With only one week left of the furlough scheme there is uncertainty as to what autumn and winter have in store for UK employers.
When furlough ends on 30 September 2021, employers will once again have to pay all of their staff’s salaries in full, with no government assistance. The hope is that once employees return to their workplace full time, pre-pandemic levels of profit will return to businesses. However, if this does not materialise, many businesses will be considering whether redundancies are the only option in the face of dwindling profit margins.
This newsletter will explore ways of reducing the staff headcount in the business. The second newsletter in this series will explore further alternatives to redundancies.
Is the end of the furlough scheme a good time to make redundancies?
Redundancy is a potentially fair reason for dismissing an employee with over 2 years’ continuous service. There will be a genuine redundancy situation where a business has ‘a diminished requirement for employees to do work of a particular kind’.
While there may be a diminished requirement for employees to do work of a particular kind in many businesses across the UK due to the pandemic, redundancies may not be the ideal solution in these circumstances as:
· Statutory redundancy payments are costly;
· Carrying out a fair redundancy process can be time consuming; and
· Redundancies can lead to the loss of valued or experienced staff.
Are there any alternative cost saving methods to redundancy?
Alternatively, businesses may wish to explore intermediate solutions, allowing them to tie themselves over from the end of the furlough scheme to the return to normal business, without the need for permanent structural changes. An intermediate solution may include temporarily reducing the staff head count, for example.
How do we reduce the headcount in our business without making redundancies?
Methods of reducing, or at least stagnating the number of staff engaged by a business may include the following:
1. Eliminate non-employees i.e. agency/temp staff
There is no legal requirement to provide work for non-employees and dismissing these individuals is an easy cost saving method. If the business engages agency staff, in the majority of cases the agency staff will have a contractual relationship with the agency, as opposed to the business in which they perform their duties. As such, in the event they are dismissed by the business in which they work, they will not be able to make a claim against them for unfair dismissal or for any protective award.
However, before taking any steps to dismiss agency or temporary staff, employers should ensure that they are not employees with contractual rights.
A secondment occurs when an employee is temporarily sent to work in another part of their employer’s business or group company, or temporarily works for an external organisation e.g. a client of the employer, known as the ‘host’ company. A secondment may be an effective way to temporarily reduce the head count in one area of the business, and fill a vacancy in another area. In some circumstances, a client may be willing to pay for a seconded member of staff.
The employer will remain the same throughout the secondment, and will remain responsible for the direct salary payments to the employee but can be reimbursed by the host company. Best practice is to engage in a three way agreement between the employer, the host company and the employee setting out the terms of the secondment.
3. Career breaks/sabbaticals:
A career break can either be a form of unpaid leave (during which the employment relationship continues) or a temporary break in the employment relationship altogether with the expectation of resuming employment on the same terms (so far as practicable) in the future.
Unpaid career breaks may be an effective way for businesses to weather challenging economic conditions. Permitting career breaks enables an employer to reduce its payroll costs, in the knowledge that key employee’s services will be retained for the future (while offering the time off as a benefit to the employees). An agreement on the terms of the career break should be reached with the employee prior to the break beginning to avoid potential disputes. The agreement should cover employee pay, benefits, bonuses, the right to return to the same role following the career break etc.
When enforcing any of the above changes communication must be clear, and sensitively delivered. An honest approach in setting out the reasons for change may be more effective than informing employees changes are being made with no background information. If you are in any doubt as to the contractual status of any scheme, we would advise seeking employee’s agreement to any changes.
We are ready to advise and support your business through these challenging times. Please get in touch with your usual 3CS contact to find out more about how we can help.