Part 1 Of 2: Employee Cost Savings And Alternatives To Redundancy
With the furlough scheme recently being extended to the end of June, it has given employers that have furloughed some (or all) of their workforce more time to consider their next steps. In the first of two articles on post lockdown planning, Selena Baker, Associate Director of Greenway Scott (part of the GS Verde group) looks at employee cost savings and alternatives to redundancy.
We understand that many businesses will be experiencing a reduced demand for their products or services and (as a result) lower revenue due to the impact of the pandemic, with little likelihood of any immediate improvement and uncertainty regarding when the situation will improve and what the long-term effects will be.
In these circumstances many companies will be looking to decrease costs, and considering whether they may need to make redundancies or other employment cost savings. In the first of our two part article series on steps after lockdown, we set out some of the things employers may want to consider now in terms of alternatives to redundancy.
Redundancies are costly in the short term and can have detrimental long-term effects, most notably the loss of experienced and valuable staff who might not be easily replaced and the commercial impacts in terms of public image. In the current unprecedented climate, employees may agree to various options, which they would not usually do, in order that their jobs remain secure (at least for the time being). We have listed below some alternatives to redundancy that some businesses in this position may wish to consider. When looking at alternatives to redundancy, companies need to consider carefully their legal and commercial implications (for example, some options may trigger the obligation to collectively consult) and so we would strongly suggest seeking legal advice.
Whichever of the below difficult options (or other alternatives) you consider, during this unprecedented time and difficult economic climate, it is often best to be as open and honest with staff as reasonably possible and, if possible, lead by example from the top.
Some options that employers may want to consider include:
- Delay pay increases/ pay freeze – you could delay any pay increases to keep costs low, however, whilst there is normally no express contractual right to a pay increase (only a review), it is important to ensure there is no implied right through, for example, custom and practice. Commercially speaking, although such a step is unlikely to amount to a breach of contract if there is no such contractual or implied right, a salary freeze is often viewed by employees as, in real terms, a pay cut and so should be carefully managed.
- Delay new starters/withdraw job offers- the impact/risk of this will depend on whether there is a contract in place (which can of course be verbal).
- Delay/not pay any discretionary bonus – you could delay any discretionary bonuses, however it is important to be mindful that discretion in an employment context is very rarely absolute, and whether a bonus is actually discretionary (rather than an implied or express contractual right) will depend on the individual circumstances. Advice should therefore be sought on each occasion in order to avoid allegations of breach of contract.
- Temporary lay-offs and short time working – there is no automatic right to do this, however employees can be placed on temporary lay-offs and short time working if there is a contractual right to do so. If there is not then you can seek to vary the contract via consultation and with the employee’s consent. Please seek legal advice should you wish to do this to avoid any allegations of breach of contract (potentially) rendering any terms and conditions of employment void.
- Voluntary redundancies/temporary layoffs/temporary changes to their terms and conditions, such as reduced hours or days – you could invite staff to volunteer for voluntary redundancies/temporary layoffs/temporary changes to their terms and conditions. Some employees will be in a position financially and personally where this would suit them. It is of course important to engage with employees sensitively as this would be a hugely worrying time for them. Please see legal advice on how this should be undertaken correctly.
- Vary terms and conditions (salary, benefits or hours of work) – this would need to be done via consultation and with express consent to the variation even on a temporary basis.
Of course, for some businesses the options outlined above are not enough to avoid the need to make redundancies. In the second of our two part articles, we discuss when a redundancy situation arises and the general process/steps to follow including collective consultation.
The information contained in this article is for information purposes only and is not intended to constitute legal advice. Should you require support and assistance on the employment law implications of the COVID-19 pandemic, our experienced advisors will be able to provide practical advice to support your business through the process. For advice, contact our employment & HR team at firstname.lastname@example.org or call us on 029 2009 5500.