STAFF MATTERS: Five ways to avoid redundancies

With inflation still above 10 per cent and expected to remain high until the middle of 2023, many Scottish businesses will be forced to cut costs.

If you want to avoid a redundancy situation that can be costly, time-consuming and possibly bring legal risks if not carried out properly, here are five strategies worth considering.

Freeze external recruitment

Pausing all external recruitment is one way to cut costs. However, it could mean no maternity leave cover or replacements for leavers.

Employers must also recognise that recruitment freezes could strain current employees and reduce their performance and engagement levels. Businesses should minimise the impact on their teams and maintain morale by recognising hard work, being more flexible, and having regular one-to-one catch-ups on employees’ wellbeing and workload.

Offer voluntary redundancy

You could offer your employees the option of voluntary redundancy. But remember, employers can say no to someone who makes an application. Also, if people volunteer for redundancy, this still counts as a dismissal, so you must follow a fair procedure to terminate their employment.

Employers should also be careful about offering voluntary redundancy to only certain groups, as this could constitute unlawful discrimination, eg only offering voluntary redundancy exclusively to older workers could be considered age discrimination.

Review employee benefits

Another option to consider is reviewing your employee benefits package, making savings by removing those underutilised or with huge costs.

Before removing a staff bonus benefit, be cautious and understand if it is contractual or discretionary. If the bonus is contractual, the employer must make these payments if the employee meets the required criteria. Employers must gain express agreement before removing these unless they wish to force the change through in breach of the contract or they can terminate the existing contract and offer re-engagement on the new terms. Both of these approaches carry risk.

If the bonus is discretionary, the employer can choose when to pay it, how to calculate it and the total amount that will be paid. They might also withdraw it altogether. However, case law reveals that employers must not use their discretion irrationally or perversely.

Even if a benefit isn’t stated within the contract and the employer has never agreed to it expressly with the employee, it can become contractual through custom and practice.

Consider lay-offs

Another option is lay-offs. This means that the employer provides employees with no work (and no pay) for a period while retaining them as employees. Employees can only be laid off if an express provision in their employment contract permits it.

If there isn’t, you can obtain a written agreement from the employee to be laid off. Employees may be more receptive if they understand that it’s an alternative to redundancy and only temporary.

Introduce short-time working

Short-time working cuts employee hours and reduces wages accordingly, eg employees finish early each day and are paid only in respect of hours worked.

Again, you can only put an employee on this if their employment contract expressly permits this under the lay-off clause, there is a collective agreement in place, or they provide their written consent.

If your business uses these strategies, keep communication with employees flowing. They are likely to be more co-operative and understanding when they understand you are trying to avoid job losses.

Daniel Gorry is legal director, Scotland at WorkNest

Do you want to respond to this article? If so, click here to submit your thoughts and they may be published in print.