Home Business News Redundancy warning to businesses

Redundancy warning to businesses

by LLB Reporter
7th May 20 1:54 pm

Donald MacKinnon, group legal director at employment law and HR firm, Law At Work, advises on the steps businesses can take to limit losing staff and lays out the considerations which must be made if employers are forced into the last resort.

The announcement by British Airways that it will cut 12,000 jobs has many commentators predicting that this is the stark reality of what is to come. As the UK economy falls deeper into a state of chaos, business leaders across the country are being forced to consider the shape their business might take post-coronavirus.

For now, the government has issued a lifeline, in the form of the furlough scheme, but with some estimates putting the cost to the Treasury at £16bn per month, it is clearly not something that can be sustained indefinitely.

Although a lift in social restrictions will help with cash-flow, many businesses won’t see a return to “normal” levels of income for quite some time. The tragic result of this unprecedented pause will inevitable be restructure and redundancies.

Redundancies should be an absolute last resort for businesses and, even during these times, there is plenty organisations can do – beyond the much vaunted furlough scheme – to reduce the chances of that last resort being required.

Payroll is the single biggest expense incurred by the majority of employers so taking measures to reduce the costs of employing staff without making them redundant is a sensible first step. In difficult economic conditions, many employees may be willing to give their consent to changes in order to avoid job loss. A sensible approach would be to link any reduction in pay to a reduction in working hours. Where a change is agreed, and agreement is absolutely crucial, it must be confirmed, along with the proposed timescale and permanence, in unambiguous, written form to those affected.

Furthermore, it is estimated that, excluding pensions, up to 7% of payroll costs go on fringe benefits. While an employer may not be able to realise these savings immediately because of contractual obligations to the providers, it is well worth considering when and how such benefits can be cancelled or postponed.

Another, longer term, alternative to redundancies that could prove effective for some businesses are sabbaticals. A period of unpaid leave may seem like an unlikely avenue but some workers, particularly those struggling with childcare in the current climate, may welcome an extended period of time away from work, especially if means protecting their role in the future.

While these measures can remove some pressure it is the unfortunate reality that, for some, redundancies will be inevitable. The redundancy process is complex and tricky to navigate. Any business exploring this route should only do so with the appropriate professional and qualified advice. However, there are some essential first steps that all organisations should have in place.

Consultation underpins a company’s route to compliance. From the very first meeting with employees to the final stage of the process, meetings must be fully minuted to provide an accurate record of events for both sides.

Having a suitable redundancy policy in place is also very important. Reviewing this and making sure it is fit for purpose before starting the process can prove extremely valuable further down the line. It is also good practice to make this known to all employees, for example, by inclusion in the organisation’s handbook.

There is often a temptation to try and manipulate the selection process to ensure certain staff stay or others leave, often where there are unaddressed performance or attendance issues.  Tribunals are alive to this and will scrutinise the process followed closely to ensure that it is objective and fair.

Balancing the obvious and often devastating impact of a redundancy with the pragmatic realities of running a business is almost impossible in the current circumstance but the risks of getting the process wrong are high.

Litigation leading to claims of unfair dismissal could haunt businesses for months and years to come which is why everything should be done to avoid the redundancy process in the first place and, if required, that it is carried out correctly. Businesses should listen to their advisors and not rush into a process that is complicated and fraught with potential issues.

As part of its Covid-19 response, Law at Work has made a whole host of its business advice available for free. Companies can access that advice here.

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