Wake-up call: what are the alternatives to redundancy?

It may be possible to avoid the cost of redundancies, whether that’s through voluntary retirement or redeploying your people, says Ed Cotton.

The problem

We’ve been faced with some really tough staffing decisions over the past year, not least the prospect of needing to make redundancies. While we are hoping for an uninterrupted summer of ‘normal’ business, government scientists say stronger restrictions could be needed this autumn and winter to manage a rise in coronavirus cases, and the furlough scheme is being phased out and is due to end in September. So what are the alternatives to redundancy?

The law

Redundancy is a tried and tested method for reducing headcount and costs. However, it is a long-term and costly solution, and risks losing valuable members of staff at a time when the industry is already facing staff shortages and a recruitment challenge. Redundancy can also have a negative impact on staff morale and carries reputational risks.

If you are looking for a short-term solution – while the business goes through a difficult period, for example – there are a number of alternatives you can consider.

Reducing headcount

One means of reducing headcount is a recruitment freeze, including deferring new joiners. An offer can be withdrawn without payment in lieu of notice before it is accepted. After then, damages will be limited to the notice period. Employers should be careful not to terminate for a discriminatory reason.

Another option is to reduce agency, temporary and casual staff. Note, however, that casual staff are taken into account for the purposes of collective consultation.

There is also early retirement, but this must be a voluntary decision. Employers should be wary of age discrimination claims from targeting people individually. Also, consider the effect on the employee’s future pension entitlement and the cost to the business.

Voluntary redundancy can also be encouraged by putting enhanced payments on the table.

Redeployment

Something many businesses have done successfully during the pandemic is redeploy staff to different roles to fill vacancies, either on a temporary or permanent basis. Large-scale redeployment can trigger collective consultation depending on how many employees resist this change.

Secondments, for example to an associated company, can also help reduce costs. This is a temporary solution but can bring useful new skills back to the business.

Temporary stoppages

Your policy might allow people to take unpaid leave, and you are free to change the rules, for example on how long they can take. You can also encourage people to take holiday, and if your contract doesn’t allow this, you can give notice to take holiday under the Working Time Regulations.

Reducing hours

Employees may be open to reducing their hours or a job share, especially if the alternative is redundancy. You can invite employees to submit a request for flexible working – either on a temporary or permanent basis – and waive the criteria for 26 weeks’ continued service.

Employers can put a ban on voluntary overtime. If this is a contractual right of the employee, they must agree to this change, and employers should beware the risk of indirect discrimination claims.

Other alternatives include lay-offs and short-term working, but you need a contractual right to do this or the employee’s express consent.

Reducing costs

Ways of reducing costs include pay freezes, which are unlikely to be a breach of contract; pay cuts, which require consent in writing and advance notice; and removing bonuses.

To-do list

• Think: are you looking for a short-term or long-term solution?
• Remember that employees may be more willing to agree to alternatives at the moment
• Remember that redundancies are costly and have other detrimental effects
• Consider if you can make savings in other areas
• Be as open with staff as possible
• Use honest figures to demonstrate savings
• Lead by example
• Retain the flexibility to reverse arrangements.

Beware!

Be mindful of triggering collective consultation, and the risk of direct or indirect discrimination claims.

Contact

Ed Cotton is partner at TLT LLP: ed.cotton@tltsolicitors.com

Photo: denis kalinichenko/Shutterstock.com