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Recession tips for employers

If a recession is on the way, how can you protect your business as an employer? There will be specific things that you may want to put in place depending on your individual circumstances, but below are some general points you may want to consider.

Establish regular and effective channels of communication with your employees.

If your business is looking to save money and freeze investment spend you should consult employees before you do so. Employees should be able to trust that they will be kept informed of any changes which may affect them. This can alleviate stress and keep your employees loyal, productive and motivated.

Proactive planning

Being ahead of the curve and preparing a contingency plan is good practice. A contingency plan might include:

  • Considering what costs could be cut back if required. This might not necessarily mean redundancies. It could mean changing staff remuneration or patterns and ways of working. For example, it could mean more of your staff being permitted to work from home and therefore potentially saving costs on larger more expensive office space and rates.
  • Considering how you can minimise any disruption to the client experience. If there will be contractual related issues, reviewing any penalty clauses contained in the Company’s contracts with clients, in the event that agreements with them have to be broken and/or suspended.
  • Restructuring the business and working in a more streamlined, efficient way. Consider whether the company headcount and structure are appropriate to the work required and which is being delivered. Are the more profitable areas of the business being maximised and given the required resources to grow in the future?
  • Making sure that employment contracts, redundancy procedures, key employee information and organisation structures are up to date and easily accessible.
  • Ensure that if you are restructuring the business that you have planned how communication will take place so that it is clear and well thought through. It is essential to treat affected employees with dignity and respect and although everything cannot be shared, to communicate as openly as possible so as not to disrupt or create distrust amongst those employees who are remaining.

How you can reduce overheads

So how can you effectively reduce your business’ costs in the right way during a recession when it comes to staff? There may be other ways to save costs without reducing headcount such as:

  • Temporarily reduce employee hours and/or pay or offer job sharing;
  • Restricting or banning overtime opportunities;
  • Cutting down on business travel so that you save money and reduce travel to the office so that staff save money, by allowing staff to work remotely;
  • Recruitment freeze or a slow-down in recruitment; or
  • Automate or outsource support functions such as HR, payroll and marketing and reduce budgets in these areas, where appropriate.

Avoid making unnecessary redundancies

It is wise to be aware of which employees, if any, are temporary or agency workers, are still in their probation period, on a fixed term contract (and checking whether the contract is capable of being terminated early prior to the expiry of the fixed term) or have less than 2 years’ service. These individuals are likely to be less costly to dismiss as no statutory redundancy payment will be due to those employees. This is likely to be the least risky route to headcount reductions as such employees would not generally have the right to bring an ordinary unfair dismissal claim if they have less than two years’ service. However, employers should be mindful that employees without this level of qualifying service may still have grounds to pursue other claims so it is recommended that advice is taken at the outset prior to taking steps to effect these dismissals.

If there are key individuals which you believe will add real value to the future of your business, it is not as simple as removing the most recent joiners and so consideration should be given about how to avoid redundancies by reducing costs in other ways.

It is worth considering the long-term cost saving. Cutting too many staff may not be the best idea for the longer term, as it could prevent your business from being able to make gains when the economy recovers. You might try to upskill or retrain an employee in a growth area of your business rather than make them redundant and then have the later cost of recruiting another employee in another department.

Understanding redundancy legislation and procedures

Should redundancies be required, it is worth ensuring that those responsible in your business for reducing headcount are up to date with employment law relating to redundancy. You should seek external professional advice from an employment lawyer. Our employment lawyers would be happy to review your business’ current redundancy procedure and update it if required.

Summary

Employers should make sure that the correct procedures are in place. Thinking ahead means that clear consideration can be given to any gaps in training or documentation can be filled and a fairer, less risky process for your business can be carried out. A recession will not only give you the opportunity to reassess whether some of your staff are adding the value they should, but also whether contracts and other business spends are really working for your business, or whether there is another direction you will move staff and resources in.

About our expert

Simon Gilmour

Simon Gilmour

Head of Employment
Simon Gilmour is Head of Employment at Harper James. He joined the firm in April 2018 as a partner in the employment team. Having qualified as a solicitor in 1994, he has worked at top 50 law firms in the West Midlands for 25 years, 18 of which were as a partner and Head of Department.


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