Furlough pay has assisted many organisations in subsidising payroll but as the furlough scheme starts to drop away, so the payroll cost for struggling employers looks set to return. Many employers are left working out how to go about cutting one of their biggest costs, payroll, whilst keeping a business fit for future growth, particularly if recession is “V” shaped. There are also concerns about a second pandemic wave not to mention local city/town lockdowns and of course lockdowns of individual workplaces.
This note isn’t intended as a comprehensive legal advice. As always, specific advice should be taken tailored to the needs and context of your business and your workforce.
Here are my top ten tips for saving costs whilst going through a redundancy process.
Ten tips to saving your business whilst saving costs
- Firstly, there must be a redundancy situation i.e. a business closure, workplace closure or less work to do for the employees involved. You will need to think about what shape you need the business to be in after the redundancy programme has been completed. Which skeleton staff will leave you in the best position for the future?
- Check how many roles are at risk of possible redundancy as the rules on which procedure to follow differ depending whether 20 or more roles are impacted. Remember that there are additional obligations where more than 20 roles are to be made redundant in a 90 day period at any one establishment. This note applies to situations where less than 20 roles are potentially at risk.
- Reflect: check employment contracts for clauses that might be useful to you such as a “lay-off” or “short time working”. Are the steps you propose to take, reasonable “in all the circumstances”? Engage in meaningful consultation. Start consultation early enough for this to happen.
- Decide what the “pools”, or departments, of roles are from which you propose to make redundancies. What work is disappearing? Are there any employees who do more than one job? If putting a wide pool “at risk”, how will you address issues of morale for those roles put at risk when you do not wish to upset skilled staff.
- No employment tribunal judge will expect you to retain your weakest performing staff. How will you objectively decide which staff are those the business will need to get you back to best performance? Rule out personal or discriminatory selection criteria and don’t just focus on those who have been furloughed. What skills will you need in the business going forwards? Watch out for appraisal records which show staff in glowing terms when scoring the same staff lower during the redundancy process.
- Recruitment can cost money so it is worth genuinely considering whether there are alternatives to making roles redundant. Don’t just pay lip service to this. Are there creative alternatives such as job shares or flexible working?
- Make sure you’ve properly consulted before giving employees notice of their employment ending.
- Calculate redundancy costs before starting the process and check whether there are any contractual enhancements to take into account.
- Look out for hidden costs including: management time dealing with consultations, defending claims that might come afterwards, allowing staff time off to look for work during their notice periods if they have been told their roles is redundant, a fall in productivity during consultation as well as the costs of any adverse publicity. Dismissing by text isn’t going to get you a good reputation for the future. How will you handle communications with suppliers, customers and other stakeholders?
- Consider alternatives including: a recruitment freeze, postponing new recruits, secondments, redeployments and reviewing those who may already be subject to performance management, pay freezes and agreed temporary or permanent reductions. But beware of improperly freezing or cancelling bonuses. Think about whether existing reward packages might be restructured in a more cost effective way. Can unpaid time off or sabbaticals be agreed? Existing staff know you and know the business. Can staff be coached into new roles?
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