Legal

How to use sabbaticals to avoid redundancy

17 Aug 2018 By Sarah Evans

Businesses can be innovative when they are consulting with their employees, as Sarah Evans reports.

As HR and business advisers, we all know redundancy is rarely pleasant for anyone involved, and in the short term, it does not feel good for our businesses. In extreme cases, it may mean the business survives another day, but the immediate impact on reputation with clients or customers, ability to attract talent, and even the share price, is usually negative.

We are also increasingly cognisant of the importance of concepts around workforce morale, employee engagement and retention, effective recruitment and change management. Redundancies are a challenge to all this, particularly among those carrying on in a business after colleagues have been dismissed, when there may be a shift in morale, culture and trust in management, at the same time (in many cases) as an increase in individual workloads.

Redundancy is a fair reason for terminating an employment contract and it’s the go-to procedure for many businesses facing economic challenges or restructuring. We are all comfortable with how it works, when consultation must be collective, and what a reasonably fair procedure looks like, including the obligation on both the business and the at-risk employee to look for, propose and consider alternatives to redundancy.

Avoiding dismissal

Sometimes, this part of the process – avoiding the dismissal – is treated as little more than a tick-box exercise and comprises of printing off lists of current vacancies whether suitable or, more likely, not, and suggesting job shares or part-time work. Indeed, we sometimes find the idea that avoiding a dismissal is the whole purpose of consultation comes as much of a surprise to the affected employees as it does to the business implementing the changes. 

Instead, the process of genuinely seeking to avoid redundancies can reap its own rewards: we saw it back in the economic crisis when business leaders and innovators became very creative about addressing the immediate need to reduce their biggest overheads (salaries) while protecting talent pools and employee relations. In industries where express contractual rights to temporarily ‘lay off’ workers would not work to avoid dismissals, offering voluntary sabbaticals did, and still can.

BT was one of the first, way back in 2009, when it offered a year’s sabbatical on 25 per cent pay to avoid further redundancies, in the same way you would offer or invite applications for voluntary redundancies. Lonely Planet adopted a similar scheme, saving a reported $250,000 on payroll through the use of one- to six-month sabbaticals on 15 per cent pay.

The benefits are obvious: you avoid the stigma, unnerving your staff and reputational damage associated with redundancies; you keep hold of the talent you have nurtured; you avoid future recruitment costs when the business is ready to grow again; and best of all, you avoid the risk of tribunal litigation and spending time with lawyers batting back unfair dismissal claims, however speculative they may be.

How to go about it

As with any process, delivery must be fair and absent of discrimination, and must be recorded in an enforceable contract that is clear about obligations and rights to both parties. We would expect to see terms dealing with restrictive covenants, protection of confidential and business information, holiday accrual, salary, pension and rights on return or termination during or at return from sabbatical.

The practicalities are generally pretty easy to accommodate: keep the employees involved and engaged – just as you would someone on maternity leave – with KIT days, invitations to company/social events, as recipients to internal business updates and communications, and offer a named contact for the period of leave.

Sabbaticals won’t work for every company, or employee, but in addition to everything else employers have learned, we know encouraging flexible working, employee morale and retention is good for productivity and good for business. When considered and implemented successfully, sabbaticals do have a place in modern employment practices.

Sarah Evans is a partner in the employment team at JMW Solicitors.

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