Avoiding redundancies: Top tips to save costs without (permanently) losing staff

Whilst planning how to save costs in a business is a difficult and stressful and the ‘quick fix’ of lowering head count might be attractive, HR practitioners should not jump to the conclusion that redundancies are an inevitable part of the process. Redundancies tend to damage morale and may impact on a business’ ability to remain viable and to regain its competitive edge when the market picks up. Alternatives to redundancies are often not easy, but www.hrlaw.co.uk is here to guide you through the options!

With any of the methods outlined below, you must firstly ensure that the correct process is followed. In most cases the proposed change will require the express consent of the employee before it can be implemented. A Tribunal would also expect you to demonstrate that you have attempted to save costs through other means (such as cutting back on your training or client entertainment budgets) before taking steps which impact on your employees’ earnings. Below are some possible alternatives to redundancy:-

• Reduction in hours / days worked: Consider introducing a reduction in hours or days worked for certain groups of employees. This can be an effective way of reducing costs without making compulsory redundancies. If this approach is adopted, care will need to be taken to ensure that the business has the right to require those employees to work full time again once levels of work pick up.
• Reduction in salary / cease overtime payments: Clearly this will need employee consent, but many employers are considering these types of arrangements as a means of avoiding compulsory redundancies. Where these changes are led by management (and where management therefore accept cuts themselves) we have seen success in implementing such changes across the workforce. A recent case in the employment tribunal, Garside & Laycock v Booth [2011], looked at the situation where an employee was dismissed after refusing to accept a pay cut that was being implemented across the board. The key question was whether the employer has acted reasonably in all the circumstances, as opposed to whether the employee thought the change was reasonable, which is worth bearing in mind if you are faced with such a dilemma.
• Seek candidates for voluntary redundancy: Before making compulsory redundancies it is often a sensible idea to see whether there are any employees who would be willing to take voluntary redundancy.  This is still deemed to be a dismissal by the employer, so a fair process will need to be followed, and an attractive redundancy package is usually required to incentivise employees to accept.
• Early retirement: It is also worth making enquiries as to whether employees might want to take “early retirement”. Although an employer can no longer forcibly retire an employee (unless it is able to objectively justify a retirement age), it is open to employers to ask staff if they are interested in taking retirement earlier than they might have planned. Note though that all staff, young and old, should be asked about this, not just those staff who an employer might think are approaching retirement age.
• Buying extra holidays: who wouldn’t jump at the chance of extra holiday?! Companies often offer employees a proportionate reduction in salary if they agree to “buy” extra holiday. This is a similar idea to the voluntary sabbaticals, but for a shorter period.
• Voluntary sabbaticals and secondments: Consider whether employees may be interested in taking voluntary sabbaticals, either unpaid, or paid at a greatly reduced rate of pay. Similarly, an employee may temporarily move from one business to another for an agreed duration of time. This option provides an employee with the opportunity to gain experience in another company whilst removing the financial burden on the original employer with regards to a salary.
• Deferral of job offers made to graduates: This is not a solution which will work for all businesses, but some organisations have offered graduates a fixed sum of money (between £5,000 and £10,000) if they agree to delay their contracts for a year. This gives the graduate the chance to go travelling or undertake voluntary work, whilst at the same time reducing immediate overheads for the firm.
• Recruitment freezes: These have already been adopted by many employers in response to the downturn in current economic conditions. Even if you have a recruitment freeze, you may need to review this if employees in certain key roles leave unexpectedly.
• Retraining and reorganisation: Can you re-train employees and fill vacancies in some departments with those who are at risk of redundancy in other departments?
• Remove discretionary benefits: This needs to be done very carefully as in some circumstances a benefit may have become contractual (even if it is stated to be “discretionary”).
• Ask the employees: Ask the employees if they can come up with any innovative ways of reducing costs whilst avoiding redundancies. Even if the employees are not able to formulate any good ideas, by involving them in the process, they are likely feel a greater sense of camaraderie and may therefore be more open to some of the options.

Whilst these measures won’t suit all businesses, it is worth considering some creative solutions to see whether it is possible to avoid compulsory redundancies and to retain some key employees until the market recovers. If none of the selected options are viable for your business then ensure that a fair selection process is used for deciding who should be made redundant.