How to avoid the "R" word

WHEN cash flow begins to dry up and the order book is less than full, cutting staff numbers seems like the only option.

However, coping with a reduced workforce is no easy reality and not having the skills needed could actually knock a firm’s future growth prospects and competitiveness.

But as Jacqui Parker, a partner with Simpson Millar’s employment law team explains there are other routes to saving costs.

Ten top tips to avoiding redundancies

1. Reduction in agency staff
Reducing or eliminating the use of temporary staff could provide continued employment for permanent staff at risk of redundancy.

2. Restricting/reducing external recruitment
If there are current vacancies then these could either be deleted and the work redistributed amongst staff at risk of redundancy or any vacant position could be ring-fenced and offered only to those staff (see point 5 below).

3. Overtime
A reduction in the salary bill could be achieved by introducing either a reduction or ban on overtime.

4. Change to working practices
There are a number of routes by which an employer might seek to reduce the salary bill through different ways of working. For example, employees could be offered the opportunity to:

• Volunteer for a reduction in hours/change to part-time working
• Job share i.e. split a full-time job between 2 workers and reach agreement as to which hours they will each work
• V-time working (Voluntary reduced working time) i.e. employees agree to a reduction in their hours for a fixed period with a guaranteed return to full-time work when the period ends.

Any changes to an employee’s terms and conditions must be allowed for either in the contract of employment or alternatively agreed in advance with the employee.

If employers impose changes in the absence of advance agreement or contractual entitlement to do so they could face claims for breach of contract and/or constructive dismissal.

5. Redeployment/retraining
If there are vacancies in one part of the business at a time when redundancies are being considered in another those vacancies could be “ring-fenced” and, if appropriate, be offered to employees at risk of redundancy. Any redeployed employees will of course need to be given any necessary training to equip them to perform the new job.

The law provides that where employees are provided with suitable alternative employment, they are entitled to a trial period in the new post for 4 weeks. This period can be extended for a period of up to 3 months provided it is agreed by both parties.

6. Secondments
Offering employees at risk of redundancy the option to work on either an internal or external secondment could reduce the salary bill in the areas where redundancies are being considered. An advantage of offering secondments is that they allow employees to develop knowledge and/or new skills which might be of use to the employer’s business when the employee returns to their original position.

7. Sabbatical/career break
Allowing employees to take a sabbatical or career break will provide the employer with a cost saving (assuming the sabbatical is unpaid) and will provide the employee with the opportunity to gain new skills which may be of use to the employer if and when the employee returns to work.

Care should be taken in agreeing the terms upon which an employee can return from a sabbatical. It is essential that the employee understands that when they do want to return to employment, the employer will do their best to accommodate them in a position which is on similar terms to that which they left but that no guarantee can be made of this.

8. Early retirement
Offering early retirement could result in vacancies becoming available which could be filled by employees who might otherwise be made redundant. Age discrimination legislation means that employers need to exercise great care if exploring this option.

9. Voluntary redundancy
Offering a voluntary redundancy package may mean that it is not necessary to make compulsory redundancies at all.

If employees do apply for voluntary redundancy employers will need to consider their applications in light of the business’ need to retain a workforce which has the right mix of experience and skills for its future operation. Ultimately it is the employer’s decision whether or not to grant an application for voluntary redundancy.

10. Make savings in other areas
The monthly salary bill will often be one of the first places that employers will look to save costs. However, there may be other areas in which costs can be reduced which might mean that one or more jobs could be saved.

In considering how to reduce the overall costs of a business, employers should undertake a review of the contracts with those who supply them with goods and services.

For example, if the employer’s business is sited in a number of locations each of which has different suppliers of goods, consideration should be given to having only one supplier for all locations as this could result in a cost saving. The same exercise can be undertaken for the supply of services such as maintenance contracts.