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Alternatives to Redundancy

9th April 2009

Large numbers of employers are currently facing the need to make significant cuts in costs. As a consequence the unemployment figure for the UK, at approximately 2 million, is the highest it has been for over a decade.

It has been long accepted that part of a fair redundancy procedure is the consideration of alternatives courses of action. Recent studies and surveys have illustrated the various ways that employers in the UK have looked to avoid the need to make redundancies.

The Chartered Management Institute has published the results of its 2009 National Management Salary Survey. This shows that many employers are choosing to offer their staff more holidays, training, and time off in lieu in exchange for nil pay rises, or lower rises than normal. The survey also shows that there has been an increase in internal redeployment.

Incomes Data Services (IDS), in its annual Pay Report, indicates pay freezes in approximately 10% of UK firms. The head of economics at the TUC, Mr Adam Lent, has commented that-“It’s better for a large number of people to take the pain of a pay cut than to have a small number of people take redundancy, which is totally de-motivating.” He has stated that the trend of pay freezes was becoming “increasingly widespread”, and that the unions “will always opt for a pay freeze and short-time working over redundancies”.

Some businesses have simply postponed their pay reviews. The deputy director general of the CBI has said that about half its members would not be offering pay rises this year. An alternative chosen by other businesses has been to reduce their staff’s working hours, and consequently their pay. There have of course been a number of high-profile examples of the cuts in working hours recently, such as at Jaguar Land Rover; while Honda has closed its UK plant in Swindon for 4 months.

Lord Eatwell, the chief economist at the Chartered Management Institute, has commented that it, “is encouraging to see employers looking for ways to avoid redundancy rather than adding length to the dole queue without a second thought.” However, he has given a warning over the longer term consequences of the recession, saying that, “the longer the recession goes on the more likely it is that employers will be forced to lay-off staff-creating the possibility of skill shortages in the recovery.”

While it is true that the case law on redundancy indicates that an employer must consider if there are any alternatives to making redundancies, it does not state that employers must adopt any particular alternative option. It is true that certain alternatives may be viable and appropriate for some businesses, that would be unviable and inappropriate for others. The vital point is that employers should give some thought and consideration to any alternatives to redundancy that may be suggested.

Even if a suitable alternative option to redundancy can be identified, there are other legal issues to consider, such as ensuring that any variations of the contracts of employment are handled fairly and lawfully. This is an aspect of the process that can easily be overlooked and neglected in the effort to avoid making any redundancies. The real key is consultation, both on a group and individual basis. Whether you are an employer, or an individual facing the risk of redundancy, we can guide you through all aspects of this process. (see our Free Factsheet: Redundancy,  and Employment Document : Redundancy Policy)  

If you require further information or advice on any of the matters raised in this article, please do not hesitate to contact us.

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