Cutting staff costs: the alternatives to redundancy

Challenging times continue for employers across every sector. Widespread cost pressures were even further amplified in April by the rises in National Minimum Wage and the increases in National Insurance contributions.

Inevitably we see many businesses contemplating significant cost-saving measures and the unpalatable prospect of cutting their workforce in response to the increased wage bill.

But is a round of redundancies the only option if you’re trying to balance the books when you’d rather be growing the business? There’s no easy answer, but it may be worth considering meaningful engagement with your employees to see if there are other options which will allow them to stay in work without the risk of job losses. Some ideas to consider:

1. Consider reducing pay across the board

No one wants their pay to be cut, but if an agreement could be reached to reduce salaries by, say 10%, for a fixed period, it may give the business breathing space, particularly if there’s a prospect of improvement in the foreseeable future. If you do consider this option, please speak to us first to obtain advice on minimising the risk of claims for breach of contract or unlawful deduction from wages.

2. Actively invite flexible working applications

Some staff may jump at the chance of reducing their hours (and with it, their pay) and making every Monday a day off, not just the bank holidays. If you do consider this, take care to set out the core principles which will apply to all applications, to ensure business continuity. Ask us for advice about what will amount to valid business reasons for turning down requests.

3. Propose the removal of costly benefits

The loss of valued benefits could be unpopular, but trimming the perks to keep everyone in work could free up valuable cash. As with any changes to contractual terms, please do speak with us before discussing with staff, so that we can guide you on the best approach to avoid risk of legal claims.

4. Secondments

Do you have partner organisations, suppliers or clients who would be interested in taking on any of your staff for an agreed period of time? With the right formal agreement in place, the arrangement could bring other benefits to your long-term relationship, as well as saving staff costs for the period.

5. Sabbaticals

Is there a member of staff who would like to take six months off for an important trip? Not many people can afford to be out of work in this way for an extended period, but there may be someone on your books who you want to keep for the long term but wants to spend an extended period with family abroad, for example. Speak to us for advice on how to deal with the contractual side and what a sabbatical agreement should contain.

6. Invite applications for voluntary redundancy

Let staff know that finances are tight, if they aren’t already aware. You may have someone on the books who would welcome the chance of leaving with an enhanced redundancy payment. When you invite applications, make clear that not all applications will be accepted, so that you limit the risk of key people leaving. We can advise on the best approach to the exercise to limit the risk of grievances or claims.

If there really is no alternative to making some roles redundant, planning is key. Your project plan for the restructuring exercise should take into account any need for collective consultation. This will apply if you’re proposing more than 20 redundancies and will mean that you need to allow longer for the consultation period, as well as for the election of staff representatives if you don’t have a recognised union or works council already authorised for the purpose.

Planning in detail the entirety of the process, from Day 1 of the management decision to cut jobs, right through to the day on which the affected staff will leave, will give you the best chance of avoiding the main risks to the business of such an exercise. Although the obvious risks are the disruption to operations, lowering of morale and the threat of tribunal claims from staff who believe they have been treated unfairly, the reverberations of a poorly handled restructure can be felt by a business for many months afterwards. Remaining staff may be distrustful of management or suffer “survivors’ guilt” that they did not lose their job while their colleagues did.

Speak to us as soon as you believe job cuts may be inevitable and we can support you throughout, helping you plan the process and minimise the risks. We can advise on the rationale for the cuts, the options for change, methods for minimising the disruption, such as putting at risk only the minimum necessary numbers, as well as the preparation of key documents and scripts for difficult meetings.

No business relishes being forced to make staff cut backs and our aim is to help you implement change in a pragmatic way so that operations are affected as little as possible in the short term and recovery starts to take effect.