Why redundancies might not be your only option

As the Government’s job retention scheme is scheduled to come to an end in March 2021, many employers are now considering what their workforce will look like going forward and if redundancies are going to be needed.

In these circumstances, making employees redundant is an obvious option for reducing costs. However, making redundancies is a real loss for businesses. Not only is it expensive, but it often means letting go of good people who employers have invested in and may not easily be replaced.

However, if there is a possibility of an upturn in the short to medium term, retaining employees may be the best approach.

How can you retain employees?

• Job Support Scheme – To make use of the Government’s Job Support Scheme, employees must work and be paid for 20% of their normal hours. For every hour not worked, the employee will be paid up to two-thirds of their usual salary. The government will provide up to 61.67% of wages for hours not worked, up to £1541.75 per month (more than doubling the maximum payment of £697.92 under the previous rules). The cap is set above median earnings for employees in August at a reference salary of £3,125 per month. You can find out if an employee is eligible for the scheme by using our online calculator. If an employee is eligible, employers must have a written agreement with their employees regarding the Scheme. HMRC have stated this agreement must be made available to them upon request. If an agreement cannot be produced, HMRC may demand that all financial support offered under the Scheme be repaid by the employer. In addition, failure to agree on the reduction in hours with an employee properly may result in an unlawful deduction from wages claim.

• Job retention bonus – Review whether there is any other government assistance available. For example, having regard to the Government’s job retention bonus, if you know you are going to retain at least some of your furloughed employees after January 2021, does the benefit of being paid £1,000 per furloughed employee enable you to keep on some other employees who you may otherwise make redundant?

• Reducing overheads – Carefully review your company’s overheads and gain control of your spending to see whether you can make sufficient cost savings before looking to reduce your headcount.

• Pay freezes – this will be unpopular for many reasons, but as an employer, your primary commitment should be to preserve employment for as many people as possible – stopping a pay rise is a good way to manage cost and maintain employment for the majority.

• Reducing salary or hours – Agreeing with employees to reduce their salary or hours – this approach has the same purpose as redundancies (i.e. reducing costs). Yet, it doesn’t require you to let employees go. An additional benefit to this approach is that when business eventually picks up, you still have a full workforce and don’t have to spend time and money recruiting new employees. However, you cannot just change an employee’s terms of employment without their consent. Changing terms of employment needs to be done correctly; otherwise, you risk exposing your business to claims and costs, which could ultimately defeat the purpose of making the changes in the first place. It is, therefore, advisable to seek legal advice before making any changes.

If you have to consider redundancy, make sure you follow a fair process.

If, after considering all avenues, you may find that, unfortunately, redundancy is your only option. During these unprecedented times, it is essential to ensure that you follow a fair redundancy procedure as the financial risks of getting things wrong can sometimes be very significant. To guide you through this process, we have put together a Redundancy Support Hub.

Alternatively, if you would like to discuss with us your redundancy proposal please get in touch.

This article was written by Claire Berry, an Employment Solicitorat Price Bailey . If you have any questions or require any assistance, you can contact Claire and the employment team on the form below.