Alternatives to redundancy- things to consider first

Redundancies are a big step and can have a strong effect on someone’s life and the company in question, so it’s important to consider what potential alternatives to redundancy options exist before going down this last option resort.

Understandably, redundancy is an extremely tough decision for a business to make of any size or sector and supporting a company through a redundancy process can be one of the hardest aspects of the job for any HR professional. That is why as an HR professional, it’s wise to consider any alternatives to redundancy as in some situations, the HR team can assume a more strategic role and put forward alternative proposals without the need for any redundancy actions.

Often, it’s worth consulting with your company and its employees about why the business is having to consider alternatives to redundancy, and why if measures don’t improve, redundancy might need to be a final option. Doing this will enable the employees to get on board at an earlier stage for maximum results, but also allows the HR team to explain why changes need to happen, and that the ultimate goal is to save their jobs and possibly the company/organisation they work for.

When companies go through redundancy, the spotlight is often on the HR team to lead the way. HR professionals become the go-to experts for support and advice and often, will still need to provide assistance and guidance while also facing the potential (or certain) loss of their own jobs. So with further restrictions and closures on the horizon, how can HR teams in different industries become more strategic? How can HR professionals successfully support their companies and avoid reducing their workforce?

What are some alternatives to redundancy?

If you are an HR professional working in an organisation that is currently facing financial difficulties, below you will find a series of measures and potential alternatives to redundancy that can help your employer during this difficult time:

Implementing a hiring freeze

While this may only work in certain areas of the organisation, putting a freeze on new recruitment creates a natural pause that stops your company from hiring (albeit for a limited period of time) employees in non-essential positions and creating any new costs. This process may enable the company to focus on consolidating and potentially restructure the departments that are key to delivering essential work without the need to let anyone go.

Introducing a salary freeze

Other alternatives to redundancy could be to introduce a salary freeze. Stopping pay rises for a set period of time could prove to be a strong enough measure for a business to avoid making any of their staff redundant. By putting a freeze on salaries, this short-term solution could create enough stability within a company to keep it with steady footing until the financial landscape improves.

Letting contractors go

Before taking the difficult decision to put staff at risk of redundancy, a company could look at reducing the number of contractors hired within their workforce. This would not only help the business save some money, but it would also give other employees in the company the opportunity to transfer to other departments or develop skills that may better serve the company in the long run. Should redundancy be needed at a later date, allowing the employees the opportunity to learn or improve on their skills, might also help them secure their next job and improve their CV. This step is particularly true if a hiring freeze has also been put into place and a gap has arisen in skills that still need fulfilling.

Reducing overhead costs

With many businesses like PWC embracing the ability for their employees to work from home, it’s provided an opportunity for overhead costs to be dramatically reduced. Where many companies are now set up for their employees to work from home a few days a week (if not all), not only will everyday costs be reduced (e.g refreshments and consumables) but when employees are returning to the office, flexible working means not all the employees will be needed in at the same time. With this reduction in desks needed at the same time, ‘hot desking’ may be an option meaning the floor space previously required could be reduced resulting in a potential reduction in office size required (and so reduced building rates). Companies like Capita have recently announced the sale of many of their (newly redundant) locations which “will be used to pay debts” and provide some additional finances to help the company’s future.

Encouraging employees to permanently work from home

With the Global pandemic of 2020 hitting unexpectedly, it forced businesses to create a way for employees to work from home full time, and in turn, created a huge shift in the way it’s viewed. By redeploying most of your staff into home-based roles, not only does the need for any office space at all become an option, but it can increase employee satisfaction and be an effective alternative to redundancy. As an example, Lloyds Banking Group is set to roll out this change in 2021, and they are not the only ones. Deloitte is also closing four of its UK offices, meaning that roughly 500 employees will be offered to work remotely as part of their contract.

Reducing paid overtime

If your company usually pays for overtime, you may consider either reducing, capping, or stopping this practice altogether as a way to reduce some additional costs. This allows the business to save money in the long term potentially eradicating the need for redundancies. However, as with all other ideas in this article, I would strongly recommend seeking legal advice before implementing this suggestion and talk it through with the employees and consider how this will impact them (financially and with their workload).

Introducing a temporary pay cut

This measure could apply to your senior team only or to the whole company. While asking senior members of your team to take a considerable pay cut may not be a popular measure, in some cases, this strategy could mean the difference between the company closing its doors permanently or surviving a period of extreme financial difficulty. As an example of this, the boss of the ‘Restaurant Group’ announced he would take a 40% pay cut, along with the “Daily Mirror publisher Reach who has cut the wages of all staff by 10%, while executives will see a 20% cut”.

Consulting with your staff and explaining the situation openly and honestly may also give your business the option to request all your employees to take a temporary pay cut. Gravity Payments CEO Dan Price did just this with effective results stating “give power to your people, be honest and democratic. They will find solutions that you can’t see.”

Reducing employees’ hours

If contracts allow it, you may also be able to offer your existing staff reduced hours. In turn, this could reduce pay in some instances, and, therefore, your outgoings as a company. However, as an employer, you can only legally do this if the clause is already included in your employment contracts. If not, you may need to first renegotiate a change to your existing staff contracts; but please do consider the implications this could have on the employee’s personal lives outside of the workplace such as finances, working pattern or morale.

Another way to reduce working hours is by introducing a job-sharing scheme. Copenhagen Airport decided to do this with nearly 380 employees as alternatives to redundancy identifying cost savings equivalent to about 325 full-time positions.

Offering voluntary redundancy

To avoid starting a forced redundancy process, a softer approach could be to give your staff the option to volunteer for redundancy. This process gives your employees the ability to choose the best course of action based on their personal and professional situations and priorities. It also gives them a level of control that they would not otherwise have if your company put them through compulsory redundancy.

However, this strategy may not be the right answer for all businesses. Voluntary redundancy carries potential risks that should be thoroughly considered before deciding to go down this route as the company may not receive the results it desires, for example:

• A larger number of staff members than you expect may volunteer for redundancy.
• Your company may lose highly-valued and skilled employees.
• Naturally, staff with long service will be more likely to put themselves forward for redundancy. From a financial perspective, this means the company may have to pay higher redundancy payouts compared to what they would pay for employees with shorter service.

Having said that, when all these risks are taken into account and successfully mitigated, voluntary redundancy may be the right answer for your business, as ITV News put this proposal forward towards the end of 2020 “with a view to making a small reduction in its overall headcount“.

Redeploying staff into different roles

Instead of making your staff redundant, wherever possible, you may choose to redeploy them into other roles. John Lewis did this successfully when they were forced to temporarily close their shops during the Covid-19 pandemic. John Lewis made the strategic decision to then transfer some staff to their Waitrose branches to help the success of the website johnlewis.com. The solution meant they could retain their workforce while covering for the increased demand in specific areas of the business.

The importance of seeking legal advice

The above list covers guidance and recommendations that may work for both large and smaller businesses as alternatives to redundancy. Whilst it may allow an HR team to become more strategic and create engagement and openness with its employees, it’s still a complex and emotional situation that will likely have long-term results for its employees as well as the company in question.

With this in mind, I would always recommend you seek relevant legal advice before implementing any of these suggestions to ensure all bases are covered. Some companies may already have a preferred employment law firm that can help provide this advice and guidance, but my recommendation is Starford HR and Legal Services.  

Would you like any outplacement support?

If redundancies are unavoidable and you would like to support any colleagues who are leaving the organisation in finding their next jobs, get in touch and ask me about my Outplacement Services. I offer a complimentary 20-minute discovery call for business owners, HR professionals, or members of the leadership team to help you decide how to best support your teams.

You can also check my free resources for all HR professionals here.