With alternative measures to redundancy, employers can ensure that the business survives in the short term to ensure success and survival in the long-term.
We have set out below some alternatives to redundancy.
REDUCING HEADCOUNT
Reducing headcount as a quick-fix to a downturn in falling orders and reduced expenditure can look like a tempting option as a remedy. Short term measures can often affect the long-term prosperity of the business.
RESTRICT RECRUITMENT
This option can be an easy and cost-effective way to reduce costs and expenses. A recruitment freeze will not often have legal implications.
If you take the measure to adopt a recruitment freeze and find that suddenly you need to recruit for a critical and/or key role that suddenly becomes vacant, this is where legal issues may arise. Please get in touch with us if you find that this is the case.
WITHDRAW JOB OFFERS
An employer may withdraw an offer of employment at any point before it has been accepted by the applicant, without having to give notice or make any payment.
If the job offer has been accepted and any preconditions attached with it have been met (references/qualifications), an employment contract is then in place even if they have not yet started work. The employer is then unable to withdraw the job offer and instead has to terminate the employment contract. This will be done by giving notice and making a payment in lieu of notice.
Failure to give the correct amount of notice or failure to make a payment in lieu of notice, can lead to a breach of contract claim.
DEFER NEW JOINERS
An alternative approach to withdrawing job offers is to defer the start date of any prospective new employee, by a set period of time. If a new joiner has already accepted the offer of employment then there is a contract in place and a change to the start date will need to be agreed by both parties. This is the reason why some employers offer a compensation payment alongside the offer to defer the start date.
REDUCE NON-PERMANENT STAFF
Reducing the number of agency, temporary and casual staff is often a cost-effective measure put in place. As such staff are not employees of the organisation, it is often legally simpler and cheaper to terminate their engagement, rather than dismissing workers or employees. Before this decision is made, please take careful consideration as to whether the individuals are employees or workers of the organisation.
If you find that this is an option for your organisation and require some support in determining the status of the member of staff, please let us know.
REDEPLOYMENT AND RETRAINING
The actual job the employee does is an essential part of their employment contract. This can only be varied with the employee’s consent or under an express term of their contract.
Where an employer needs to move employees around the business, taking them from a quiet department to cover a busy department but no actual need to reduce the headcount, it is advisable to look into the terms and conditions of the employment contract.
Many contracts contain a mobility and/or redeployment clause which allows employers to move employees around the organisation. An employer will have to take reasonable actions such as matching the employees skillset to the new role and offer re-training to all employees moved around the business. Please check your terms and conditions carefully if this is an option for your business.
EARLY RETIREMENT
It is important to ensure that retirement is indeed voluntary, or it could amount to dismissal for claims such as age discrimination. Employers should retain discretion as to whether or not they accept early retirement in order to ensure they do not lose valuable and experienced employees.
If an employer has volunteers for early retirement it is worth considering the effect this may have on an employee’s future pension entitlement and advise employees to potentially seek individual pension advice from a qualified professional.
TEMPORARY STOPPAGES
As economic conditions deteriorate, organisations may have to cut down on the work they do (for example, manufacturers cutting down on production). Employers might try to adopt temporary stoppage arrangements, instead of implementing redundancies.
UNPAID LEAVE
Arranging for employees to take unpaid leave is another measure that can be put in place as a way of reducing or stopping working temporarily. Any unpaid leave it likely to be a short period of time, over a number of days/weeks rather than weeks/months.
An employee must consent to unpaid leave, unless their contract of employment contains a collective agreement allowing the employer to place the employee on unpaid leave. Where an employer has an unpaid leave policy which contains certain restrictions, (the amount of unpaid leave an employee may take per year) it may decide to waiver these restrictions to encourage take-up of leave.
HOLIDAYS
As an alternative to unpaid leave, employers could require employees to take their contractual or statutory holiday entitlement at quiet times (legally, employers must give twice as much advanced notice as the amount of leave required to employees, for example; asked to take 2 weeks holiday, must give advanced notice of 4 weeks). Although employees are entitled to their normal amount of annual leave during the holiday year, by forward planning it allows the employer to ensure employee availability during busy business periods.
LAY-OFFS
During periods of economic uncertainty, it has become common for some employers to ‘lay-off’ some or all employees when there is not as much work over a short term and temporary period. Employees remain employed through-out the ‘lay-off’ period. This is why it is a popular solution for employers as it provides an immediate saving of labour costs as well as providing the flexibility to restore the workforce when the work picks up again.
Employers do not have a right to automatically ‘lay-off’ employees just because trade is poor. An employer must have a contractual right to ‘lay-off’ and the contract should be clear and concise in that employees will not receive their normal salary during the lay-off period.
Enforced ‘lay-off’ without such a clause could lead to repudiatory breach of contract which will allow the employee to resign and claim constructive dismissal. Where there is no pay provided during such a period, this would lead to an unlawful deduction in wages.
REDUCING HOURS
Employees working hours are viewed as a condition of employment arrangements which can only be changed with an employee’s consent. Employers may sit down with employees and explain the need for shorter working hours as a way to secure job stability for the future for themselves and the workforce as a whole.
Hours may be reduced as a temporary or permanent change to terms and conditions of employment.
It is important to consider explaining the financial impact of such cuts for both the individual and for the business as a whole (how many jobs may be saved if the measure is adopted). It may also be worthwhile for management to lead from the front and voluntarily take pay cuts or waive bonuses.
SHORT-TIME WORKING
Short time working is the reduction in hours that employees are required to work and a corresponding reduction in pay. Employees are guaranteed some work and a proportion of their pay and are more likely to accept this as an alternative to possible redundancy.
Employers must have a contractual right to put employees on short time working or ask for their agreement to do so.
Employees are entitled to receive guarantee payments in respect of any day that they are normally required to work but are provided with no work at all. If an employee’s hours are reduced, but they are still required to do some work each day, they will not be eligible for guarantee of payment in respect of the hours lost.
Guarantee payments will not be available to employees who agree a permanent change to their working hours. It is therefore important that the short-time working arrangements make clear that the arrangements are intended to be temporary and that the employee should be available to return to their normal pattern of working when the employer requires them to do so.
A permanent reduction in hours has different implications.
PART-TIME AND FLEXIBLE WORKING
When adopting part-time and/or flexible working measures, part-time workers must not be treated any less favourably or discriminated against than full-time workers.
When entering flexible working arrangements the following should be made clear;
- The precise change to work conditions (hours, days and location);
- How long the arrangements are to stay in place; and
- How the arrangements affect an employee’s pay/benefits and pension arrangements.
To reduce the negative business impact such arrangements might have on employee motivation and morale, an employer can limit the arrangements for a period of time.
OVERTIME BANS
Where there is no contractual entitlement to overtime, it is easy for employers to stop offering it. Where a contractual right to overtime is in place (within a collective agreement), the employer must have the employees consent to stop offering it.
When imposing and overtime ban, the employer must consider the effect this may have of different groups within the workforce (men or women more dependent on overtime).
IMPLEMENT A PAY FREEZE
Most employment contracts provide for salaries to be reviewed regularly, usually once a year. There are contracts which give a right to an annual increase in pay. Where a contract only promises a salary review, it is legally permissible for an employer to freeze pay, once it has carried out the review.
A pay freeze may not be enough on its own to avoid redundancies, so many businesses might implement a pay freeze along with other measures, such as a four-day week or unpaid leave.
REDUCE PAY OR BENEFITS
An employee's pay is a condition of the employment contract. An employer who pays less than it is required to may face an employee’s resignation and a claim for breach of contract and/or unlawful deduction in wages. To pay less than is agreed in the contract it requires genuine consent of an employee.
In a particularly difficult economic climate, employee's attitudes may be such that a cut is agreed in order to save jobs. It is also possible to structure pay cut arrangements so that, over time, salary levels will recover or total packages will remain unchanged.
Employers who are thinking of adopting this measure should clearly explain why they are adopting this approach and the overall positive impact they are trying to achieve for the businesses employees, which is more likely to secure employees’ consent.
