You don’t have to search very hard at the moment to find stories such as this which predict a massive increase in UK unemployment when the current furlough scheme ends. Consultation rules in the UK say that you must consider alternatives to redundancy as part of the process. However, it’s not always that easy to identify any alternatives. So what alternatives are there to making staff redundant?
Alternatives to redundancy - releasing contractors
One of the first steps businesses will take is to release contractors. By contractors, we are referring to genuinely self employed people and not people employed on a fixed term basis by the organisation.
However many contractors are brought in to fill skills gaps in the organisation. So this approach may only work if you employ people with the same broad skill set.
Alternatives to redundancy - short time working
One option open to employers is to temporarily reduce hours of work. This is known as ‘short time working’. If you have a contractual clause that specifically allows this, then you can reduce salary accordingly.
Alternatives to redundancy - not filling vacancies
In higher turnover businesses, you may be carrying sufficient vacancies to allow you to make the cost savings you need by simply not replacing people as they leave. This won’t work in business critical roles and you should keep a close eye on remaining staff to ensure that they don’t become overburdened.
Alternatives to redundancy - reducing pay and benefits
Another option that is used is to reduce pay for all employees. This can be done on either a temporary or permanent basis. This is achieved primarily by consent. The senior team would present the request and ask people to voluntarily take the cut.
Usually leading by example and promising that normal salaries will be resumed when the economy picks up will secure a high percentage of volunteers. However if the employees don’t agree, you can look at dismissing and reengaging on new terms. This approach is fraught with potential issues so take advice before contemplating this! If you are decreasing salaries by a fixed percentage, you should also check that no one will drop below minimum wage levels.
Where cash flow is an issue in the future rather than now, wage freezes may achieve the desired goal.
Another element of remuneration that can be changed is entitlement to bonus or commission. Again this would need to be consulted upon.
Benefits can also be reduced, such as pension contributions (where you pay over the automatic enrolment minimum)
But what do you do if your employee doesn’t agree? In this case you could dismiss the employee for some other substantial reason but you would need a compelling business case to be able to successfully defend a claim of unfair dismissal.
Reducing or stopping overtime
A less dramatic way of reducing the salary bill is to stop overtime. Clearly this will only work if overtime is contractually payable and often available. It will also depend on whether the overtime can be cut in a team where you have spare capacity.
Do these alternatives to redundancy work?
Sometimes but not all the time. If a role is genuinely not required due to technological or organisational reasons then these options are unlikely to affect the end outcome. However, we would encourage leaders to consider all options before deciding that reducing headcount is the best way forwards.
About Cornerstone Resources
Cornerstone Resources are experienced HR professionals. We have helped organisations across the UK to successfully complete both collective and individual consultation programmes. Contact Rob on 07494 161169 or Nicci on 07908 875146 to talk about how we can help you with your redundancy programme.