Alternatives to UK Redundancy!

In the wake of the economic downturn, businesses of all sizes are experiencing a downturn in business. Some of the larger retail chains have gone into administration and many are still struggling, while many other businesses across all sectors are making job cuts.

It’s a tough period for the economy, and it might even get tougher in the coming months. So what do you do if you run a business and are finding it difficult? Well, the easy option for most employers is to make redundancies, but is this really the best option? Of course, if there is less work to be done, or the need for fewer employees to do the work, then there is obviously less requirement for employees and redundancies may be the logical choice.

There are, however, disadvantages as well. Firstly, negative publicity from redundancies can affect the business, especially larger ones, to the point where the adverse impact may override the savings made through the redundancy process. In addition to this, the one-off payments made to the unfortunate people who are losing their jobs can affect the cash flow of the business, which can cause obvious problems. Perhaps most importantly, there is also the issue of losing a skilled workforce. Most employers invest significant sums in training and developing their workforce, and redundancies mean that these investments go overnight.

But what are alternatives? Employers don’t generally consider redundancies unless they can see no other option. However, there are numerous ways in which employers can reduce staff costs without necessarily making redundancies. These include the options of Lay Off and Short Working Time, changes to Terms and Conditions of employee’s contracts, changes to Pay, Overtime, and Discretionary Benefits, Sabbaticals, and Retirement.

Lay Off and Short Working Time is essentially a reduction in work that can effectively reduce the employee’s pay for a week by more than half. This, of course, reduces staffing costs. Under the Employments Rights Acts 1996, the employer must propose a reduction of 50% or less in the employee’s hours.

Generally, this is appropriate with regards to a temporary reduction in work, such as seasonal work. Employers must, however, have an express contractual right to do this, or, alternatively, have obtained the employee’s agreement. Without this, an employee may be able to claim, for example, constructive dismissal, as a breach of contract has occurred. The rules can be complex, and it is best to seek professional legal advice before implementing any such changes.

If proposing a reduction of 50% or less in employee’s working hours, the correct approach is generally to change some of the Terms and Conditions in employee’s contracts relating to pay and hours. This can also be used where no contractual right for lay off or short working time. Nonetheless, it pays to be cautious here as changes often rely on flexibility clauses and any ambiguity will be construed against the employer by the courts. Again, it is important to seek professional legal advice if considering such actions.

In terms of Pay, Overtime, and Discretionary Benefits, an employer might reduce staffing costs by implementing a freeze on pay rises or a ban on overtime working. Before doing this, however, employers need to be careful that they are well aware of any contractual rights the employees may have in regards to pay increases or guaranteed overtime working. It is rare that employees do have such contractual rights, and therefore implementing such a strategy is usually straightforward.

Withdrawal of other so-called discretionary benefits such as bonuses, incentives, share options and allowances is another popular way of cutting back costs. However, caution should again be taken when deciding whether such benefits are, in fact, discretionary or contractual. Professional legal advice would once again not go amiss.

Other options include employees taking a sabbatical, which is an agreed period of unpaid leave from work, or retirement. Both options have their benefits and disadvantages, and again they must both be done by the letter of the law to protect the employer.

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