully to avoid a breach of contract and consider a notice of termination instead.

  • Introduce short-time working or layoffs

If you have a contractual provision to enable you to adopt Short-time working or layoff, or an express agreement to do so, this could prove invaluable as a short term solution. Short-time working involves the temporary reduction of staff hours, whereas with layoff you provide neither work nor pay (usually the final step before redundancy). If you wish to consider this you should be aware that employees will be entitled to make a request for statutory redundancy pay after 4 consecutive weeks of continuous lay off or short-time working or 6 weeks in a 13 week period (subject to certain conditions).

How can we help?

At CoLaw we understand that redundancy may be the only real answer to current trading challenges but our job, as Employment Law specialist is to advise our clients on all of the options they might have and find the very best solution both commercially and pragmatically.

The information provided in all of our blogs reflects only a narrative of some elements to consider on the topic. The blogs do not contain considered legal advice and should not be relied upon as advice. Please see our website terms and conditions for full details of our disclaimer. If you are interested in obtaining advice, please contact one of our lawyers who will be happy and able to advise you on your own particular circumstances.