Just recently, I’ve had cause to reflect on what has been a very challenging few years for business owners; it’s probably no surprise that the R-words of restructuring, redundancy and recovery are popping up more frequently in my conversations with clients.
When the pandemic struck, and we faced our first lockdown, we were in uncharted waters. Even the most risk-aware of us couldn’t foresee the impact of Covid-19. Business continuity planning offered some quick “go-to” steps to protect positions, lists of priority contacts, and measures such as facilitating home working. As the virus took hold and we realised we were in for the long haul, the financial impact on many sectors began to bite hard.
Furlough proved a life-saver for employers offering an opportunity to scale back and accommodate the downturn in trade by temporarily reducing payroll. I know it wasn’t a walk in the park, and we had many meetings with clients working through the detail to ensure the business remained compliant and sustainable.
When the pandemic finally looked to be under control, we emerged from our “Teams” and “Zoom” existence to enjoy face-to-face meetings and socialising we had. Still, a moment of respite, believing a corner had been turned and the path ahead would be bright. Then Russia invaded Ukraine, and we had something new and equally devastating to worry about.
The accumulated cost to our businesses and mental health cannot be underestimated, but here we are. We’re playing the “Hokey-Cokey” with a recession; we’re in, then out, then going back in again, but we don’t need the Office for Budget Responsibility to call the moves on the dance floor. We’re already experiencing the symptoms of a full-blown downturn, and that’s unsurprising given everything we’ve had to deal with.
All the above, you know, but what can you do if your business is in financial difficulty and a Government supported furlough route is no longer an option?
You’ve reviewed your figures and met with the FD and accountant, deciding that you need to reduce costs and restructure to protect your business’s medium to long-term future.
What does that mean?
It could involve a variety of cost-saving measures. Still, one of the most impactful, redundancies, will reduce salary costs, especially if the trading position is at the point that it cannot sustain the number of employees in post. Bear in mind that redundancy is not a step to take lightly and will need to be handled very carefully, not least because of the impact on those directly affected and others who may be indirectly impacted either due to losing colleagues or the change it will make to their current role.
*Be sure to cover all possible options before heading toward a formal redundancy round. This could include…
- Seeking out any volunteers for redundancy, note: you are not obliged to accept an offer to take voluntary redundancy but avoid discriminating.
- Reducing hours/days worked or job share, consider temporary “lay-offs.”
- Placing employees in new, busier areas of the company
- Reducing overtime
- Stopping all new hires
The above are steps I would strongly advise you to take and highlight why employers must consult with staff before deciding redundancy measures. Any alteration to existing contractual terms must also be reflected in a new contract. Failure to consult appropriately with employees before making any redundancies will leave the employer open to claims for unfair or constructive dismissal if those remaining are overburdened as a result.
If the discussions involve 20 or more staff, you must organise “Collective Consultations,” where staff representatives, such as unions, can participate.
The consultation is an opportunity to cover the following:
- The communication of forthcoming plans and background to the decisions
- Possibility of exploring any possible route to reduce the number of redundancies *(as set out above).
- How you will decide on those selected for redundancy.
- The selection criteria could raise a discussion around the attributes you will need from staff as you move forward.
- It’s an anxious time for staff, so allow time for plenty of questions and, if possible, publish an accessible FAQ covering the common points of concern.
Selection Criteria
During consultations, it is advisable to find agreement on issues such as the selection process and measures you will apply to determine the selection of employees for redundancy.
In my experience, employers struggle more with the selection criteria and process than any other aspect, and it’s not surprising, given it is a feature that brings employees into direct engagement with the process and makes it very real. It can be stressful for all concerned, but you can help yourself hugely by keeping the criteria simple, easy to convey, fair and consistent.
Some examples of selection criteria include…
- Performance/ productivity
- Appropriate qualifications, skills, and experience for the role
- Good attendance record relating to independent events, not as a result of a disability or other protected characteristic.
- A good disciplinary record is marked down for any note of conflict or issues surrounding their approach to work that are officially recorded.
You can select which categories you feel are most appropriate or all areas for scoring. To make it a fair assessment, you should consider weighing the scores based on the importance of the company attributes. i.e. Performance could be marked out of 20, qualifications 15, skills 15 and experience 15 etc.
Timing
You should only notify the staff who are to be made redundant once you’ve completed the entire process. Staff can be accompanied at any face-to-face meeting.
Those to be made redundant should each receive the following;
- How they scored in the assessment
- A notice period and last day of work confirmation
- The redundancy payment calculation and when they’ll receive it
- Details of how the employee can appeal the decision
Redundancy Pay
Statutory redundancy pay is capped at the last 20 years that the employee has worked for you.
Maximum statutory pay for a week is £571. The rate can change yearly, and we’re awaiting news of the April 2023 figures.
Max total statutory redundancy pay is £17,130.
Remember to include any regular overtime or commission/bonus payments within the weekly pay calculation.
If the redundancy payments are likely to put the business in financial jeopardy, it’s possible to request support from the Redundancy Payments Service (RPS).
Management
Be sure, whenever possible, to keep to the process you have documented within your employee handbook/ redundancy policy. Be consistent and avoid going “off-piste”, as it may allow an employee to lodge a claim against your business.
By contrast, you should always strive to be as considerate an employer as possible by putting steps in place to support those made redundant. Provide help with finding a new role, CV drafting, re-training options etc…
