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Managing costs in a downturn
Gemma Herrick
Brachers LLP
Managing costs in a downturn

By Gemma Herrick, Brachers LLP

As employment lawyers, our daily routines involve listening to employers’ worries and complaints about their employees (or former employees). Granted, they are not always easy to manage; they are human after all.

Employees are also costly. They demand salaries, holidays (and the statutory requirement seems to increase annually), payment whilst they are sick, bonuses and still complain that they are undervalued.

Whilst businesses have suffered during the ‘credit crunch’, it has been a good time to evaluate how employers are managing employee costs. For some, the first consideration is redundancies. Cut backs are needed and the simplest way to achieve them and increase cash flow is to reduce staff, one may think. Yet redundancy is not a cheap process and it is certainly not procedurally simple. Whilst it might seem like the easiest idea, before you know it you’re in an Employment Tribunal with an unfair dismissal claim on your hands because, despite remembering to dot the i’s, you forgot to cross all the t’s.

Rather than veer straight towards that redundancies, employers can consider other ways to manage the cost of employees such as: restricting recruitment, offering early retirement, redeployment or retraining into areas which can tolerate more employees, or seconding employees to other companies.

If cash flow is a problem and employers need a ‘quick fix’ to reduce expenditure for a short time, they could look at temporary measures such as offering employees sabbaticals or time off for unpaid leave. Just because the business is suffering does not necessarily mean that the employees are. Some may jump at the chance to take a few months off without pay, so why not ask? It may also be possible to request that employees take their annual leave during quieter times (provided sufficient notice is given to them) so that their time is not wasted and their presence is guaranteed when things pick up.

Another alternative to managing employee costs, without having to make redundancies, is reducing hours. This may involve making full-time jobs part-time or incorporating flexible working practices. If employees currently work overtime, the business could put a temporary overtime ban in place. Such changes are likely to amount to contractual variations and employers should obtain appropriate advice before implementation.

There are many options provided you use careful planning and remain open-minded. Employees tend to be more responsive when they are consulted. So ask for initial feedback on options rather presenting a fait-accompli and start by making offers rather than demands. You may be surprised at the response.

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