Retaining key staff in an economic downturn

One unfortunate consequence of the economic downturn has been a sharp rise in levels of unemployment. In times of recession, are large-scale job losses inevitable, or are there some viable alternatives? And when redundancy is the only option, how can you help to protect the best interests of your business?

While redundancy may initially seem the fastest way of reducing overheads, it can involve many associated costs, from redundancy payments and potential costly legal disputes, to reductions in productivity and a loss of core skills and expertise.

Staff represent a significant investment for the small business owner, and considering the alternatives to redundancy could work in your business's favour in the long-term, helping you to reduce costs while retaining valuable employees. Some of the options to consider may include:

• Freezing recruitment, overtime and pay
  Many employers begin by putting on hold any plans to recruit new staff, and by scrapping overtime. Implementing pay freezes or pay deferral schemes, cutting bonus payments, and cutting agency and temporary work can also save money while safeguarding key positions.
  
  
• Taking a flexible approach
  Offering reduced hours and flexible working arrangements, which might include part-time working, term-time working, job sharing and home working, can reduce costs while enabling you to retain the workforce in preparation for future recovery.
  
  
• Retraining and redeploying
  Retraining existing staff and using them to fill any vacancies within the business will allow you to retain valuable resources while saving on recruitment costs. When business is slow, give staff the opportunity to develop new skills and ask experienced employees to coach newer members.
  
  
• Early retirement
  If the existing body of staff cannot be supported, early retirement can be a preferable option to compulsory redundancy. Although there are associated costs for both employer and employee, the business benefits can include less impact on staff morale, and less likelihood of legal disputes.
  
  
• Voluntary redundancy
  It may suit some members of staff to take voluntary redundancy. Although the initial costs may be higher for your business, and you will need to follow the correct procedures for dismissal, this option can be preferable to compulsory redundancy in both personal and legal terms, so you should weigh up the relative costs and benefits of both options.

When compulsory redundancy is unavoidable

If there is no escaping the need for compulsory redundancies, you should approach the issue carefully in order to make it as painless as possible for all parties, while minimising the impact on your business.

Employers are bound by a number of legal obligations and must follow the correct procedures when making redundancies. Firstly, there must be a legitimate reason for making redundancies, which may include one of the following situations:

• the business is closing
• there is a reduction in need for the work carried out by an employee or a group of employees
• the business is relocating

Avoiding discrimination
When selecting staff for potential redundancy, you must be fair, objective and consistent in your approach. Your decisions should be based solely on the future requirements of your business and your employees' aptitude for fulfilling those requirements.

The law prohibits discrimination against all employees on the basis of age, race, gender or sexuality, disability, or religious or similar beliefs. To avoid the risk of discrimination, whether direct or indirect, you should employ a range of objective selection criteria, such as:

• Skills and aptitude for the work required
• Ability to take on new responsibilities
• Performance record
• Experience
• Qualifications
• Disciplinary record
• Attendance and punctuality
• Length of service

Remember to put all of your important decisions in writing and to keep the supporting documentation so you are protected in the event of a dispute.

Following the correct procedure
Any employer who is considering redundancies must follow a three-point dismissal procedure which involves:

• Providing a written statement to affected employees, detailing why they are being considered for redundancy
• Meeting with the employee to discuss the matter
• Holding an appeal meeting with the employee, should they want to appeal against the decision

Failure to follow the correct procedure could automatically class a dismissal as unfair.

Communicating with employees
Once you have reached the decision that redundancies are necessary, you should work to minimise the impact on morale by being as open with your employees as possible. During such a time of uncertainty, motivation and productivity can suffer significantly.

When meeting individually with staff, you should be sympathetic to what can be a traumatic experience. Set out clearly the business reasons and processes behind your decision. If appropriate you could offer affected employees assistance with reworking their CVs, brushing up on their interview technique, or considering their career options.

Additional entitlements
Employees who are facing redundancy have a number of additional rights, including an entitlement to the following:

• Adequate notice of the decision, based on their length of service and employment contract
• Consideration for a suitable alternative position within the business, wherever this is possible
• A redundancy payment if they have two or more years of service, calculated according to age, length of service, weekly wage and individual contract
• Time off to look for alternative work if they are under notice and have worked for you for at least two years

Looking to the future
Once your decisions have been actioned, don't forget to keep an eye on your remaining members of staff, who may have concerns about their future role within the business. When new systems are up and running, consider arranging some team-building exercises to boost morale.

Redundancy is a difficult time for all parties concerned. However, putting in place strategies for reducing and managing redundancies will minimise the impact and help your enterprise to move forward into more positive times.

This article is for general guidance only. Additional requirements apply in relation to collective redundancies and individual employment contracts. You should always seek legal advice before taking action.