What are the alternatives to redundancies?

UK employers are facing increasing costs and obligations associated with employing staff, including recent significant rises in National Insurance contributions and minimum wage rates – and set against the backdrop of challenging trading conditions with low economic growth and rising costs of living, many employers are looking at cutting costs. This inevitably involves reviewing labour costs. 

Redundancy numbers are on the increase but losing a role could create challenges for you, especially if there’s an upturn in demand and you need to recruit a replacement. So, before turning to redundancy, make sure you’ve considered all the alternative options. Doing this means that, even if redundancy can’t be avoided, you’ll be able to show in your business case that you turned to redundancy as a last resort. 

What are your first steps?  

Before doing anything, you need to speak to your employees and explain the challenges the business faces. They could have some ideas for cost cutting measures that you might not have thought about.   

If none of the suggestions will work for your business, or if you need to take more significant action, then it’s time to consider the alternatives.  

What are the alternatives to redundancy?  

Offer voluntary redundancy  

Once you’ve told your employees that redundancies may be necessary, it’s possible to give them the option to put themselves forward for voluntary redundancy. This is often accompanied by an offer of enhanced redundancy pay, as an incentive.  

It’s up to you as an employer whether to accept the volunteers. Think about the wider needs of your business when you make your decision and make it clear to employees from the start that you can’t guarantee that their voluntary redundancy will be accepted. 

If you do give the option of voluntary redundancy, avoid the risk of any potential discrimination by: 

• offering it as widely as possible 

• not pressuring or singling anyone out 

• selecting employees in a fair way 

Short time working 

If you need to make cuts now but think the situation will improve relatively quickly, you could consider short time working as a temporary measure. This option means you can keep an employee on, but on a reduced-hour basis. It’s intended as a short-term measure, and you and your employee must have already agreed it as an option in either: 

• their contract of employment 
• a national agreement for your particular industry 
• a collective agreement between you and a recognised trade union 

But even if you have this agreement in place already, you still need to communicate fully with your employees before introducing temporary short time working and keep them updated throughout.  

Be aware that if their weekly wages drop below 50% for more than four consecutive weeks, or six non-consecutive weeks in any 13-week period, they have the right to apply for a redundancy payment. They would also be entitled to Statutory Guarantee Pay if you don’t provide them with any work on a day they would usually be required to work, but we’ve provided more details on this below.  

Lay-offs 

Another temporary measure to consider is laying employees off. This is not the same as redundancy  – it’s a temporary period where the employee isn’t provided with any work but remains employed by your business. Employees on lay-off qualify for Statutory Guarantee Pay (currently £39 a day) for the first 5 workless days in any 13-week period.  When considering lay-offs as an option, just remember:

• 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 a redundancy payment after four consecutive weeks (or six non-consecutive weeks in any 13-week period) of lay-off or if their weekly wages drop below 50% for more than four consecutive weeks, or six non-consecutive weeks in any 13-week period. 

Flexible working 

Flexible working has become more common in recent years with the government now encouraging employers to view it as the default, and some employees could be keen to reduce their working hours to enjoy a better work/life balance. Letting your employees know that you’re open to consider these requests might give you some options to avoid making permanent cuts to your team.  

Changes to terms and conditions 

Another alternative you could consider is to propose permanent changes to employees’ terms, which would result in reduced days or hours of work or other costs.  

But remember… 

Always seek advice from our HR and Employment Law experts before starting the process of changing terms and conditions, as there are various claims that could come from this. There are specific procedural requirements in going down this route and it can be very costly if you get it wrong. Here are the steps you need to follow: 

• You’ll need to have a strong business case justifying why the change needs to be made. 
• You’ll need to follow a robust consultation process. If the number of employees affected is 20 or more and you intend to force through the changes in the absence of agreement, collective consultation rules will apply.  
• Finally, if you reach a point where you think it might be necessary to impose changes without their agreement, you have to comply with the Code of Practice on Dismissal and Re-engagement published in 2024. This put strict guidelines in place for treating dismissal and re-engagement as a genuine last resort option after fully informing and consulting on all alternatives. There are steep financial penalties for failing to follow this Code. 
• If you’re considering making any changes to your contracts or terms and conditions, give us a call on 0345 844 4848 to chat to one of our experts to see how we can help. 

Move employees into other roles 

If you have too many employees in one area but have gaps in other areas of your business, think about whether it’s possible to deploy employees in other roles. Consult with employees to see if you can move them into different areas of your organisation (‘redeploy’) to avoid redundancies. For example, you could look at: 

• what transferable skills staff have 
• if there are other vacant or new roles in the organisation that require those skills 

Again, any changes would need to be made by consent.  

Alongside any of these measures, you should also consider: 

• letting go of temporary or contract workers 

• stopping the use of agency workers 

• limiting or stopping overtime 

• not hiring any new employees 

• cost savings and efficiencies in your processes and other overheads, if possible 

If none of these options work for you… 

Then it may be time for 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 means they can engage in the process, and suggest or discuss potential alternatives to avoid a redundancy termination.

When considering who to make redundant within your team, you need to consult on fair criteria which will form the basis of your selection.  The selection criteria should be handled carefully to avoid disadvantaging certain groups, particularly those with disabilities or who have been on family related leave.

While redundancy is never a pleasant topic, it’s certainly one that requires careful consideration and expert guidance.  

We’re here to help 

No one wants to go through redundancies, but, unfortunately, they’re sometimes necessary. Don’t feel like you have to take the stress of the process on your shoulders by yourself – if you’re an HR or combined client, call your free advice line on 0345 844 4848 and we’ll be able to support you.