• Newsletter Subscription
• News
• Events
• Newsletter Archive
• E-Magazines
• E-Bulletins

Desperate times don't always call for desperate measures

30 July 2008

Desperate times don’t always call for desperate measures

Concerns have inevitably risen amongst both employers and employees since the end of last year when the term “credit crunch” found its way into our everyday vocabulary. A recent British Chamber of Commerce survey suggests that overall unemployment could rise by up to 300,000 over the next 12 months. This is a frightening statistic for employees and demonstrates the fact that businesses have already started to find ways to save themselves from sinking.

What options are available to businesses during this economic slowdown? As highlighted above, many have begun the complex (and often very expensive) redundancy process whilst others are striving to avoid this at all costs. This article will consider the alternatives to redundancy as well as the fundamentals of redundancy itself.

Redundancy

Due to the reduction in consumer buying, many organisations are finding themselves with a genuine redundancy situation on their hands, i.e. a reduction in the amount of work to be carried out. Although, perhaps, the most obvious way to reduce costs, redundancies lower morale and can cause substantial damage to a company’s reputation. Moreover, the redundancy process can be extremely expensive.

Should an organisation decide that making redundancies is in its best commercial interest, management of the redundancy process is essential. It requires a lot of planning and it is imperative that proper procedure is followed as there are significant consequences if you get it wrong.The exact procedure will vary according to the size of the redundancy and the timescales in which it is to be carried out.

Refocusing

One way to avoid redundancies is to refocus the business. It might be possible for more emphasis to be placed on aspects of the business which were previously not so lucrative but are more realistic in today’s climate. For example, estate agents are concentrating less on sales and more on lettings.

Care needs to be taken from an employment law point of view if this approach is taken as it may involve varying certain employees’ terms of employment. This cannot be done unilaterally. To avoid any of the several possible claims which an employee has open to him if his terms of employment are unilaterally varied, employers should consult and try to reach an agreement with employees prior to making any variations to their contracts.

Retraining and Redeployment

It makes sound business sense to redeploy employees where possible as both time and money will have been invested into their training. It also means less statutory redundancy payments will have to be made.

Employers need to find suitable alternative employment within their business if they want to offer this to employees.

In brief an offer of suitable alternative employment should:

• Have similar status
• Have similar earnings
• Be within the employee’s capability
• Not cause unreasonable additional inconvenience to the employee

If the offer of alternative employment is suitable and is refused unreasonably by the employee, the employee may lose any right which they would have had to a redundancy payment. If an employee agrees to an alternative position within the business, the position is automatically deemed suitable.

Alternatives

Some other possible alternatives to the above are:

• A recruitment freeze;
• Stopping or reducing overtime;
• Offering early retirement to volunteers (care should be taken when considering this and legal advice  sought due to possible age discrimination claims); and
• Offering existing employees sabbaticals/unpaid leave.

And finally

Whichever route is followed, be sensitive towards your employees. Employees are far more understanding of financial or organisational difficulties if they are informed and involved in the decision making process.

Prevention is better than cure and legal advice should be sought early on where appropriate. In the current economic climate no organisation has money to throw away on unnecessary employment tribunal claims. The initial costs involved to plan the process will be money well spent when compared with the potential legal expenses and settlement costs incurred to remedy a mistake, which could have been easily avoided.

Latest Events

• 
• December 2008
•