Reducing your Payroll Costs

Many businesses are seeing an increase in overheads and decrease in turnover. This usually prompts a cost cutting exercise.

For most businesses, payroll is the largest overhead and is the first to be targeted, especially with National Minimum Wage increases on the way (see below). As a result, we are seeing an increase in the number of redundancies being made across a range of business sectors.

Redundancies can be a useful way for a business to cut costs and remove surplus, under-performing and/or troublesome employees. However, before commencing a redundancy exercise we believe businesses should look at other ways of reducing payroll costs.

We can assist you by reducing the chances of a costly claim while managing the cost-cutting process for you, allowing you to get on with running your business. As part of the cost-cutting exercise we will:

• Consider options first that may avoid the need for formal redundancies. These will often save you time, your business money and reduce the risks of costly employment disputes. For example:



• In many instances employees with less than one year's service can have their employment terminated relatively easily and without the need to go through the redundancy procedure.



• Employees over the age of 65 can be compelled to retire by giving 6 months notice (and following the statutory retirement procedure).



• Laying-off staff for a period of time without pay.



• Agreed pay decreases or reduction of working hours.
• Should redundancies still be necessary, we can help ensure that a genuine redundancy situation exists and that the correct redundancy procedure is followed. Going about redundancies in the wrong way can cost a great deal in terms of money and, just as importantly, wasted management time at a stage when you can least afford it.



• As part of the redundancy procedure, we will give advice on:


• Who to include in the redundancy exercise. It is possible in some circumstances to limit the scope of those affected, allowing the majority of your workforce to remain undisturbed while targeting for redundancy those more troublesome or costly employees.



• How to seek volunteers for redundancy. This can cut short the process and so reduce the time/cost involved as well as reduce the potential for conflict.



• Redundancy payments. For example, the less time an employee has been employed, the lower their statutory redundancy entitlement. Employees with less than 2 years' service are not entitled to statutory redundancy pay.



• Breaking the news to employees in a way which will encourage them to understand why the decision has been made. This can reduce the potential for costly and time-consuming disputes.

For practical, clear and concise guidance on each of the steps involved in a cost-cutting exercise please contact Alistair Latham or Mark Daubney on 01482 324591.

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