Redundancies: Avoidance And Alternatives

This is probably the most drastic option, and in reality would only be seriously considered where redundancies were otherwise inevitable. Self-evidently any salary reductions require employees' consent, and the likelihood of that consent being forthcoming will depend on a myriad of factors:

• how, if at all, will the employees ever get back what they forego (often there will be agreement that waived salary will be paid as a bonus once cash-flow is back on track, or shares in the business are awarded in lieu of pay);
  
  
• what are the prospects of the employee getting work elsewhere;
  
  
• how long is the cut proposed for, and how deep is it; and
  
  
• does the employee see a long-term future for the business.
  
  

From a legal perspective, however, even although this is the most drastic of the approaches it is in many ways the easiest. As no employer would effect these changes without getting employee consent it is usually an agreed solution. Strategic consideration should be given at the outset in order to tactically approach the employees or their trade union in the first instance. The messaging aspect needs to be carefully managed: with the correct degree of carrot and stick applied for the relevant situation. The benefit to this route is that employees are provided with options, they consider themselves integral to the business itself and where the employees' understand the business needs, the negative influence of this step is genuinely mitigated.

Few employees will have a contractual right to overtime, and so a temporary freeze on overtime is likely to be relatively unproblematic. Claims that employees have a right to overtime by reason of custom and practice are unlikely to succeed. Obviously in certain industries employees will rely on regular overtime as a significant part of their normal pay. Employee relations issues, rather than legal claims, will be the concern here. Again companies need to get the messaging correct – consultation with the employees from the outset is recommended – the more the employees understand, the better the option will be in their eyes.

Overtime freezes will often be considered in conjunction with shift pattern changes. A business needs to ensure that it is managing its required output without the overtime. If its output falls, any savings on overtime payments are lost in reduced sales income. Shift pattern changes can be more difficult to implement legally:-

• Even if there is a contractual right to vary shift patterns, that right must be exercised reasonably in order to reduce the risk of breach of contract and constructive dismissal claims. In all cases, but most particularly where any right to vary shift patterns has never as a matter of fact been utilised, there should be prior consultation with employees before effecting the change. Even if that consultation process involves one mass meeting.
  
  
• Where there is no express contractual right to vary shift patterns, a greater degree of care should be taken on the consultation exercise. Ideally employees should agree to the change in shifts: so the consultation should be a selling exercise for the Company. If agreement cannot be reached with employees there are essentially two options: (i) go down the route of terminating employees' existing contracts and offering new ones with the new shift patterns (this will necessitate collective consultation if more than 19 employees are affected), or (ii) taking the view that adhering to the new shift patterns is a reasonable instruction and disciplining staff who fail to do so.
  
  
• Businesses need to be particularly sensitive to the impact of proposed changes on those with childcare responsibilities or religious beliefs that impact possible work patterns. Any enforced shift change would need to be objectively justified in the context of a discrimination claim. In the context of the justification defence, the company would effectively be required to show that there was no practical alternative to the enforced change.
  
  

Sabbaticals are increasingly being offered by businesses, and used by employees. The employee takes an agreed period of unpaid leave - often up to 1 year - with arrangements agreed in advance in respect of the employee's return to work. This has the obvious benefits to the business of (i) immediate cost savings, and (ii) the hope that an experienced and 'known' employee will not be lost to the business, as well as tapping in to the increasing trend for lifestyle opportunities. The biggest issues here are what the individual's status is during the sabbatical period, and clarity around the terms of that return. In most cases a business will provide that the individual is not employed if the sabbatical is for more than 3 months. This has implications for the employee if he/she is dissatisfied with what he or she returns to at the end of the sabbatical period. Assuming there is no discrimination claim, the employee is unlikely to be able to bring an unfair dismissal claim because there will be insufficient continuous service. Of more importance, however, is clarity around the return terms. There cannot be a guaranteed job - no business has the necessary crystal ball - and so there needs to be a commitment to try to redeploy the employee with, ideally, an articulation of what will happen if that is not possible.

Finally, businesses should look to see if discretionary benefits can be withdrawn from employees in order to make cost-savings. This does need, again, to be balanced against the impact on morale (and therefore, indirectly, on productivity). However if a benefit is genuinely discretionary in nature, provided that the decision to withdraw it or not to pay it is not irrational, then it is lawful. The one issue which will merit some consideration is whether or not the benefit is genuinely discretionary or, rather, has become contractual by reason of custom and practice. Any businesses considering the withdrawal of bonuses which could arguably have become contractual due to custom and practice, should assess the risk of claims of breach of contract at the outset and proceed with this route when that assessment has been undertaken only.