Alternatives to redundancy

With the Coronavirus having an unprecedented effect on the UK economy and the Government’s Job Retention Scheme (“JRS”) coming to an end on 31 October 2020, many employers are faced with the prospect of considering redundancies in order to reduce overheads and save their business.

But is redundancy the only option?

It is generally in an employer’s best interests to avoid redundancies wherever possible. Finding the right staff can be a timely and expensive process and to potentially lose valuable, experienced and trained staff can be detrimental especially if those employees are then subsequently employed by rival businesses. In addition to the loss of valuable skills and experience, employers are also faced with incurring the associated redundancy costs including notice pay, statutory redundancy pay and possibly enhanced redundancy pay where the contractual right to an enhancement exists. 

With the above in mind, employers may wish to consider the following alternatives to redundancy.

Secondments

Secondments allow employers to temporarily loan their skilled employees to other businesses who have a need for additional staff. This could be to other businesses in a group of companies, to contacts they work with regularly, or to unconnected companies. Under a secondment arrangement the employee remains employed by your business, but the expense of the employee’s wages are borne by another company for the period of the secondment.

Lay-off or short time working

Provided the contract of employment expressly permits you to do so, an employer can lay-off or put staff on short time working, meaning you can send employees home with no salary or reduce their working hours and pay.

Where no such right exists an employer could seek to negotiate such an arrangement with staff, and this is in effect what many employers did when placing their staff on furlough albeit with wages being covered by the JRS. With the end of the JRS coming to an end and therefore the loss of the government subsidy it might be expected that many employees would object to a lay-off or short time working with limited or no pay, but some may be open to the idea if it meant they kept their position in the long term and retained their employment rights. 

Pay cuts

If the contract of employment does not allow short time working or lay-offs and it cannot be negotiated, you may be able to agree that employees work less hours for less pay in order to preserve their role. If employees are not willing to agree to a pay cut, you may be able to agree a scheme where part of their salary is deferred in the short term, and they are paid back pay in instalments as and when business returns to normal.

Sabbaticals

An offer of an unpaid sabbatical whilst keeping your position may also be attractive to many employees, and could be offered as an alternative to redundancy.

Consultancy arrangements

Finally, some staff may be interested in entering into a consultancy arrangement where they continue to provide their services to the business on an as-and-when required basis and the employer promises to re-employ them if and when business returns to normal with all previous employment counting towards their period of continuous service. This option could allow the employer to save the costs of redundancy whilst allowing the employee to maintain an income and their role. Such an arrangement could however raise issues over the precise legal status of the individual if there is no substantial change to the way in which services are provided to the business.