3.2 Alternatives to redundancy
We always advise clients that the trick to running an effective and safe redundancy process is in making sure that your preparation is done before communicating your decision to staff. The more sure you are in what changes you are making and why you are making them, the more effectively you will be able to communicate this information to staff and it will be easier to fulfil your obligations to inform and consult with them.
One of the first steps we recommend when any clients are considering making redundancies are to determine whether any action can be taken to avoid either redundancies themselves or the process needed to make them.
Alternatives to Compulsory Redundancies
No employer likes making compulsory redundancies, however there are some options that can be exercised before they get to this stage. These include:-
Short Term Working
If you have experienced a recent downturn in work which you think may resolve itself in the coming weeks but cannot afford to pay full wages whilst you’re waiting, one option may be to place staff on a pattern of short term working by cutting their hours. This means that you can make some costs saving but also service any customers at the same time.
Hopefully, the employer will have a contractual right to undertake this action with staff. If you do not have this right or if you are unsure, then contact P4B Law who will be able to advise you on incorporating this into your contracts.
If an employer does not have this right then they will have to get their staff to agree to it. Whilst it may seem unlikely that this is something that staff will agree to, when the alternative is redundancy, employers can often persuade them that it is in their interests.
If an employee’s hours are reduced considerably then they may be entitled to a Minimum Guaranteed Payment. This is set by the Government and usually changes every April.
Short Term Working can only last for a set period of time if it equates to more than 50% of the working week – usually 8 weeks in total and during this time an employee can make an application to be made redundant if their hours do not return to usual levels.
This is similar to Short Term Working, however this is more likely to be used in situations where there is no need to service customers in the immediate future. This might be used when you have to wait a few weeks before projects or the business has had to temporarily close for whatever reason.
Again, if the employer has a contractual right to undertake this action with staff, the process will be easier. If not then it can only be done with the agreement of the staff.
Employees who are laid off will be entitled to a Minimum Guaranteed Payment.
Lay-offs can only last for a set period of time – usually 8 weeks in total and during this time an employee can make an application to be made redundant if their hours do not return to usual levels.
Renegotiating Terms and Conditions of Employment – for instance reducing salary/holidays/sick pay
You may seek to reduce some costs by re-negotiating contracts of employment with employees. This is rarely straightforward but with the alternative being redundancies, many employees may be willing to take a cut in salary and other benefits.
We have a separate 5 part course entitled Contracts of Employment which is available from email@example.com
Terminating Employment Contracts using Settlement Agreements
Settlement Agreements are a handy tool for employers looking to remove specific employees from the business. If done correctly, any discussions that take place will be ‘protected’ which means that they cannot be brought in front of an Employment Tribunal in any future legal action. However, employers must be careful as not all types of conversations (for instance those that involve discrimination) will be protected.
A positive for this type of arrangement is that businesses can target specific individuals without having to involve other members of staff in a stressful redundancy procedure. Once signed, it also means that the employee cannot bring a claim against the employer in the Tribunal. This means that any future recruitment can usually be done immediately
On the downside, an employer will usually end up paying more to terminate an employee’s contract using this method than if they made them redundant following a normal redundancy procedure. Despite this, however, employers should also think of the commercial benefits of entering into such an agreement. Not only will it save time but it will also mean that customers and suppliers are less likely to become aware that cuts are being made.
Rather than making compulsory redundancies a wise step to take initially may be to see whether any employees wish to be made redundant. This can be done when the potential redundancies are first announced.
Even if staff want to take voluntary redundancy there will still be formal steps to take before you finalise it. You will also have to think about how you will select staff in the event that more people apply for voluntary redundancy than you want to make redundant.
We would always recommend that you get in touch with us before offering voluntary redundancy to your staff so we can assist you (firstname.lastname@example.org)
Ready to discuss your own approach to employment law?
If you would like to discuss your employment law options as an employer, please do not hesitate to get in touch. We offer an initial free, no obligation discussion.