Redundancies: Employers should consider all options before furlough scheme ends
THE furlough scheme has helped save millions of jobs since it was introduced in March last year, and with the scheme due to end on September 30, it is anticipated that redundancies will rise as many businesses continue to struggle with the economic impact and after-effects of Covid-19.
According to Office for National Statistics (ONS) data, around 11.2 million jobs have been supported by the scheme, about 4.7 million people are currently on furlough and four out of 10 employers are using the scheme. And whilst the scheme continues until the end of September, employers will have to increase their furlough contributions from July, which will prove challenging for some.
A new study has revealed that businesses are preparing for a surge in contract disputes and in employment-related litigation as some employers prepare to make staffing cuts that the furlough scheme has enabled them to defer.
With just over three months until the end of what has been critical support, businesses should be acting now to look at their options, put a plan in place and view compulsory redundancies as the last resort.
Self-reflection is potentially the most important step a business can take when exploring alternatives to redundancy. This step will inform employers on the current position of the business and will show them where they are in relation to where they would like to be. Employers should assess the current spending of the business and think about whether any changes can be made to their current budget. For example, are clients paying their invoices on time? Can any costs be saved through cutting down on electric, heating or maintenance costs? In other words, is the business paying out any unnecessary expenses that can be avoided? Also, businesses should consider positive actions that can be taken to improve performance, such as cost-efficient methods of marketing that can be utilised to increase the customer base.
Another measure an employer can take to reduce the need for redundancies is to reorganise the workforce. Employees in a department that is struggling during the pandemic could be retrained and redeployed to areas of the business that are busier. Recruitment can also be restricted to allow work to be redistributed among existing staff. This can not only save on recruitment costs but can also help keep staff motivated during the ongoing pandemic.
Businesses may wish to consider the possibility of implementing temporary reductions in working hours and pay. It may also be a viable option for your business to implement job sharing or flexible working. Implementing these kinds of reductions will help to reduce costs for the business without the need for redundancies. It is important for employers to explain that the reductions are temporary and that they are a necessary evil to prevent compulsory redundancies further down the line. It should also be noted that any changes to an employee's terms of employment must be made by mutual agreement so a modification to the employee's contract of employment will be required.
Employers may wish to invite employees to apply for voluntary redundancy. This form of redundancy is a lot less disruptive and demotivating and reduces the need to follow the compulsory redundancy process. However, generally voluntary redundancies will need to be incentivised to encourage employees to accept the redundancy package which is likely to increase short-term costs for the business.
:: Andrea McCann (firstname.lastname@example.org) is a partner at McKees (www.mckees-law.com) specialising in employment law.