Avoid redundancies and still survive the recession

The recession is forcing many employers to consider redundancies – yet holding on to key workers could be vital if firms are to survive and take advantage of the upturn when it comes. Liam Kenealy examines some ways to avoid redundancies.

Staff wages are by far the biggest expense for most firms so reducing the number of employees can go a long way towards making the books balance as the recession deepens.

There can be a lot of downsides, however. Making staff redundant may not be as cost effective as it first appears once redundancy payments are taken into account. It can also be unsettling for the staff that remain and may even serve to de-motivate them. There is also the problem of the way it will be perceived by customers and suppliers who may start to have doubts about the viability of the business.

The procedure can also be time-consuming and employers must ensure that they follow the correct procedure to avoid any errors that could lead to costly claims before employment tribunals.

The best approach is to try to avoid the need for redundancies. Many firms have already reduced their use of temporary and agency workers. This can be a quick way to relieve some of the pressure but it is important to first check the contractual arrangements with the provider for notice periods and also to ensure there are no penalty clauses for early termination.

Stopping or reducing paid overtime is another tactic, as long as staff are not contractually entitled to a specified quota of extra hours. It may also be possible to go a step further and actually reduce the number of hours employees work. This would need the agreement of the employees concerned and although they may not like it, they may well be prepared to accept it if it helps to avoid the need for redundancies.

Some employees may even welcome a reduction in hours as long as it is a temporary measure. Working parents, for example, may like the idea of being able to spend more time with their children even if it does mean missing out financially for a while, especially with the school summer holidays coming up.

An extension of this approach would be to encourage staff to take sabbaticals.

Many employers are also looking at things such as reducing bonus payments, changing benefits or terms and conditions, and freezing salaries. All of these can be preferable to job cuts as long as they do not contravene any contractual obligations.

It is in the interests of both employers and employees to reach sensible agreements in these difficult times. That way the business will be able to hold on to valuable employees and those employees will be able to hold on to their jobs. Both sides will then be well placed to benefit once the economy starts to recover.

Liam is an employment solicitor at Andersons Solicitors he can be contacted on 0115 947 0641 or by emailing: lkenealy@andersonssolicitors.co.uk.