7 Top Tips to Save Costs and Avoid Compulsory Redundancies

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The furlough scheme is due to close at the end of September 2021 and as the deadline nears, it is becoming more and more unlikely that there will be an extension to the scheme. Therefore, many employers will be looking to ways of saving costs without having to make staff cuts, whilst still grappling with reduced work levels.

In this article we look at some of the options available to employers when faced with increasing shortages of work and economic uncertainty.

  1. Recruitment

It is being widely reported that the UK is facing a recruitment crisis in certain sectors, particularly in hospitality but generally, work levels are still lower than they were pre-pandemic across many sectors.

It seems rather obvious but if you are faced with having to save costs, which may mean the loss of jobs, then a recruitment freeze is advised.

If, however, you have to recruit in some areas where the work is stable yet have losses of work in other areas, be advised that you should consider long serving members of staff for any vacancies that you have. You should also reasonably consider how long it may take to train them to undertake any vacant roles before recruiting externally.

Recruitment freezes do come with a downside of course, such as potential burnout amongst existing staff, so you do need to strike the right balance.

If you find yourself in a position where you must withdraw or delay a recent job offer, please see our previous article on the best approach to avoid any costly pitfalls (read more).

  1. Reducing the use of temporary or agency staff

If you are faced with a shortage of work or the need to reduce costs, which may result in compulsory redundancies, its important that priority is given to retaining and protecting the employment of existing staff.

Sometimes the need for specialised external contractors, freelancers and so on are unavoidable but they are costly when you factor in the various fees. Perhaps now is the time to look at the structure of your business to see if existing staff can be retrained or redeployed into other areas of the business to save those external costs.

Do exercise caution though with those staff on zero hours contracts, if they have developed a regular pattern of work, they may likely have enhanced employment rights and protections- so do seek our advice before ceasing to offer work to staff on temporary contracts.

  1. Overtime/TOIL reductions

Most overtime arrangements are ad-hoc but if you find yourself continually shelling out for overtime, look at whether this is necessary. Is there an issue with productivity? Are staff working smart enough? Overtime costs and the build up of TOIL (time off in lieu) can quickly build up, so get checking to see if these costs really are essential.

Be aware though, that any contractual overtime should not simply be stopped without good business reason and consultation, otherwise this may lead to a breach of contract claim.

  1. Temporary work breaks

Also known as sabbaticals, they are not something that many employers outside the public sector offer but they can be attractive to many staff and there are also significant benefits to the employer.

A sabbatical is where an employee takes a break from work. Their contract hasn’t ended, and they will still accrue annual leave and possibly other employment benefits, but sabbaticals are unpaid.

You may have someone working for you who has had a lot of time to think during the pandemic and would love to take a career break to spend more time with the family or travel.

As long as the terms of the sabbatical are expressly agreed in writing beforehand, an employee may be very happy to take a few months or a year off. This will save you the cost of their salary whilst they are away.

Also, client or internal secondments can often be a useful means of reducing salary costs for an employee, whilst also enhancing their training and development with no additional cost to you.

  1. Unpaid leave

This was offered to a lot of staff pre-furlough and is likely to be something that a lot of employers will want to offer post-furlough.

Like sabbaticals, employees may be willing to take some unpaid leave for all or some of their contractual hours, to assist the business during difficult economic times and to avoid redundancies.

If you are thinking of offering this, you must offer it fairly and seek our advice.

If you want to ask employees to use some of their annual leave you can. Please see our previous article for guidance on placing employees on annual leave here.

  1. Lay off and short time working

If no voluntary solutions can be agreed, you can consider lay off/short time working either as a means of getting through a temporary shortage of work or to assist you in bringing down your wage bill during redundancy consultation.

  • Lay off is where you have the option to keep your employees away from work without their contractual pay/salary whilst maintaining their employment.

Lay off can be for their full contractual hours or 1 day a week.

Contractual pay is not payable during lay off, but statutory guarantee pay (SGP) is payable where at least 1 day of work is lost. The current rate is £30 per day for a maximum of 5 days in a 3-month period.

Depending on the individual circumstances, an employee may be entitled to employment benefits during a period of lay off.

  • Short time working involves an employee’s contractual hours being temporarily reduced.

It is still used for the same reasons as lay off but, in this instance, no full days are lost and therefore SGP is not payable. Instead, employees are paid only for the hours that they work.

Please note- You are only able to use lay off or short time working where your contracts of employment or employment handbooks allow. It is also vital that you seek advice from our experts before doing so.

  1. Voluntary redundancy

Voluntary redundancies can be useful in avoiding compulsory redundancies. For example, an employee may have been contemplating leaving and may be happy to volunteer for redundancy.

Please be advised though that despite popular myth, voluntary redundancy is not a resignation. It is still a termination of contract and there has to be a genuine reduction in work affecting the role of the person who wishes to volunteer.

It is of course up to the employer as to whether a request for voluntary redundancy is accepted or not.

Finally, there are many steps that employers can consider before having to make redundancies, of course not all are going to be suitable and sometimes there is just no room for further savings without having to make job cuts.

Whatever the difficulties being faced by your business, our experts can provide practical advice to assist you.