THE ECONOMIC DOWNTURN – POSSIBILITIES FOR AVOIDING REDUNDANCIES
We have all seen the headlines: “job losses, bank failures, recession, profit warnings“. As the effects of the credit crunch continue to bite, redundancies have become increasingly common, particularly across the property, construction and financial sectors. No one is immune, people who would previously have been considered to be in safe professions such as bankers and solicitors are all now at risk. This update seeks to give a general overview on possible ways to avoid making redundancies in this economic downturn.
Alternatives to redundancy
Given the inherent stresses and PR difficulties involved in any redundancy process, in the first instance it is sensible to look at options which fall short of reducing the size of the workforce and avoid the need for redundancies.
These could include:
• a variation in terms and conditions;
• a three or four day week;
• sabbaticals, or
• reduced pay or pay freeze.
You will have seen in the press some of the high profile companies which have instigated such practices already. These include Honda, where the image of thousands of gleaming new vehicles piled up at Southampton docks after the export market they were intended for dried up speaks volumes about the way the current economic slump is crippling the car industry. Whilst Honda has said that there are no plans for redundancies amongst its 4,000 strong workforce at the site, it has, however, announced 35 non production days during the months of April and May with production restarting in June 2009. In another significant move KPMG, Europe’s biggest firm of accountants, has offered 11,000 staff a dramatic cut in hours in an effort to save jobs. This initiative involved employees being able to apply for between four and 12 weeks of partly paid leave or moving on to a four day week with the fifth day unpaid. It is important to remember in such situations that employees are being asked to volunteer and staff are not compelled to accept the proposition. However, such measures underline the shock waves that are continuing to reverberate throughout the City of London, and the world as a whole, as companies are forced to put staff on to part-time contracts and ask them to accept lower pay, reduced pay or no pay rises as they attempt to avoid waves of redundancies. For firms who are able to implement such strategies they not only reduce the extensive costs involved in redundancies, but it also means that key skilled people will not be lost to competitors over the long term.
If you wish to change terms and conditions of employment and staff consent cannot be obtained or volunteers will not come forward then really the only way to implement the changes is to dismiss and re-employ the employees under the new terms and conditions. This is a process to be carried out through a structured programme of consultation with employee representatives and must, of course, comply with the statutory dismissal procedure in order to avoid claims of unfair dismissal.
Transferring staff or offering alternative employment
Another solution is to transfer employees or to offer them alternative employment instead of redundancy. If you are offering staff alternative employment it is prudent to allow them, for example, a four week trial period and if they refuse unreasonably to accept alternative employment this may mean that they are no longer entitled to redundancy payments.
Voluntary Redundancy
It may be that some employees would take voluntary redundancy if it were offered to them, however the difficulty in this is that you may lose key employees who you would rather keep. This can be an expensive exercise for employers since long serving employees may be attracted to higher redundancy settlements and it may result in a disparity in the remaining experience and skills of the staff and affect the productivity of the company. Again it is important to emphasise that voluntary redundancy will not be guaranteed for all applicants. Another issue to be careful of is that voluntary redundancy schemes may be regarded as potentially discriminatory; if employees are paid higher payments because they have longer service this may be seen to be a method of age discrimination.
Redundancy itself is fraught with difficulties for the employer from a commercial and legal point of view, as well as the obvious human impact. Getting it wrong operationally can seriously affect an organisation’s reputation and undermine its ability to retain and motivate the remaining workforce as well as to recruit talent in the future. Where the alternatives to redundancy are simply not an option, any implementation of a redundancy programme should, of course, only be done after obtaining legal advice on the particular circumstances.
A redundancy exercise can be seen as an opportunity to rid an organisation of poorly performing employees and therefore it is essential before embarking on such a course of action that a business identify why change is considered necessary. It is important to identify what the ongoing business needs are and where the reduced requirement for employees exists. This will identify the pool of employees at risk of redundancy from which a selection exercise must be carried out. Redundancy should certainly not be used as a label for removing under-performing staff in the absence of a genuine redundancy situation. Where there is a genuine redundancy situation and a real need to reduce staff numbers, a good redundancy programme will focus on the ongoing needs of the business and will retain the workers who are the most valuable to the business. In turn, this will remove under-performing staff in a manner which is fair and transparent. The outcome will be a trimmed down and more efficient business which can remain competitive in these tough times.
IN THE NEXT ISSUE
In our May update we will look at the changes being brought in during April 2009 by the Employment Act 2008 and the new ACAS code of practice. By way of preview, it is important to note the following advice in the meantime.
In a dismissal case, the old rules will continue to apply if the employer has sent a step 1 letter, or held a step 2 meeting, before 6th April (or, obviously, dismissed the employee before 6th April).
In a statutory grievance case where the action occurred wholly before 6th April, then the statutory grievance procedure will continue to apply. However, it gets a bit more complicated for actions which began before 6th April 2009 but continue after that date. For such actions:
• For almost all types of claim (with the exception of equal pay, redundancy payments and some industrial action claims), the old statutory grievance procedure applies if the employee sends a step 1 grievance letter, or presents a Form ET1 to the Employment Tribunal, by 4th July 2009. If that date passes without a step 1 letter or Form ET1 being sent, then the new regime applies and the statutory grievance procedure will not engage.
• For equal pay, redundancy payments and some industrial action claims, the same applies except the changeover date is 4th October rather than 4th July.
SEMINAR ANDTRAINING PROGRAMME 2009
BREAKFAST SEMINARS
These free 60-minute events start with registration and breakfast at 8.30am. Presentations begin at 9.00am finishing at 10.00am. All events are held at our Frederick Street offices. To book a place on any of these events please contact:
Luisa Deas, luisa.deas@balfour-manson.co.uk Tel: 0131 200 1402.
Autumn Series
Tuesday 13 October:
Bullying and harassment in the workplace This 60-minute seminar will examine the effects of bullying and harassment at work. We will outline how these behaviours affect people and organisations and examine the legal implications if employers allow such behaviour to go unchallenged. We will also provide guidance on the development of appropriate policies and procedures.
Thursday 26 November:
Hiring, firing and retaining key employees
During this 60-minute seminar we will examine the recruitment process, from advertising the position to drafting the employment contract. We will also look at how to resolve matters if an employee’s performance is below expectation and will discuss compromise agreements and dismissing staff. We will examine methods of retaining key staff in business units where commercially sensitive work is conducted by employees with a high market value and we will look at the risks of losing key people in key posts and retention strategies.
HALF-DAY SEMINARS
These free half-day seminars provide practical guidance on the most significant employment law developments during the year.
The events start with a 9.30am registration, 10.00am presentation and finish at 1.00pm when a buffet lunch will be served.
Tuesday 28 April:
The Employment Act 2008 and Mediation
Tuesday 8 December:
Round-up of employment law for 2009 and looking forward to potential developments in the year ahead.
To book a place on any of these events please contact,
Luisa Deas, luisa.deas@balfour-manson.co.uk
Tel: 0131 200 1402.
TRAINING COURSES
We offer training on topics we have identified as key areas for HR professionals. These training sessions can be held either at our offices, or, we can come to you.
The topic titles can be used as a template for a more bespoke in-house course for all levels of management including supervisors, directors or other senior officers within an organisation.
• Equality and diversity
• Disciplinary and grievance procedures
• Becoming a family friendly employer
• Recruitment
• Mock employment tribunal
• Work performance and appraisals
To discuss your training needs please do not hesitate to contact:
Robert Holland
robert.holland@balfour-manson.co.uk
Tel: 0131 200 1242
Lorna Gibb
lorna.gibb@balfour-manson.co.uk
Tel: 0131 200 1263
