REWARD INSIGHT
Redundancy and alternatives
Danny Done, managing director at Portfolio Payroll, provides advice
I t is an unfortunate fact that many businesses have not been able to cope under the financial pressures that they have faced over the last year, including, for example, the introduction of the national living wage. Many have had to close their business entirely, making the whole workforce redundant, or have at least had to downsize their workforce to a level that finely balances the demand for work and operational minima. Redundancy is classed as a dismissal in law even though there is generally no fault to be apportioned to either employer or employee. Therefore, any employer making redundancies must follow a fair procedure if they are to abide by the law. Depending on the number of employees being made redundant, there are different rules that must be adhered to in order to ensure that a tribunal would find that a fair redundancy process had been carried out. Where only a certain number of redundancies are required, it follows that a selection process must be entered into to determine who out of the current workforce is going to be made redundant, and who will remain in employment. This is often where employers fall down because their selection criteria are too subjective, or they have an overriding predetermined objective which renders the selection process futile. Certain types of redundancies require minimum consultation periods, which means that the employer must inform his employees of any proposed action and consult them. The duration of this minimum period will vary dependent on the number of redundancies being made. It is a forum through which employees themselves can become involved in suggesting measures that, if adopted, may be able to avoid the redundancies altogether.
If the redundancies are being proposed as a cost-cutting measure, no one is better placed to suggest ways of reducing the expenditure connected with certain job roles than the employees themselves, so the consultation period should allow employees to offer ideas on alternatives to redundancy. Employers should also put their own ideas to their affected employees for a meaningful two-way discussion regarding taking the company forward in light of the pressures it currently faces. ...the consultation period should allow employees to offer ideas on alternatives to redundancy There are many potential measures that an employer could take to ease the financial burden in a way that may avoid redundancies. Some are more obvious than others but all may be capable of making considerable cost savings. Imposing a freeze on recruitment can either mean stopping the annual recruitment drive, or simply not filling roles caused by natural wastage when employees leave. This would place a focus on re-training current employees to fill these roles, but could be significantly cheaper than continuing to pay a higher salary to an external replacement. Maintaining the same number of employees but on reduced hours means that valuable skills are retained but the overall wage bill is reduced. To achieve this, employers could propose a shorter working week, for example, four days instead of the usual five.
This would involve a change to the employees’ terms and conditions and therefore should only be done with their agreement. A unilateral imposition of a reduction in hours is likely to be risky. Alternatively, if provision is made in the employees’ contracts of employment, they could be placed on lay off or short- time working. This is not an official change to terms and conditions but does allow an employer to place employees temporarily on reduced hours or no hours with pay reduced accordingly. This is, however, only intended as a short-term measure so should not be used as a permanent resolution without a specific amendment to terms and conditions. Similarly, offering flexible working may achieve the same result, for example, job sharing or part-time working. Where overtime is not offered on a guaranteed basis, employers may need to consider stopping or reducing the provision of overtime. Where overtime is offered at an enhanced rate of pay, consideration may be given to bringing the rate in line with the normal rate of pay. Once again, this would involve a change to terms and conditions so must be done with the employees’ agreement. It may also be worth consulting on a reduction in overall pay, which may seem a more advantageous option to employees than losing their job altogether. If it is not operationally possible to reduce hours, it may be an option to cease using the services of agency or contract workers, subject to their terms and conditions. Redundancy may, in individual circumstances, be an attractive option to certain employees so employers should consider whether they will accept voluntary redundancies. This could reduce, or in fact avoid completely, the need for compulsory redundancies. n
| Professional in Payroll, Pensions and Reward | April 2017 | Issue 29 34
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