Mar 16

How to save staff costs as coronavirus takes hold….without taking the final step of redundancy….


As the coronavirus gathers strength employers may be looking to cut costs if they work in a sector where home-working is impossible. Employers will want to retain skilled and experienced, valuable staff and avoid the negative impact on morale that compulsory redundancies can result in.

Below are some alternatives to the final step of redundancy……

1. Recruitment freezes
Where possible, aim to avoid replacing employees who exit the business. Consider whether you can fill vacancies by redistributing work amongst existing staff or by accepting internal applicants before advertising externally.

2. Lay offs
You can ask your employees to stay at home. A lay-off is where employees are off work for at least one working day. There’s no limit for how long employees can be laid off but they should get full pay unless the contract allows unpaid or reduced pay lay-offs. If employees are unpaid they are entitled to guarantee pay.

3. Short time working
You can ask employees to work fewer hours or days in a week, unpaid. This can be on a temporary basis within a defined time period or indefinitely until business picks up. You will need the consent of the employee to mitigate any risk of breach of contract and/or constructive dismissal claims. However, provided they consent you can reduce staff hours to save costs, keep the business going with a skeleton staff in the hope that the business is viable and able to employ them fully when business has picked up.

4. Pay freezes or cuts
While pay rises are always desirable, it is likely that employees will be happy to settle for job security rather than a pay rise.

5. Pay deferral schemes
These allow a temporary deferral in pay, to be given back to employees at a later date.

6. Remove overtime
This may be an effective way to reduce costs, especially if there is no business requirement for overtime. However, banning or restricting overtime would need to be communicated carefully to employees, and employers would need to explain that it is a means of avoiding compulsory redundancies.

7. Reduce use of agency workers
Relying on core staff and cutting freelance cover is an option, especially in times of reduced demand.

8. Cut bonuses or pension payments
Never popular but employees will understand if this is a way to avoid other more drastic measures being taken.

9. Sabbaticals (paid or unpaid)
Arranging unpaid sabbaticals/career breaks can be a great way to save on the costs of salary for a fixed period of time, whilst retaining valuable staff and giving them the opportunity to do something for themselves such as study, travel or voluntary work.

10. Secondments to other companies
Internal or client secondments can work well to either train an employee in a certain area or provide a specific service to a client. This may help to consolidate client relations and/or develop the employee’s knowledge/skills, ultimately benefiting the employer’s business when the employee returns to their original role.

11. Redeployment in other parts of the business
If one area of the business is busier than another, it may be possible to retrain an employee with transferable skills to take up a new role on a temporary or permanent basis. It may also be possible to carry out a restructure without the need for any job losses, by redefining existing roles in line with work demands. Any significant changes will need to be agreed in writing with the relevant employee. Any redeployed employees will also need to be given training to ensure that they are properly equipped to perform the new role.

12. 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, in writing.

13. Voluntary redundancy
Although offering voluntary redundancy can take some control away from the employer in terms of selecting roles for redundancy, it is the employer’s final decision as to whether or not to grant an application for voluntary redundancy. Ultimately, offering a voluntary redundancy package might reduce the need to make compulsory redundancies.

In order to protect the employer, care must be taken, the correct process must be followed and the arrangement should be carefully documented, in respect of all of the above options. If, after exploring the above tips, the requisite cost savings have not been made, then compulsory redundancies may need to be considered.

For advice on any of the above, do email or +44(0)7917878384