The past two years have been turbulent and the rest of 2022 looks set to continue this trend. We have entered the post pandemic world with an initial period called the great resignation with candidates seemingly having their choice of jobs. Now we are in a cost-of-living crisis with high inflation which is set to rise even more by the end of the year[1],record high energy and fuel prices and rising food costs. Employees are looking to companies for support them with increased wages, enhanced benefits and/or more flexibility to work from home to reduce commuting costs. Companies concerned over these rising costs will be carefully examining budgets and looking to see where savings can be made to combat the increasing costs. Smarter and more efficient working seems to be the way forward but with a risk of businesses struggling to survive during these difficult times there are predictions of future redundancies.
Predictions of redundancies
Companies are being forced to consider a wide range of cost saving measures which may include redundancies as a last resort. The Office for National Statistics reported that earlier this year the number of redundancies increased by 103 per cent in one month– from 8,869 in January to 18,043 in February. ACAS reports that nearly one in five employers are considering redundancies over the next year[2].The Scottish government have already outlined that they have a reduced budget this year and local councils should begin looking for efficiencies to cut costs.
Redundancy as a last resort
As a cost cutting measure redundancies can support a business to survive by restructuring and aiming to be more efficient. However we’d suggest that redundancies should be used as a last resort and only when all other options have been explored. If employees can see that you are doing all you can to avoid a redundancy situation this can help to bolster team morale and increase buy in to any proposed changes which will help the business to survive.
Options can include a reduced working week (e.g., Friday afternoon as non-working time) and potentially cutting wages for all employees. Another option can be utilizing technology to see if there are any savings to be made with upgraded or new technology – a large cost at the outset but likely to save money in the long-term.
If all other options have been exhausted and redundancy is the only way forward, then one way to begin the redundancy process can be to offer voluntary redundancy and see if any employees will accept. Offering voluntary redundancy has some benefits including:
· Offering employees, the chance to leave if they are already disengaged or looking for another career opportunity
· Maintains some morale within business as this is seen as fair
· Removes the need to create redundancy criteria and select employees based on the criteria
Of course, there are disadvantages to this approach as you may end up losing the employees you need to keep the business successful or those with the skills you really need. This could also entail higher costs as those with the higher financial benefit tend to be the ones who want to go with their redundancy payment which may mean you pay higher amounts than if you went for a compulsory redundancy option.
Top Tips
Any redundancy situation is stressful for all involved. To support with redundancy situations here are some top tips to follow –
1. Establish a fair process – To support employees during this time it is important to follow the ACAS guidance on redundancy and any internal policies which you may have. It is important for employees to have confidence in the process as this will help with acceptance of the situation and support the employees who remain. Ensuring you follow a fair and balanced process will also limit the likelihood of a tribunal claim being made.
2. Selection – Redundancies should arise from a genuine business reason which can be explained to employees and justified.. You will need to establish where in the business the cuts will come from and from this how many positions are being made redundant – this will then determine those who are at risk of redundancy known as the pool. Remember the selection pool will not always be limited to those currently in the role but may stretch out to include all those completing similar tasks.
3. Communication – You should inform and consult employees as soon as possible with the news of redundancies and be transparent about the reasons. Allow employees the opportunity to come up with suggestions on ways to avoid compulsory redundancies and any cost saving measures which can be made. Consulting with employees appropriately, with compassion and support, and following the ACAS guidance on redundancy is essential if you want to keep the costs to a minimum and continue turning the business around.
4. Calculating redundancy pay – When you have confirmed those who are to be made redundant it is important to calculate the redundancy settlement for employees quickly and accurately including any notice, statutory redundancy pay and any contractual redundancy entitlements. Gov.UK has a calculator to help you work our statutory redundancy pay and Breath HR also have a free calculator available here https://www.breathehr.com/en-gb/redundancy-calculator
5. Maintain accurate records – The CIPD recommends keeping full records of redundancies and each stage of the process for 6 years. You should include all correspondence between yourself and each employee in these records. It is important to keep these files in case of any future disputes.
[1] https://www.ibtimes.com/uk-inflation-hits-40-year-record-highest-g7-3547808
[2] https://www.peoplemanagement.co.uk/article/1789792/cost-living-crisis-good-enough-reason-redundancies