These are difficult and uncertain times. With the recent news that we are formally in a recession, people’s economic situations are in jeopardy with the impact on people’s health, wealth, and well-being a huge concern.
Looking to save on staff costs without resorting to redundancies?
Discover effective strategies for blockading ways to cut expenses while keeping your team intact. Unlock creative solutions, smart techniques, and friendly approaches to optimize your budget without sacrificing valuable employees. Let’s explore cost-saving alternatives together!
The Chartered Institute of Personnel and Development estimates that a quarter of UK employers are expected to make some redundancies due to the pandemic (survey conducted by People Management and the CIPD April 2020) and this is likely to be higher as the months have passed.
With the Furlough Scheme (Coronavirus Job Retention Scheme) currently being drawn to a close in October many people are concerned for their jobs and livelihoods and worried that they will be made redundant prior to the scheme ending. Organisations are at risk of losing their talent and skills and this will inadvertently hinder their recovery and moving forward.
When carrying out redundancies employers must be aware that employees with two years’ service or more are protected from being unfairly dismissed so it is important that organisations are able to demonstrate that it is a genuine redundancy situation and that a fair procedure has been carried out. Part of this is to demonstrate that all other options have been considered prior to compulsory redundancies being made.
Identifying other options also helps the organisation retain their staff; their skills, expertise, and knowledge to support the business in moving forward.
So, with this in mind, what other options are available to businesses to avoid redundancies whilst still needing to cut staff costs?
Coronavirus Job Retention Scheme (Furlough)
In 2020 ‘furlough leave’ and ‘flexible furlough leave’ are commonly heard phrases. This scheme was bought in to provide support to businesses and to avoid redundancies where possible. The Government guidance refers to the Furlough Scheme as an alternative to redundancy and the guidance urges companies to instigate redundancy as a final option.
The scheme is being wound down at the end of October with the introduction of employer contributions taking place over August, September and October. The Coronavirus Job Retention Scheme has been an alternative to redundancy for many employers.
However, if an employee has not been placed on Furlough Leave for a full 3-week cycle prior to the 30th June, then unfortunately this is not an option for the business.
If, however, they have, then, with agreement there is still the option to place an employee on Furlough and Flexible Furlough Leave albeit with some cost to the business up until the end of October.
If a company is looking to cut staff costs through redundancies and there is the option to utilise this scheme then it would be prudent to be clear on the justification and business case for going forward with compulsory redundancies should this be challenged as an unfair dismissal in the future.
Although there is this option available at present, it is not available to all. Taking a planned approach will support an organisation in considering all alternative approaches. These can include but are not limited to the below.
Lay Off Self-Employed Contractors
A starting point is to review the current workforce and to release any self-employed contractors or associates where possible. This work may be covered by the existing working force; retraining and redeploying into these roles if suitable and able to do so.
Limit or Stop Overtime
Reducing unnecessary costs through overtime payments may be an option. If moving forward with this it is important to communicate effectively and review contracts of employment to ensure that there are no breaches of contractual clauses.
Lay Off and Short Time Working
If a business is unable to use the ‘Furlough Scheme’ they may wish to consider implementing ‘lay offs’ or ‘short time working’. These are temporary changes that can support the business through a time when cuts are required.
A lay-off occurs when an employee is off work for at least 1 working day, short-time working is when an employee’s hours are cut. A layoff or short time working can only be unpaid if there is a specific clause in the contract to do so, or an agreement is made between employer and employee.
It’s important to note that should this option be instigated the employer must be fully aware of the rules and statutory payments around lay-offs and short-time working so, before this option is taken, it is advisable that employers review government guidance prior and again, check the contract of employment before making any decisions.
Reduction in Salary
Employers may need to explore the option of cutting pay to reduce costs. To make this change businesses must consult with their employees and seek to reach an agreement to avoid, for example, any contractual or constructive dismissal claims.
Any decisions that are made must be fairly applied and not be discriminatory in any way (based on any protected characteristics under the Equality Act 2010).
Recruitment Freezes and Retraining
By having a recruitment freeze it gives the opportunity for roles that become vacant through natural wastage to be filled by existing employees where suitable. Retraining and redeployment will result in headcount reduction without the need for compulsory redundancy.
There are a number of options that employers can seek voluntarily from their employees that may support the business in the short term. Asking employees if anybody is interested in a temporary job share is one of them – do you have any employees that would welcome a period of part-time work?
Is there anyone within the business that would be interested in taking a ‘Sabbatical’ whereby they take an unpaid period of leave, but their contract of employment and length of service continues?
Offering Voluntary Redundancy
Although this does not avoid redundancies this can avoid the need for compulsory redundancies. Employers do not have to accept the application for this if a job role is important to the business.
Many of the options above rely on employers seeking agreement with employees.
Making changes that affect people’s terms and conditions of employment can be emotive and affect their well-being and financial situation even if the long-term solution is to protect their jobs.
Changes made without a planned approach and consultation also put the business at risk of future claims which can be costly in terms of time and money.
It is important to give consideration to this from both a legal and long-term engagement perspective.
Companies should take a planned approach, review all resources and options available, and communicate.
They should seek advice and be sure to check all contracts of employment to be fully informed and avoid costly claims in the future.
Explain the situation to employees and consult with them. Ask them for their suggestions – businesses may find that their employees can supply options that have not been considered.
By involving employees and explaining the reasons for the decisions, agreement is more likely to be achieved. People may not like the changes but will accept them as they understand them as a way to protect their long-term future with the company.
As always, communication is the underpinning key to successfully managing employee relations and change. If you need any specialist guidance then speak to our HR support team, they will be more than happy to help.
A lot of companies take small costs for granted, but it adds up. Ensure you are taking everything into account by working with experts. Contact us via our online form, or give us a call on: 0330 400 5490.