Cost Cutting – Is Redundancy The Only Option?

At some point in your business you may decide you need to cut your business overheads.  There may be many reasons for this: loss of a large customer; a slowdown in sales; new competition; or – at present – a global pandemic!

A quick way to cut your losses may be to reduce your employment costs.  Some job cuts might save salaries, benefits, employment costs like tax and National Insurance.  You could save on training costs, sick pay, holiday pay.  This can seem attractive, but is redundancy the only option?

Redundancy is never a cost-effective solution

Making staff redundant is never a short-term solution to your financial difficulties.  It is expensive in so many ways.  The redundancy payments themselves can be costly, particularly if your employment contracts offer an enhanced redundancy package. On top of that, you also have to pay notice periods, or pay in lieu of notice.

There are other costs, which may not be immediately obvious.  Things like the management time needed to plan, prepare and carry out a redundancy programme.  Or the unsettling effect on the remaining staff, which will surely lead to a drop in productivity.

This just skims the surface of the costs involved.  I could write a whole different article on redundancy costs alone.

Redundancy is a real negative for your Business

Redundancy  is expensive and hugely time-consuming. It means letting go of employees in whom you have invested  and who might be hard to replace in future.  It usually has a negative impact on those staff that remain.  It is very bad publicity.  It can lead to legal challenges unless handled carefully.

If your business has an uplift and you need more people, you may not be able to recruit again straight away. Even if you can, the people who were redundant may no longer be available or willing to return.  If you can recruit, you will have the cost and the need to train up new staff.

So is redundancy the only option?

It is not, of course, the only answer.  It may seem to be the simplest and cheapest way to cut costs. But you might find it very instructive to look at alternatives before you commit to redundancies.

  • Firstly, a thorough understanding of your Business financials. Is redundancy really the only option, or are there other reductions in cost which could be made instead to mitigate the need for redundancy?
  • Can any of the work be adapted, or dropped (temporarily or permanently?
  • Can you recycle, reuse or repair furnishings, equipment, tools instead of renewing?
  • You might look at reductions in things like non-essential travel; company vehicles; subsidised cafeteria, etc.
  • Are there any grants or incentives available from the Government or elsewhere which might help you get through a sticky financial period?
  • Your employees might have some ideas, so communicate and consult with them. They have a big interest in helping you to save their jobs.
  • Before you make employees redundant, look at limiting the number of contractors and agency staff you are using. Are they doing work which could be carried out by an employee instead?
  • The Government’s furlough scheme during the global pandemic is coming to an end, but could you offer something similar to your employees? This keeps them on your payroll, but reduces your costs.
  • Other alternatives might be to offer sabbaticals; to offer reduced hours or reduced working days; offer a salary reduction; look at secondment or redeployment opportunities

This list is not exhaustive and there may be other things you can do to avoid some or all of your redundancies.

If you think this article is useful and you would like to talk more about dealing with redundancy, – please join our mailing list, or contact us for further guidance.

Reactions To Redundancy Which Managers Need To Plan For

I have supported employers with redundancy programmes for over two decades now, and I have seen a huge variety of reactions from employees when they face the news.

There is not one answer and nobody can guess or predict the emotions felt by someone else when they are dealing with redundancy.

What are some of the common reactions to redundancy?

Redundancy can feel like bereavement and the individual needs to grieve. Even if it is voluntary, it can still engender a feeling of loss.

It is a frightening time for many people.  They worry about finding another job.  Especially when many others are jobseeking at the same time.   Often there are money worries as well.  Redundancy payment only goes so far  – and often is nothing like the amount people are expecting.

Those who lose their jobs – through no fault of their own – may feel a sense of failure. They wonder if they could have somehow prevented it – especially if they have been through a selection process and scored less well than some of their peers.   They might even feel shame and dread the reaction of family and friends.

Some feel anger, borne from fear.  They feel that they have been let down by the Company and their hard work has gone unrecognised. They might threaten legal action.

Some employees might welcome redundancy

The odd one is happy with the situation.  They have plans for their future and were only hanging on at work in the hope of some redundancy pay.  These are the ones who might volunteer for redundancy, but they may also be your best workers who have no fears about finding other work.

A manager could see any, some or all of these reactions to redundancy. Most people probably feel a mixture of all these emotions.  And some people may not show their emotions.  Or they may stifle their natural reactions.

And what about managers?  What are their reactions to redundancy?

My experience is that redundancy consultation is among the most difficult conversations a manager has to have with the team members.

Nobody wants to give bad news.  And in most cases, you can expect that it is bad news. So you are probably dreading the meeting yourself!  On top of that, you might be apprehensive about the reaction you will get.

In some cases, the manager may also be concerned about his or her own role.  Their job might also be at risk of redundancy.  Or they may just be concerned in case it is going to happen to them soon. If the Company is in such straits that it is making jobs redundant, can it survive?  Will their job be safe?

Additionally, the manager is likely to have built some kind of relationship with the employee.  They may be grieving the loss of a good employee.  Or concerned  about whether the employee can find another job.  They will be worrying about future team dynamics without that individual.  There could be some concerns about how the work will be distributed. What can be changed or stopped so that the remaining team can function?

The survivors will also have reactions to redundancy.

What about the people who survive the redundancy and remain in the Company?  How are they going to feel?

Of course, their overwhelming reaction will be relief that their job is safe.  If there has been a selection process, some may even feel superior and falsely proud that they were scored high enough to stay. Or there may be some who are frustrated because they would actually like to have left with the benefit of a redundancy payment.   And any of them might wonder when/if there will be more redundancies in the future.

Teams will be concerned about the workload. What about the work which was done by the redundant employee?  How will that get done? Will they need more training?  If so, some may be happy, others may worry.

People will also be grieving the loss of a colleague.  A familiar face no longer there. Some will be friendly with the departed person.  They might feel aggrieved on behalf of their friend.  Others may be relieved that a difficult colleague is no longer there.

Others may also have reactions

There are also others who may have some reactions and emotions about redundancy.  For example, customers and clients of the Company. Particularly if the redundant employee was client-facing.  Or suppliers may have a relationship with specific employees. This can also have an effect on business.

There may be others who will have emotions and reactions to redundancies .  When companies are planning for redundancies, they might find it helpful to think about all of these reactions and how to deal with them.  This will help the business to quickly get back to some productivity following the redundancy programme.

If you think this article is useful and you would like to talk more about dealing with redundancy, – please join our mailing list, or contact us for further guidance.