Alternatives to redundancy

Mark Minns, 11 March 2009

As many businesses struggle to balance a reduction in income with static or increasing costs, many find that they have no alternative to making staff redundant.

Barely a day goes by without further news of the increasing numbers of individuals that are out of work, having been made redundant by their employer.

However, some employers are taking the view that rather than make employees redundant, they will instead look at other options that might give cost savings whilst at the same time maintain employment and an income for their staff on an ongoing basis.

Set out below are some of the alternatives that employers should consider. In doing so they will not only increase the chances of being able to show that they looked at all of the options before making redundancies, but they might also find that their employees will be willing to be more flexible than they had imagined would be the case.

Alternatives:

(1) Pay cuts - employees may be willing to agree a cut in pay in return for a commitment that there will be no compulsory redundancies for a given period. The view taken may well be that 85% of full pay for a year is better than being made redundant after a consultation period lasting a month or so.

(2) Reduced working time - this can be agreed with pay cuts or could also stand as an alternative in isolation. Reduced working time can range from early shut down of the employer’s business to a 4 day working week. The practical viability of this approach will depend on the organisation in question.

(3) Flexible working - this could involve a job share with another employee that would otherwise be at risk of redundancy, or an agreement that a team will all reduce their working hours to cover a drop off in business.

(4) Training - if business has dropped in one area more than another, consider whether employees would be willing to retrain and work in another part of the business. Work that might traditionally have been viewed by an employee as unattractive or something that he or she was not interested in undertaking may take on a new level of interest if it is an alternative to redundancy.

(5) Sabbaticals - some employees may be prepared to take unpaid time away from work in return for a promise that they will be able to return to work at a later date. Employers should obviously be careful to not make promises that they cannot deliver, but it is possible that some employees would welcome the opportunity of time away from work, perhaps to go travelling.

(6) Lay off and short time - check the contracts of employment that your employees have signed. You might find that they contain a provision allowing you to lay employees off work, and impose short working time on them.

(7) Secondments - is it possible to second skilled employees to a group company, customer or supplier less affected by the current climate? If so, they may agree to fund the employee’s pay for a set period and provide the original employer with the opportunity of retaining a skilled employee.

(8) Reduced benefits - employees may agree to a reduction in insured benefits (such as healthcare) and even employer pension contributions in return for ongoing employment.

(9) Early retirement - are any employees willing to accept early retirement? If so, will that increase the employer’s costs, or be a benefit overall?

(10) Bonuses - often a controversial area. Employees that have accrued bonus entitlements in earlier prosperous times may expect to be paid their entitlement. However, they may also be prepared to forego bonuses in the current trading period in return for increased job security.

(11) Recruitment freeze - ensure that any vacant roles are advertised internally first, and that all employees that could be made redundant are given an opportunity to apply for them.

Finally, a note of caution as to the above points.

It will not normally be possible to impose many of these suggestions on an otherwise unwilling employee, and in addition there may be wider related issues to consider such as collective consultation. You should take advice prior to seeking to implement any of the above.