It is a good idea to identify the essential priorities for your business, i.e. those that are achievable, do not require unnecessary investment and that will produce swift returns. Think critically about the needs of the market and focus on the things that will have the most robust financial impact before you make any knee-jerk reactions to cut staff overheads.

We've had almost 15 years of a long economic cycle that has meant a lot of investment in your staff. When you announce that you are having to undertake a cost saving exercise it will undoubtedly have a negative effect on the remaining employees as, whatever way it is dressed up, it will always make your employees reassess their position.

Your best-qualified and key people are going to feel insecure and much more likely to look for other jobs if they feel the company is unstable.

Therefore, the true cost of redundancy can be much greater if you also lose your key staff. Therefore, before the final decision to reduce staff is made, you should exhaust all other avenues first, i.e. other vacancies or retraining wherever possible. This is key as you will also need to ensure you have the skills available for the future when the downturn ends.

Redundancies have to be managed well, with full communication, negotiation with staff to try to minimise the impact - not just going through the motions - as well as complying with all the legislation that surrounds such a situation.

Can you handle redundancies?

Over 70% of executives have little or no experience of managing redundancies. As stated, it seems likely that redundancies will happen this year, therefore you need to ensure that your procedures are up to date and that you are clear about the processes to follow.

The statutory definition of redundancy can be simply summarised as a dismissal caused by:

• A disappearing business
• A disappearing workplace, or
• A disappearing job

A fair redundancy dismissal will involve a fair selection, individual consultation and consideration of alternative employment. The Statutory Dismissal procedure must be followed as a minimum.

Consultation should be as soon as the likelihood or necessity for redundancies has arisen. The issues on

which you should consult are:

• The risk of redundancy and pool for selection
• Selection criteria and results of selection, and
• Alternative employment

Recent case law has confirmed that employers will be in breach of the Statutory Dismissal Procedure if they do not provide employees with sufficient information, in advance of any meeting, to allow them to understand and challenge why they have been selected for redundancy. If the information is supplied later at an appeal hearing the dismissal will still be automatically unfair.

What actually constitutes ‘sufficient information' is dependent upon each individual case. However, where you are selecting from a pool, it is always advisable to provide details of the selection criteria being used and then provide the individual with their scores and the basis for them.

You must consult with the employees, whether this is individually or collectively and with appropriate

representatives where this is appropriate and in line with the ICE Regulations.

The consultation should always include ways to:

• Avoid the dismissals
• Reduce the number of dismissals, and
• Mitigate the consequences of dismissals

There are statutory consultation periods that must begin before the dismissal takes place:

• 30 days if it affects 20-99 employees
• 90 days if it affects 100 or more employees

There are no statutory timescales for fewer than 20 employees, but you must ensure that proper consultation is given.

During consultation you should also offer any suitable alternative employment where appropriate.

As part of consultation you can:

• Ask for voluntary redundancies
• Available suitable alternative employment
• Consider an early retirement scheme

Consultation must also precede any public announcement.

If you don't have an enhanced redundancy payments scheme, then employees who have over two years

continuous service qualify for Statutory Redundancy Payments (SRP) that are based on pay, length of service and age. The upper and lower age restrictions on SRP were removed in 2007.

From 1 February 2008 the maximum SRP increased to £330 per week.

It is also worth noting that if you have an enhanced redundancy payments scheme that you establish whether it is not contractual or not, i.e. that details of enhanced redundancy payments are detailed in a Staff Handbook.