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Tackling the inevitable redundancies – are there alternatives?

Helen Astill, MD - Cherington HR Ltd.

It is a sad fact that despite the introduction of the Coronavirus Job Retention Scheme (CJRS), many businesses emerging from lockdown will not survive.  Those that do get through the crisis will look very different as they review their cost base and reduce their income predictions because of the Covid-Secure restrictions.  This has already led to a wave of significant redundancy announcements in sectors such as aviation and the arts.  Even local authorities are warning that they may have to declare bankruptcy.

Is redundancy the only option?

In many cases the problems are too severe and the timescale for recovery too long to avoid implementing redundancies, but there are other actions that a business should consider before getting to that stage.  For example, if you are still recruiting into vacant posts, the first thing to do would be to impose a recruitment freeze and withdraw existing offers to new recruits or deferring offers to graduate trainees.  If any of those roles are critical, consider training and redeploying surplus employees from other areas.  Similarly, not renewing or giving notice on non-essential contracts with contractors and laying off casual/ agency staff will reduce your costs and provide alternative roles for existing staff.

Reducing salaries

Many employers have already reduced the salaries or wages paid to their staff – either as part of the furlough arrangements or negotiated reductions for those who have carried on working.  The key here is the word “negotiate” because any changes to working hours or pay rates must be agreed with the employee.  If they understand that this is a temporary arrangement and you put in an agreed review date into the variation letter, they are more likely to agree.  This is especially the case if they realise that the alternative is that they may lose their job.  Asking an employee to reduce their hours and be paid less accordingly is one thing, but to ask them to have a pay cut and insist they carry on working the same, could damage the psychological contract and degree of trust between employee and employer.  One way of addressing this, is to propose deferring a proportion of the salary payments, so that they will be repaid in a few months’ time over an agreed timescale (providing that does not breach the National Minimum Wage levels).  In essence they would be lending you the money.

Those employees who have been working from home over the last few months, may have discovered that it has actually saved them money with regards to commuting expenses and the cost of daily coffees and lunches.  If it works for your business for them to continue working in this way, you may decide to discuss with them whether they would like that to be a permanent arrangement, but as part of that negotiation agree a salary reduction to take account of those savings.  You would of course need to make sure that you provided the proper equipment for the employees to work permanently from a home office, rather than the temporary arrangements that may currently be in place.  If you have staff who benefit from a London Weighting payment (or similar) and if their normal place of work changes to home, then this could be removed as part of that negotiation.

Other cost savings

There are other benefits that staff may be happy to do without for a period, especially if they are for benefits that they cannot use currently – such as gym membership.  If they are happy to forego those for a while, that might save you some more money, but again make sure that any changes are agreed with staff.  If you have a Trade Union or other staff representatives, talk to them to explain the situation to see whether they have other ideas that could help.  Be open and honest about the situation.  The more they see that you are trying to save jobs, the more they will be willing to work with you and help you persuade the workforce that you are genuinely trying to save their livelihoods.

The other obvious action is to make use of the CJRS and keep staff furloughed for as long as possible or use the new flexibilities in the scheme applicable from the beginning of July.  Remember that if you tell staff to book annual leave during this period, you will need to top up any payments from the furlough rate to 100%.  But if ultimately you have to make staff redundant, you will already have covered the pro rata leave allowance and so this would keep that cost down and help with cashflow.

A change is as good as a rest

Some organisations have a sabbatical programme for staff who have been with them a while.  These tend to be bigger employers in the public sector or perhaps academic institutions, but there is nothing to stop smaller employers considering them as an option.  Offering an unpaid sabbatical period of maybe six months to a year, might be one way of saving money, but at the same time retaining the skills and experience of staff when you can afford for them to return.  It may be that employees would like to take time off to do some studying, travelling (when restrictions are lifted) or simply pursuing a hobby or taking time to spend with family.  The arrangements are likely to include a guarantee of a job at the end of the period and continuity of service.  This means that they would therefore accrue paid annual leave for that time, but if this was agreed to be the statutory minimum for that period, would amount to 5.6 weeks per year, so a lot less expensive than paying 12 months of salary.

Be creative in looking at alternatives to redundancy for your business.  It may mean making some difficult decisions, but if you do need to make some posts redundant, the consultation and selection processes are critical – and expensive to get wrong, so make sure you seek advice from a reputable HR Adviser before you start.

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