Following a spate of redundancies in 2008, employers of SMEs may well think that they need to gear up for a second round as economic conditions slide backwards.
But in fact, there are some viable alternatives that should be explored before employers prepare to do the dastardly deed once more.
Bosses often follow the received wisdom that redundancies are the only way to achieve a quick fix in terms of reducing cost and streamlining the workforce. Yet aside from the time and management required to carry out a fair redundancy process, there is also the risk of costly and time-consuming litigation if owners get the procedure wrong.
Business owners may want to consider alternatives to redundancy, to avoid causing instability among the workforce and reduce the risk of potential litigation.
Below are some of the main options to consider, and how to use them effectively:
1. Recruitment freezes
This may seem like a big step, but in the long-run can reduce danger posed to existing roles. It is particularly common to see SMEs reducing or withdrawing graduate programmes for example. To reduce costs, SMEs can also consider outsourcing or reallocating duties amongst the existing workforce.
2. Pay freeze or pay cut
This will always be difficult to market to staff but can be an effective method of saving necessary costs. Employees should (in theory!) value job security over a pay increase. Nonetheless, employers should undergo a proper consultation with employees, particularly if a pay cut is anticipated, as it will fundamentally alter employees” terms of employment.
3. Short time working or lay off
Again, this involves a potential change to terms of employment, so consultation with affected employees is essential. An employer can either ask employees to agree to a change in working hours for a couple of days per week or could include and rely upon a term in employees” contracts reserving the right to change employees” hours or temporarily lay off employees where there is a reduced workload. Even if the terms reserve a right for employers to make these changes, employees should still be consulted about any proposed changes.
4. Flexible working
From time to time an employer may receive applications from their staff asking for flexible working, especially if childcare is an issue. Once again this can’t be an informal agreement between yourself and your staff, a defined procedure should be followed and certain eligibility criteria must be fulfilled. Allowing employees to work flexibly could be the answer to your problems, so take these requests seriously.
Another way for a business to keep an employee on while reducing the cost to the business is by seconding them to an alternative company, perhaps a client or associated business. Any employer considering this type of arrangement should make sure that the client or associated business that the employee is seconded to enters into a formal agreement with your business and the employee in question whilst the employee is seconded to an alternative company, they remain employed by your business. If the arrangement is not formalised, the employer could be seen to be acting as an employment agency – and so could become tied up in the Agency Worker Regulations and the Conduct of Employment Agencies and Employment Businesses Regulations, which place certain obligations upon both the employer and the end-user.
Redeployment can be useful in covering areas of the company where staff are needed to cover a busy spell, or perhaps a period of leave. This will help keep employees motivated and will of course benefit the business too. Once again though, any arrangement involving a change to the employees” normal working terms should be formally discussed with them, and confirmed in writing.
Alexis Asher is an employment solicitor at SA Law, St Albans. If you have any questions about alternatives to redundancy, email firstname.lastname@example.org or call 01727 798000.