Is making redundancies the right choice for your business?

With the furlough scheme end date drawing near, many businesses are facing the difficult decision of whether to make some of their workforce redundant. In fact, 695,000 people have dropped from company payrolls since the early stages of the pandemic in March according to the Official National Statistics (ONS).

This figure is likely to increase after the 31 October when the furlough scheme ends, so it’s important you’re prepared to make redundancies if you feel it’s the right choice. However, you might want to explore the alternative options available to you before you start down the road of redundancy. We’ve outlined below the alternative options you can consider before making any decisions followed by some key points about how to carry out the redundancy process fairly and compliantly.

Short-time working

If you can’t afford to have your workforce back on their normal hours at present, you could instead consider short-time working as a temporary measure rather than making redundancies across your workforce now. This method allows you to maintain employment but on a reduced hour basis. It is intended as a short term measure and must have already been agreed as an option with your employee in either:


However, even with this prior agreement you should still communicate fully with your employees before introducing temporary short-time and keep them updated for the duration. Also, be aware that if their weekly wages drop below 50% for more than 4 consecutive weeks, or 6 non-consecutive weeks, they have the right to apply for redundancy.

Lay off

Another temporary measure to consider is laying employees off. This is not the same as redundancy, but rather is a temporary period where the employee is not provided with any work but remains your employee. Employees on lay-off qualify for Statutory Guarantee Pay for the first week (currently a maximum of £30 a day) but it is then unpaid for the remainder of the next three months.

The above considerations apply to lay off as they do to short-time working namely:

  • You should have already agreed the right to lay off with the employee
  • You should discuss fully and keep the employee informed during lay-off
  • The employee can apply for redundancy after 4 (or 6 non-consecutive) weeks of lay off

Changes to pay, hours or duties

Other options to consider before making any redundancies are proposing to make more permanent changes to employees’ terms, for example:

  • reducing pay
  • reducing days or hours, including moving on to zero hours contracts
  • reorganising duties, for instance to move employees to areas of your business with more work

Remember...
Before changing terms, it’s important to fully consult with employees in order to try to get their agreement to the proposed changes. This would mean explaining your genuine business reason(s) for the change and asking for their input in consultation meetings, including any other solutions they can think of. It may be useful to confirm what could be a potential outcome if they don’t agree, for example that you may then have to consider making redundancies. Any change of terms should be recorded in writing.

Although employees may accept these more readily in the current climate, if an employee (or any trade union on their behalf) do not agree, the changes may have to be pushed through by dismissing and offering to re-engage the employee on new terms.

This is a complex element of employment law and you must always seek advice if this is your chosen path.

Cut costs where you can

A simple suggestion like this can go a long way. When sitting down and looking at every aspect of where you’re spending your money, you could potentially reduce resources and services. You should start by looking at freezing your recruitment activity (if applicable) for the time being and focus on your core employees.

Are there any overheads you can reduce, even on a temporary basis? Would switching any suppliers save money?

If you offer your people bonuses or overtime, can you put these on hold? Can you reduce your pension contributions until you can comfortably partake again? It’s a legal requirement to contribute the minimum amount of your employee’s pension.

Again, if such suggestions would vary employees’ contracts, you should go through a proper consultation process as outlined above, including explaining the reasoning behind the proposals.

Redundancy

One of the key elements of a fair redundancy process is meaningful consultation. This vital step helps the employee(s) understand what has led to the redundancy proposals and allows them to engage in the process.

When considering who to make redundant within your team, you need to consult on fair criteria that will benefit your business long-term, but also so your people will understand.

There is less demand for some roles during current times so looking at these roles may be a starting point for redundancies. This could apply to new departments who were at the early stages before the pandemic, as they may be premature to operating at full capacity.

While redundancy is never a pleasant topic, it’s certainly one that requires careful consideration and expert guidance. Our HR and Employment Law experts have put together a checklist of five of the key things you’ll need to think about before embarking upon a redundancy process.

Citation can help at every step of the way

These are challenging times, especially for business owners and employers. Our team of HR and Employment Law experts provide you with the latest government news to help you work through this difficult period.

If you’re a client of ours already, you can call our free advice line on 0345 844 4848 where we’ll be able to offer our support to you 24/7.

If you’re not yet a client of ours and you want the advice and backing of a team of HR and Employment Law experts feel free to give our team a call on 0345 844 1111 to talk through your business needs. Or, simply fill out your details in the form opposite and we’ll be in touch as soon as possible.

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