'Originally published in Chartered Secretary, October 2008
In the current economic climate, staff redundancies are quite often a company's first survival option. But are such measures short-term solutions?
Redundancies are sometimes necessary, but they should not be the first measure taken. Redundancy programmes are costly, and are inevitably accompanied by tribunals. In a worst case scenario, a company can find itself first paying out redundancy payments, then settling tribunal claims, and then incurring costs when they need to re-hire. Additionally, companies should think carefully about the impact on staff morale, as redundancies often result in reduced productivity and can cause the remaining employees to look elsewhere.
So, instead of laying off workers across the business, perhaps, use the downturn to do that restructuring you have been avoiding. Carrying out administrative overhauls, disposing of non-core operations, or improving internal processes can also save money and benefit the company in the long term.
Staff can play a role, too; if they know the situation they will be more inclined to put up with pay cuts and four-day working weeks than be laid off. There may be many who welcome the extra time at home with the children or pursuing leisure options. Offering sabbaticals might also allow staff who could afford time off work to take an extended period of leave – as long as they were promised a job on their return. Others may well choose redundancy or early retirement because it suits their life plans. Indeed, there have been examples of businesses agreeing with their staff to cancel Christmas bonuses in order to ensure that redundancies were avoided.
However, any such initiative should be offered to all staff – top to bottom. Additionally, employees may also have creative ideas about cost-effective measures such as non-financial incentives, job sharing, or absorbing certain non-essential functions such as the office cleaning services.
Creative solutions may not only enable you to survive the downturn, but they can also ensure that you are better placed to prosper when things get better.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
