One major consequence of the current downturn is that many organisations
have had to look at cutting overheads. Once the easy savings
have been made, reducing staff costs will rise to the top of
the agenda.
Recruitment freezes have their place, but only work well in
sectors such as hospitality, where staff turnover is high. Other
employers may see redundancies as the only option, yet it might
pay for them to think of other choices, though these may carry
legal ramifications.
Redundancy and notice payments are clearly an immediate cost
for the business, and, if handled poorly, further costs can be
incurred if employment tribunal claims are brought. Then there
is the effect on morale for those who remain.
What should be considered, especially among those employers
who have already undertaken one round of redundancies, is to
look at reducing staffing costs without necessarily losing headcount.
Sabbaticals
Some employers allow sabbaticals – which should be subject
to business needs, of course – either without pay or on
reduced pay. This allows employers to retain skilled staff, while
at the same time making cost reductions in the short term.
Another option, taken by some large organisations, is to look
for savings by cutting the cost of pension schemes. On the salary
side, cost savings can be achieved by employees making salary
sacrifices or deferments. This means that bonuses, especially
truly discretionary ones, may be dispensed with.
But employers should be very wary about making unilateral reductions
in benefits for a very good reason - they may well end up in
an employment tribunal.
If an employer were to take such action, they could be faced
with claims of constructive dismissal. Perhaps more worryingly,
employees may decide to continue working but to put the employer
on notice that the reduction is a breach of contract. Even more
dangerous for the employer is the employee who stays silent,
but in years to come raises a claim that there has been an unlawful
deduction from their wages, thus looking for all the payments
they have missed out on for many years. For these reasons alone,
sensible employers should consult with staff regarding any proposed
changes before putting them into effect. This can bring additional
benefits.
For example, when staff are empowered in such a way they may
see themselves as part of the solution and will rise to the challenges
faced by their employer. If hard decisions need to be taken,
and employees understand the reason why those changes need to
be made, and have their say in the best way forward, they may
well support the business, ensuring it succeeds, even through
the difficult times.
Instinctive
It is perhaps not surprising that when companies are forced
through legislation to consult with their staff, that the instinctive
reaction to the legislation is negative in a similar way, employees
who are told about reductions in salary and benefits or redundancies
will react negatively to this being imposed. Consultation with
employees at such times is obligatory, but perhaps if a different
mindset were taken, and companies saw consultation as part of
the solution, then they will find the implementation of the measures
they need to take easier. They will also have a far stronger
organisation in the medium to long-term, which should help when
markets pick up.
Key points
- Look at the full range of cost-saving measures available
- Look at reducing headcount by natural attrition
- Consultation with employees is essential to avoid employment
tribunal claims
- Unilateral variations to pay and benefits can result in immediate
claims of constructive dismissal and breach of contract, and
claims many years later of unlawful deduction from wages (in
respect of the whole period their salary was reduced)
- Consultation as to the measures to be taken allows employees
to become part of the solution.
To find out more about how we can help you, please contact Carvill & Johnson in Northfield, Birmingham. |
