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Top Ten Alternatives to Redundancy

Many businesses will currently be having to think dynamically and creatively as they formulate urgent business continuity plans and contemplate whether redundancies are necessary. Redundancy is not always straightforward, however, and normal obligations will apply, including potentially time-consuming requirements to follow a correct and fair procedure and to consider ways to avoid compulsory redundancies. Redundancies may also result in the loss of experienced and valuable staff who might not be easily replaced when the business recovers. There may be other ways for employers to secure greater prospects of survival and success.

In this article, we identify ten key measures employers could consider in order to avoid implementing redundancy procedures.

1. The Government’s Job Retention Scheme, under which employers are able to claim back 80% of an employee’s salary (up to a cap of £2,500 per month) where an employee is put on a leave of absence, is a potentially invaluable alternative to redundancy for employers. There are a number of tricky issues arising in relation to the scheme, which we will consider in more detail in a future news alert. Importantly, where employees earn significantly over the cap on furlough payments, this may not be an attractive option: employers may feel they need to top up payments significantly which is unappealing where the furloughed employees cannot carry out any work at all under the scheme.

2. Consider asking staff to accept a temporary reduction in pay – either in conjunction with a proportionate reduction in hours or otherwise. Employers will ordinarily need to seek written agreement to such a change. If 20 or more employees are affected, collective consultation obligations may also be triggered. Employers should consider the practicalities of having a large number of staff working part-time and ensure that arrangements are appropriately managed.

3. Check existing employment contracts for express short-time working clauses; if they exist, it may be possible to amend employees’ working patterns and reduce salaries without express consent. Likewise, check existing employment contracts for an express right to temporarily lay off staff where there is a downturn in work. This kind of clause is often included in contracts in certain sectors where workflow ebbs and flows and could be really useful for employers at this difficult time.

4. As a result of school closures, some employees will have increased childcare responsibilities and may be keen to adopt flexible working patterns. Discuss the possibility of this with relevant employees and consider whether it will aid with cost-cutting. Be cautious about treating those with childcare responsibilities differently to others. Employers should also ensure that they retain the right to terminate the arrangements on reasonable notice so that those workers can recommence their original working pattern when normal business conditions resume.

5. Review all recent employment offers and consider whether any may be withdrawn or deferred. Withdrawing an offer that has already been accepted without providing notice or making a pay in lieu of notice risks breach of contract claims.

6. If an employer’s pension scheme so allows, discuss the possibility of early retirement with relevant employees. On seeking volunteers for early retirement, employers must be careful to ensure that any termination of employment does not amount to a dismissal giving rise to potential age discrimination claims.

7. Consider not paying, or delaying, any bonuses in the current financial year, if this is permitted under the relevant bonus scheme. It is best practice to discuss this kind of measure with employees, but if bonuses are non-contractual, formal consent should not be required.

8. Ask employees whether they would consider taking a period of unpaid leave. Although many will be reluctant to take a sabbatical in circumstances where they can’t travel around the world, it may suit those who do have childcare or other caring responsibilities. Ensure the arrangement is properly documented and consider which (if any) terms of employment will continue to apply during the absence.

9. Review the company benefits provided to employees and consider whether any are non-contractual and can be stopped, whether temporarily or otherwise.

10. Employers can require employees to take contractual annual leave allowance provided adequate advance notice is provided. As a general rule, adequate notice will normally be double the period of leave (i.e. a 5 working-day period of leave will require 10 working-days’ notice). This forward planning effectively allows employers to ensure staff availability when normal business conditions recover.Of course, not all of these measures will be appropriate for every business. It is vital that employers consider the legal and commercial implications before implementing any measures. The key for employers is to be open and honest with staff; consider whether the projected financial impact can be shared with employees, so they understand the benefits for both business survival and continued income for themselves.

If you would like to discuss the matters raised in this article further or are considering taking steps to implement redundancies and/or other measures, please contact Partner Beth Hale or Associate Sophie Rothwell who both specialise in partnership and employment law issues for multi-national employers, senior executives, firms and partners.