Unpredictable customer demand and uncertainty feel very much a part of everyday life at the moment. For many businesses, staff costs are the single largest expenditure, so balancing spend against output is a key consideration – particularly in sectors where the order book is a lesser-known quantity – and the topic of redundancies is often discussed.
Many businesses may find themselves looking at what they need to do to adapt and help to safeguard their future. This is no mean feat.
So what can you do to reduce costs and avoid a situation where a headcount reduction via redundancy is necessary? First let’s start with options.
12 Alternatives to Making Redundancies
- Compulsory holiday
- Overtime ban
- Career breaks
- Unpaid leave
- Lay off
- Short time working
- Recruitment freeze
- Natural attrition
- Flexible or part-time working
- Policy changes
- Pay cuts or pay freezes
1. Compulsory holiday
You can ask staff to take holiday in downtimes which not only helps control work distribution but also helps the operation during busier periods by ensuing a full headcount is available and hopefully means the need for overtime is minimised.
Be careful how this is applied though. If there is minimal leave to take later in the year, burnt out staff can be a real problem as they are not as effective and could result in unwanted turnover. As one of the most highly prized employee benefits, limiting the scope for personal choice in how this is used may have a devaluing effect. Mandated leave is also likely to impact the cost and location of a holiday, or whether the employee is able to spend that time with friends and loved ones.
Ensure correct notice is given to take holiday – either follow contractual terms or your company policy. In the absence of this, the general rule is that notice twice as long as the leave to be taken should be given i.e two weeks’ notice to be given for one weeks’ leave.
2. Overtime ban
Stopping overtime where non contractual is simply a matter of transparent communications. Where you are specific about which areas of the business this applies to, why and the timeframe, it’s more likely people will understand and buy into this measure.
However, if this is contractual or if you suspect this might be considered contractual through customer and practice (i.e clear history of this being used frequently or with known rules etc) it will be necessary to agree this prior to application.
If contractual, it is advisable to get any agreement to vary this term in writing.
3. Career breaks
Arguably more practical in larger organisations or for more senior employees who are more likely to have larger savings pots to rely on. Nevertheless, don’t make assumptions! You are unlikely to know the ins and outs of personal finances so remember to offer to all.
Career breaks allow people to remain an employee, but they agree to receive no pay during the career break. It’s a policy matter whether they continue to receive other benefits, such as company car, health care etc.
If you are considering this, a top tip is to reserve the right to turn down volunteers to avoid a situation where it negatively impacts key parts of the operation.
4. Unpaid leave
Usually, a few weeks or a month is needed to see the benefit of this option in reducing wage costs.
In all cases it’s necessary to get the employee’s agreement, so better to ask for volunteers in the first instance.
This is a good short-term measure which may suit both parties while also protecting employment. While not legally required, it’s best practice to put any agreement in writing.
Lay-off is when an employer takes an employee off work and off pay for at least one working day. Effectively it’s sending the employee home temporarily. It is used as a response to a lack of work, and again, an alternative to making redundancies.
There is a statutory scheme for lay-off, but a lay-off clause in the employment contract is required in order to implement this. That said, if you have no existing contractual right, you can ask people to agree to this. Often if it is known this is a last resort and that more permanent solutions, such as redundancies, may need to be considered, you may have some employees accept.
Invoking a lay off is a specialist area of HR and we would advise you seek professional support if considering this.
6. Short-time working
Short-time working is similar to lay-off, but rather than providing no work, the employer provides some, reduced, work. So, in effect is reducing employees’ working hours.
As with lay-offs, an express clause in the employment contract is required in order to implement short-time working. If you have no existing contractual right, you can ask people to agree to short-time working.
Employees who put on short-time working or lay-off are entitled to pay for days they do no work at all. This is called statutory guarantee pay and is the legal minimum an employer must pay.
Statutory guarantee pay is £30 a day for 5 days in any 3-month period. Employees who usually earn less than £30 a day will get their usual daily rate. The maximum an employee is entitled to is £150.
If an employee works part time, their entitlement is worked out in proportion to their part-time hours.
Employees can however apply for redundancy and claim redundancy pay if they’ve been laid off or put on short-time working and receive less than half a week’s pay for:
- four or more weeks in a row
- six or more weeks in a 13-week period
So while this can be a very low cost solution, it really is a last resort before needing to commence compulsory redundancies. Equally, the specific rules and criteria above can be quite complex to navigate particularly where larger groups of the workforce are involved.
It is therefore always advisable to seek professional advice if you are considering this option.
7. Recruitment freeze
By applying a recruitment freeze no additional costs are added to the pay bill but care in application is required, as a blanket ban is a fairly blunt tool.
Critical positions which service customers or is a key source for chasing debt or generating higher levels of demand are likely to still be needed. So while hiring during difficult times might initially seem counterintuitive, it may be vital to you staying afloat.
If budget is really tight, consider the potential of redeploying people from one area of the business to another. Time now saved not having to recruit could be better spent, retraining and upskilling existing employees. Also, continuing to invest in workforce skills is a far more powerful message so don’t miss the opportunity to communicate this.
8. Natural attrition
Natural attrition is voluntary leavers over the course of a year.
Over the past few years, UK turnover has sat around 15% per annum though this varies hugely dependant on sector. So if you are planning to strategically downsize your business, would you consider cutting more than this percent of your workforce?
If you don’t feel confident about the number and reason for leavers establishing your natural attrition rate is certainly data you need to know to help make a more informed decision.
Allowing attrition to happen organically should be considered one of the least risky options, and removes the angst around more compulsory options, however by not backfilling roles it may mean heavier workloads for others.
It also means you have far less control in determining where job losses take place. Explaining why you are not backfilling and recognising the reality of this decision (bigger workloads) for the team, will at least show you have weighed up all the options.
Also bear in mind, movement in the jobs market has slowed as people take a more cautious approach during these uncertain times. So if action is needed now, it might be prudent to consider other options.
9. Flexible or part-time working
For many, one of the benefits the pandemic has brought is a reprioritisation of personal and social lives. Coupled with the fact many employees have now by necessity experienced a range of flexible working arrangements, perhaps due to self-isolation, childcare or other needs. Flexible working options such as part-time, compressed hours, varied start and finish times now feel much more achievable.
Just as views on where people prefer to work have altered, so have perceptions around the amount of time needing to be spent focused on work.
Again, don’t make assumptions here. You may now have a much greater pool of people who would consider this suitable for them.
10. Cross-training or multi-skilling
As mentioned above, a recruitment freeze is preferable to entering into a redundancy situation. However, you might still need to cover certain tasks, and cross-training or multi-skilling your existing employees could help.
Bear in mind it’s a perfectly legitimate expectation that by increasing knowledge and skills, multi-skilled employees are more valuable. So you should expect some form of recompense may be needed.
Again, think about the low-cost solutions. The pandemic has certainly taught us that flexi time, hybrid or home-working can work. Failing that, a future bonus or incentive if certain performance targets or outcomes are met is perhaps another carrot to help get buy-in for this option.
11. Policy changes
Some company policies are contractual or have become contractual over time through customer and practice. Key ones to look at here are sick pay, overtime, redundancy, expenses, and training.
If these are no longer viable due to the costs involved, discussions with your employees are helpful (even if not legally required) so they understand why the change is necessary and feel included in the decision-making process.
Being open and honest about alternatives i.e salary cuts or potential job losses will also help people to contextualise the predicament. The principle of prioritising all other areas first to save money rather than electing for headcount reductions is hard to disagree with.
12. Pay cuts or pay freezes
You will need express consent from people to implement a pay cut. Otherwise, you risk a breach of contract and unlawful deduction of wages claim.
If you can’t persuade people to agree, you can give notice to end the existing contract and rehire on new terms. This is a dismissal in law so dependent on the employee’s length of service, there may be a risk of an unfair dismissal claim. But as long as there is a sound business reason (as judged by a reasonable employer) this is likely to be deemed as what’s known as a “some other substantial reason” dismissal, which can be a fair and legal reason for ending employment.
Again, where unpopular measures are being considered, think about sweetening the deal in some way – working from home, flexible start and finish times are often highly prized by employees.
As this option will only offer a future saving, short-term immediate measures may also need to be considered in conjunction if cashflow is particularly precarious.
How to approach redundancy with employees
Now let’s talk about approach. It goes without saying meeting your legal obligations is the minimum that’s required. But how these options are handled could be the difference between success and failure.
Being well prepared with facts and data, as well as approaching things with honesty and transparency is a good starting point. You’ll get far more acceptance and understanding where you level with your employees.
It’s also important to note, none of these options come without some form of downside. Whether that’s an immediate negative impact on morale or potential for creating turnover among some of your best talent further down the line – particularly if things don’t return to previously experienced levels.
Putting yourself in their shoes will help you anticipate likely questions and should enable you to present a clearer picture of what needs to change and why, without glossing over the impact on individuals.
Sufficient details such as when and how long for will also help add reassurance measures are temporary, rather than a full-scale shift in culture/policy or watering down of the employee offering.
Finally, there is a balance to be had between being transparent and unsettling people. If adopting any of these measures will genuinely prevent future job losses, then say so. If on the other hand it is more hopeful optimism before inevitable job cuts, a more dogmatic approach may be required.
About the author
Claire holds a depth and breadth of experience in HR, having operated in standalone roles supporting senior leaders, as well as leading HR/payroll teams operating at Board level. Working across a variety of sectors, from micro businesses to multinational blue-chips, Claire is passionate about finding solutions to help business succeed in their goals.
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To chat to Claire Antony about this topic, email firstname.lastname@example.org or call 0116 340 3116