How can HR handle money-saving job cuts?

As multiple businesses announce redundancies, People Management asks legal experts what the sector needs to know to avoid the courtroom

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Companies feeling the financial pinch are increasingly, rightly or wrongly, making cost-saving employee cuts. It seems even the largest and most successful are tightening their purse strings, with Mark Zuckerberg-owned Meta announcing 11,000 layoffs last week (8 November).

Online fashion giant Asos has also axed 100 roles across the business as part of cost-cutting plans after making a £32m loss. Meanwhile, also entered administration with the loss of 573 jobs in the business, with a dozen employees now pursuing legal action over the way their redundancies were managed.

According to Retail Week, the employees allegedly discovered they would lose their jobs over a company Zoom call. Under current employment law, if a business is making more than 20 employees redundant at one establishment, they must follow the correct consultation process, and a claim for a protective award, if successful, could yield an award of eight weeks' wages in compensation.

Additionally, UK clothing and homeware group Joules has fallen victim to the retail crisis, announcing today (14 November) that it plans to appoint administrators, putting 1,600 jobs at risk.

Cutting jobs should always be a last resort, but – assuming all other options have been considered – People Management asked employment lawyers and people professionals what needs to be done when redundancies are on the horizon, and how HR can manage their own wellbeing during times of stress.

Stay on the right side of the law and follow correct procedure

The fundamental legal requirement to communicate with employees before initiating any redundancy is more than a “simple check-box exercise” and it should not be viewed as such, says Kevin Poulter, employment partner at Freeths: “Consultation processes must be meaningful and proactive, allowing for challenges to management decisions and to create opportunities where they may not previously have been considered or even existed.”

Reduced hours, lower compensation, voluntary layoffs, sabbaticals and benefit cuts can all help organisations save money and get through a difficult period, “but to be successful employers must build a relationship of trust, honesty and shared ambitions with their workforce, starting way before times become troubled”, explains Poulter.

According to Michael McCartney, employment partner at Fladgate, UK employment law requires a business to consult with elected representatives or trade unions if there are any recognised for a minimum period of 30 days where it envisages 20 or more redundancies, and for at least 45 days if that number exceeds 100 layoffs. 

“The corporation is also obligated to issue a warning to the UK government, called an HR1 form, and, if it fails to do so, its directors run the danger of criminal liability,” says McCartney.

He adds that employers will need to investigate alternatives to layoffs as part of the consultation process to lessen both the overall number of redundancies, and their effects on workers.

Fudia Smartt, partner at Spencer West, says that given the “gloomy” economic picture, it is likely many more retailers will be forced to lay off large numbers of employees or go into administration. “Employers will need to bear in mind that the cost of failing to collectively consult regarding proposed redundancies can be steep, including up to 90 days’ full pay for each affected employee,” she warns.

“This often results in employers trying, where possible, to stagger dismissals so that the threshold of 20 or more proposed redundancies within a rolling 90 days is not breached. However, where time is of the essence, this may not be possible.”

Smartt adds that unless there are “exceptional circumstances” an insolvent firm must still adhere to these duties as becoming insolvent is not by itself a special circumstance.

Where trade unions are recognised by the organisation, James Potts, director of legal services at Peninsula, says they should participate in the consultation, and that failing to do so "would violate collective consultation norms and may render the dismissals substantively unfair".

"Consultation means precisely that; it is not something that employers can simply pay lip service to,” says Potts, adding that employment tribunals want employees to be allowed to influence decisions that are made, and, without thoroughly listening to ideas, legal obligations will be violated.

Potts notes that the recent high-profile examples of well-known firms looking to cut staff underline the significance of properly planning and carrying out those processes for all organisations, regardless of size.

“Redundancies are tragically a fact of life and breaking bad news is never pleasant,” says Florence Brocklesby, founder of Bellevue Law. “However, how a restructuring is handled is crucial for everyone involved, including employees who stay on board and the company’s reputation in general. To go through a difficult moment safely and with dignity, good procedures must be linked with humanism.”

What does HR need to communicate?

Respect for those affected by redundancies is one of the most crucial behaviours HR managers should instil and guarantee, Laura Ibbotson, head of HR at Heras, points out. “No one wants to go through a redundancy process, but as a minimum respect must be given at all times,” she says.

Ibbotson warns that we have all been in similar situations, so instead of “reinventing the wheel and wasting time” HR managers can get support from their networks such as Linkedln and social media HR groups.

Liz Sebag-Montefiore, director and co-founder of 10Eighty, says managers must receive thorough training from HR on how to handle layoffs “sympathetically and clearly”. “Redundancies affect those who are left behind and are difficult for those who must deliver the terrible news and manage the aftermath,” she explains, adding that communication is key and you should make your message unambiguous, “cut to the chase and don’t ever say I know how you feel – you don’t; we all react differently”.

HR must look after themselves

Musab Hemsi, legal director and accredited specialist in employment law at Anderson Strathern, says “HR needs to take care of themselves”, adding that he has seen firsthand how “emotionally drained and frustrated” HR workers can get with these procedures.

“They are frequently seen as the bearers of bad news – those who watch over the people and look after them,” says Hemsi, explaining that HR professionals should make sure they have the direction, assistance and clarity required to successfully navigate these extremely “challenging waters”.

Jane Ferré, executive career coach, questions who is supporting the HR team in situations like these: “Often, they are the forgotten people in any redundancy programme as they are balancing the needs of the business, the people and the line managers.”

She adds that HR always plays a crucial role in safeguarding the company, helping individuals who would be affected by the proposed layoffs and supporting the line managers who must “deliver painful messages while they could also be facing a possible layoff”.