November 8, 2022
Most of us are probably tired of having to constantly navigate "unprecedented" political and social instability. It does, however, look like the UK is heading into a recession, and employers would be wise to start considering strategies to mitigate the impact on their business.
One of the key considerations for businesses during the economic decline will be their employees.
Businesses need a motivated and engaged workforce to thrive, but people are also (usually) one of the biggest costs to a business. Some employers might now be considering redundancies as we head into such uncertain times, but this can often be only a short- term solution which can have long term implications. In this article, we share some top tips for employers who are considering their options during an economic recession.
From employee morale and employee retention, to potential job loss - we discuss the avenues available for navigating uncertain times.
There may be ways of cutting costs associated with staff that do not directly involve the staff. For employees who already work on a hybrid basis, increasing the number of days working from home could help cut back on electricity bills in the office, or even reduce the need for office space altogether if staff can hot-desk. Consider other ways of cutting down on bills, like turning down the heating or turning lights off when not in use.
Before looking to cut costs relating to existing staff, consider what sort of savings can be made from implementing a freeze on recruitment. This is a simple way to reduce costs without having to go through a process. You do need to balance cost savings against the risk of putting existing staff under too much pressure. For instance, a hire freeze in a very busy department in order to avoid redundancies in an area of the business, which is no longer profitable, is unlikely to make good business sense and could impact employee morale. However, you do need to weigh this against the impact on staff seeing new hires starting while they're involved in a redundancy process. The other thing to consider is whether you can fill any vacancies internally.
These are unsettling times for everyone, and your staff will be feeling the effects too. Keeping staff informed will likely help to avoid nasty surprises for employees that might affect morale. Further, a benefit of keeping an open and constructive dialogue with staff is that they might come up with cost saving ideas that you haven't thought of. Of course, there will be matters that are not appropriate to discuss with the entire workforce, but appropriate communication is key.
Employers might be surprised at the number of employees who would consider agreeing to alternate ways of working, or even voluntary redundancy. Some examples include condensed hours (e.g., asking employees if they would want to work their full- time equivalent hours in 4 days instead of 5, with a 10% pay cut); offering staff the option to buy additional holiday or take unpaid leave.
Some staff might be willing to reduce their working days or hours for a corresponding pay cut, but employers should bear in mind that such changes would need the consent of the employees. Additionally, some staff might appreciate the opportunity to take a sabbatical, either for no or for reduced pay.
While enforcing a salary reduction can be difficult and requires consultation, it is unlikely that overtime will be a contractual entitlement and so it is generally easier to put a stop to it. Overtime can also be expensive if it is paid at a higher rate, so before reducing headcount consider whether reducing overtime could help.
In the first instance you should try to get employees' consent. However, if you can't then the next step would be to go through what is known as a "dismissal and re-engagement process". Basically, if you take all reasonable steps to get the employees' consent but you're unable to do so and you can show that there is a real business need to implement the change then you can potentially dismiss staff from their old terms and offer to re-engage them on new ones. However, this is not a straightforward process and the implications if you get it wrong can be serious, so do seek advice.
This should be the last option. Obviously, it is disruptive for all staff, not only those who end up being made redundant and it can be costly when factoring in notice pay and redundancy payments for long serving staff. If you do decide that this is the route you need to take, then our ultimate top tip is "take advice". Failing to go through an appropriate selection or consultation process can result in claims against the company, which are time-consuming and costly, even if you win! Another point to bear in mind is if you have cut back to the bones, you might not be well equipped to take advantage of future opportunities, so look ahead - so far as possible in these crazy times.
While your staff are likely to be one of your most expensive resources, they are probably also your most valuable. Do consider the impact that any steps you take are likely to have on staff and how you can minimise it, where possible. Also, think about your message when delivering difficult news. If staff feel that you did what you could to support them, it will go a long way to maintaining employee morale. Remember, morale is like muscle, it's easier to maintain than rebuild.
Discover how our employment law experts can help you tackle the options available to you.