What are the alternatives to redundancy?
In these uncertain and difficult financial times, many employers are facing significant financial pressures, and are looking at ways to cut costs. Therefore, they might be considering making redundancies in order to reduce headcount and costs. It’s important that you consider alternatives to redundancy before reaching this conclusion.
Redundancy is a tried and tested approach for reducing headcount and costs. However, there are many disadvantages to making redundancies within your business, such as – losing experienced and skilled staff, impact on team morale, risks of tribunal and also grievance claims. Before beginning any consultation process, here are some alternatives to compulsory redundancies that we suggest:
Employers can also ask for volunteers for job shares. This arrangement allows two (or more) employees to split a full-time job between them. An agreement between the employer and the relevant employees is made regarding hours, working days and how the role will be managed. These alternatives to redundancy will evidently cut costs for the business without having to make that difficult decision.
Flexible working patterns
Employers can invite employees to enter into a flexible working agreement. This solution reduces employees’ hours/days of work, which in turn, reduces their salary. This agreement can be on a temporary or permanent basis. In order to mitigate any risk of constructive dismissal claims or breach of contract, you must ensure that the employee also consents to any change to their contract of employment.
Pay / Bonus / Staff Allowance Freeze
This is not a popular choice however it may be a more preferable alternatives to redundancy. Many organisations have a pay and/or bonus review each year. However, that doesn’t necessarily mean a pay rise must be given. Enforcing a salary and/or bonus freeze can result in significant savings for any business. Furthermore, a pay freeze would typically only be for a period of time, usually for 12 months or until the next pay review.
Reviewing a reduction of staff allowances, such as a working from home allowance, or mileage allowance is another good way of reducing costs. Ensure any pay/bonus/staff allowance freezes are carried out fairly as only freezing for some employees may result in unlawful discrimination on the basis of age, race, sex, and disability. It is also important to check that staff do not have any contractual right to an annual pay review or monthly allowance. If you are considering implementing these alternatives to redundancy, ensure the appropriate consent is obtained.
Reduce or Restrict Overtime
Reducing or restricting overtime can be an effective way to reduce business costs. However, some employees rely on overtime pay as additional pay. In addition, any decision to reduce or restrict should be carefully reviewed. It is also important to consider whether there is a contractual entitlement to overtime, and if so, consent must be obtained to any change of contract.
You cannot force anyone into early retirement – it must be the employee’s choice. Offering early retirement could result in roles becoming available within the business. In addition, this could then be taken up by employees who may have been at risk of redundancy.
Make savings elsewhere in the business
Reviewing business costs on a regular basis is always good practice and could help you find alternatives to redundancy. Before deciding on redundancies, we would encourage you look at how budgets can be cut elsewhere. An example of this could be that your employees work from home rather than paying out on rent for an office. Could entertainment, gift and Christmas party budgets be reduced? Can contracts with suppliers for goods and services be lowered? Look at what other outgoings and budgets you have that could be reduced.
There are many more alternatives to redundancy that we can recommend and give advice on. Please contact our outsourced HR Consultants if you would like any further information on making redundancies or implementing alternatives to avoid redundancies. We will ensure you follow the correct processes at all times to mitigate any risks for your business.