Legal

What are the alternatives to compulsory redundancy?

19 Apr 2021 By Moira Campbell

With many employers under significant pressure to cut costs, Moira Campbell outlines some possible options to consider other than reducing staff headcount

Redundancy is a tried and tested method for reducing headcount and costs. However, it comes with disadvantages such as losing skilled, experienced and valuable staff; risks of grievances and tribunal claims; and negative workforce morale. It is advisable to therefore consider alternatives to compulsory redundancy before beginning any consultation process, including but not limited to the following.

  1. Restrict/ reduce external recruitment
    Avoid replacing employees who exit the business. Consider whether you can fill vacancies by redistributing work among existing staff or by accepting internal applicants, before advertising externally. 

  2. Restrict/ ban overtime
    Banning or restricting overtime can be an effective way to reduce costs. Communicate to staff that the measure is in place as a means to avoid compulsory redundancies in order to soften the blow for those employees who rely on the additional pay they receive from working overtime. 

  3. Redeploy or retrain
    If one area of the business is busier than another, consider retraining or redeploying employees with transferable skills to new roles on a temporary or permanent basis. Redefining existing roles in line with work demands can enable a restructure to take place without job losses. Any significant changes will need to be agreed in writing with the relevant employee. 

  4. Job shares
    Employers can request volunteers for job shares. This arrangement enables two (or more) employees to split a full-time job between them, while entering into an agreement regarding the hours and days of work as well as how the role and duties will be split. 

  5. Voluntary sabbaticals/ career breaks/ secondments
    Unpaid sabbatical or career breaks save the salary costs for a fixed period of time, while retaining valuable staff and giving them the opportunity to do something for themselves. Similarly, internal or client secondments can assist with reallocating and training employees, in line with client and business requirements. 

  6. Flexible working requests – reducing hours/ days worked
    Employers can introduce a reduction in hours/ days worked for a certain group of employees on a temporary or permanent basis, or invite employees to make flexible working requests with a view to achieving the same. Employee consent must be obtained – where making a pro rata reduction in salary – to mitigate any risk of breach of contract and/or constructive dismissal claims. 

  7. Early retirement
    Offering early retirement could result in vacancies becoming available within the business, which could then be taken up by employees who might have otherwise been at risk of redundancy. 

  8. Make savings in other areas
    Consider how budgets can be cut and costs can be saved in other areas of the business, such as client or entertainment budgets and contracts with suppliers of goods and services.

  9. Purchase of additional annual leave
    Offering employees the opportunity to take extra holiday in exchange for a pro rata reduction in salary can save some money in the short-term during quiet periods. However, the parameters of this arrangement would need to be set out clearly and in writing. 

  10. Voluntary redundancy
    Although offering voluntary redundancy can take some control away from the employer in terms of selecting roles for redundancy, granting an application for redundancy is the employer’s final decision. Ultimately, offering a voluntary redundancy package might reduce the need to make compulsory redundancies.

In summary, there are a number of steps which might, depending on the circumstances, be taken to avoid the need for compulsory redundancies. The correct process must be followed in respect of each option and the arrangements should be carefully documented with consent obtained, where appropriate. 

If, after exploring the above options, the requisite cost savings cannot be made, then compulsory redundancies may need to be considered. 

Moira Campbell is a senior associate in the employment team at Kingsley Napley LLP

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