Redundancy, Creating Value

During this tumultuous period, not a day passes without yet more bad news about business closures. Thousands of lives have been thrown into turmoil and there is still more unpleasant news to come for employees and employers who are reluctantly shedding staff. I wrote in an earlier blog about ‘compassionate’ redundancy. In this blog I continue the theme of redundancy as it is so topical. In this blog, I share a short case study of how I assisted clients with managing redundancies correctly (saving £000s). This freed up savings to invest in enhanced redundancy payments and mental health wellbeing support for those who were made redundant.

Case Study

Lotus HR aims in managing redundancy consultations, to make it a positive experience against the backdrop of what is very bad news for those impacted. Our client planned to make 50 redundancies out of a workforce of 175. It is vital to respect and value what employees have contributed and to have open dialogue (this is a challenge but achievable) when proposing redundancies. Collective consultation rules kick in if the plan is to make 20++ employees redundant at one establishment. With my client, a collective consultation process would have added an additional £500,000 of costs, given the stipulated timescales for the collective consultation process. Equally, if the company failed to comply with the collective consultation rules, there was high risk of a legal challenge. If that challenge were lost, it could cost the company up to 13 weeks’ pay for every affected employee. If 50 employees were affected the company would be looking at whooping fines in the order of £600,000.

Our client approached us for advice early in their planning for redundancies. Through our discussions, we focused on the definition of ‘one establishment’ as defined by ACAS guidance. When we examined closely how the business operates day to day, it was discovered that whilst there is a head office, almost 90 of employees had no occasion to work from the HO or even visit it across a 12-month period. 90% of the workforce travelled from their home to a project site and back and forth for the duration of the project. No project site had more than 10 staff working on the given project. The ‘one establishment’ definition was tested against the model of how the business functioned. We concluded that the company would not be making more than 20 employees redundant in one establishment and, therefore, collective consultation was unnecessary.

With significant cost savings being made as a result of this approach, our client agreed to offer enhanced redundancy packages to employees so that employees had a financial cushion they otherwise would not have had. Prior to this, the company only intended to pay the statutory minimum. The enhanced packages were welcomed, and some staff even opted for voluntary redundancy which made the process less complicated.

Out Placement Support

A significant number of employees who would be displaced were deeply anxious about their future job prospects. To support them, the company offered counselling support for up to 6 months after their employment ended. Displaced employees made liberal use of health/well-being and career’s advice which assisted them to get back on the front foot. This support would not have been offered had the company not made significant financial savings in the way it managed the redundancy process. Dare we say it, this was a positive end to a negative beginning.