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Alternatives to compulsory redundancy

In tough economic times, redundancy is a reality that every business must contemplate. But businesses are increasingly likely to use alternatives to compulsory redundancy.

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If you're worried about the future of your business, explore these alternatives to cutting the cost of hiring. If you need to speak to someone about any of these issues, call us on 0845 130 1722.

Voluntary redundancy

According research from law firm Irwin Mitchell, half of firms are more likely to encourage voluntary redundancies in 2012 compared to two years before. This means opening up the redundancy process to all employees and allowing them to put themselves forward for consideration. Some may already be planning a change of career or retirement.

Freeze recruitment

Recruitment is a costly business when you take advertising, interviewing and training into account. Don't take on more staff than you need to, even when times are good, or you may find yourself needing to let them go later.

Agency workers

Although agency workers now have some of the same rights as employees after 12 weeks, the process for reducing the number of agency staff is still simpler and cheaper than going through a redundancy process. If you do need to hire, agency workers can be a more cost-effective and risk free option for filling temporary skills gaps without committing to a longer term employment contract.

Reduce use of sub-contractors

If you outsource work to external contractors, this can be a massive drain on your resources. Assess whether this work could be reduced or stopped all together.

Reduce working hours

Cut down on the number of hours that staff work (see short-time working below), especially overtime if you currently offer it. Some staff may be receptive to the idea of more flexible working where they can work shorter hours to fit around child care or other commitments.

You could even ask people to come forward voluntarily if they'd like to reduce their hours on a permanent basis, these would then have to be reflected in an updated contract of employment.

Freeze pay rises

While everyone would like a pay rise, many employees are just glad to have a job at the moment and many don't expect them in the current economy.

Alternative employment

Though a role may have become redundant, there may be other suitable work for employees within your business and details should be made available to enable them to decide whether to accept or not.

Wage reductions

This can be tricky, as no one likes to make less money and you cannot reduce pay without changing the contract of employment, which you shouldn't do without professional help. However, with thorough consultation with employees you may be able to reach a compromise with them if it means they can save their jobs and the company. You can also explore payment deferral schemes, where employees will get paid in full when business picks up.

Temporary lay-offs and short-time working

Lay-offs occur when employees are not provided with work and the situation is expected to be temporary. Short-time is when employees are laid off for a number of contractual days each week, or for a number of hours during a working day. However, you must have an express contractual right to do this and, if the period of lay-off is continued, employees can claim redundancy.

Consult

If you do go through a redundancy process, you are legally obliged to hold a consultation. This allows the employees concerned to explore the options with you and it may throw up some alternatives to redundancy that you hadn't already considered.

But, even without a redundancy situation, you could still open the question up to employees and ask them for their cost saving ideas.

If you're worried about the future of your business or are considering redundancies, seek advice as soon as possible. Members should call our helpline on 0845 130 1722 to speak to a business adviser before taking any action.

We can also help you make sure your contracts of employment are up to date and contain the right clauses in case the worst does happen.

Note: This article is provided for guidance only and does not constitute legal advice. We advise any employer in a redundancy situation to seek legal advice immediately - members should call us on 0845 130 1722.

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