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Making redundancies as painless as possible

7th Oct 2020
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capium
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After months of talking about furlough, the conversation has, unfortunately, begun to turn to the dreaded R word – redundancy.

Back in July, Chancellor Rishi Sunak made it very clear he wasn’t for extending the furlough scheme beyond the end of October, and the level of support available for businesses began winding down in August.

Although many businesses are calling for an extension of the furlough scheme, especially with the introduction of new COVID-19 restrictions on 22 September, of course it can’t go on forever.

That means it’s time for businesses to ask some difficult questions and make the tough decisions they’ve probably been kicking down the road since spring.

Does your firm have too many permanent staff for the amount of business you’re able to do? And are the staff it has in the right roles if, like many, you’ve had to adapt or even pivot completely to stay afloat since March?

Redundancy regulations

The first thing to be aware of if you’re considering a redundancy programme at your business is the precise legal meaning of the term.

We’ve all heard of firms in the past making people redundant as a lazy shortcut for having grown-up conversations about performance, attendance or attitude – “Sorry, it’s not you, it’s the state of the market.” That’s not on. It’s not a tool for clearing out ‘difficult’ characters or underperformers.

To be clear, you should only talk about making people redundant if:
● your business is closing altogether
● part of your business is closing down, or relocating
● or you no longer have enough work for your staff to do.

Once you’ve decided to move forward, it’s really important to document your decision-making processes. This is not only helpful if you should later face any legal challenge, but also as a way of challenging yourself to do things properly and fairly at every stage.

For example – and this almost goes without saying in 2020 – you mustn’t identify staff as candidates for redundancy based on their age, gender, sexual orientation, health, or race.

Finally, bear in mind that if you’re expecting to make 20 or more roles redundant within a period of 90 days on a single site, you’ll have to carry out a proper collective consultation with staff.

And even if you’re making fewer redundancies, consultation is generally considered best practice. The less people feel as if redundancy is something being done to them, the better.

Mariah Tompkins, director of WKM Accountancy Services, offers her perspective on the challenges of making redundancies and your duties as an employer: “Redundancies can be hard on both employers and employees. As an employer, letting staff go once you’ve worked alongside them for years can be a stressful experience.

Mariah Tompkins

“That said, remember that employees have certain rights when they are made redundant. Part of your duty as an employer is to ensure that your staff receive their redundancy entitlement.

“The amount depends on how long the employee has worked for the company, as well as their age:
● 1.5 weeks’ pay for each full year of employment after their 41st birthday;
● A week’s pay for each full year of employment after their 22nd birthday;
● Half a week’s pay for each full year of employment up to their 22nd birthday.

To be eligible, a member of staff must have been employed for a minimum of 2 years (with the length of service capped at 20 years).”

Voluntary vs. compulsory

With that in mind, it can also make sense to start by offering voluntary redundancies.

These are generally easier on staff morale and, in many cases, can provide people with just the chance they’ve been waiting for to make their next move in life.

The downside to this approach is that you might not get enough volunteers – especially at a time when jobs are harder to come by. Equally, you might find the ‘wrong’ people volunteering, namely those whose skills and experience you’re keen to retain.

As a result, you might end up having to undertake a compulsory redundancy programme anyway.

Redundancy is the last resort

Redundancy isn’t a get-out-of-jail-free card. It can be expensive, timely and difficult to administer, and emotionally draining for both management and staff – those who remain as well as those who leave.

That’s why most experts tend to advise considering other options first. For example, could you reduce staff costs by reducing overtime, hours and/or bonuses instead?

If you use freelancers and contractors, consider reviewing those arrangements before you make cuts to permanent staff numbers.

And think about what your team might want and need, too. If you’ve got colleagues who’ve spoken about wanting to retire early, or take an unpaid sabbatical to work on freelance projects, this would be a good time to revive those conversations. There’s potential there for a win-win.

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