A senior lawyer at leading Cardiff law firm Acuity Law is offering businesses a range of creative alternatives to redundancies ahead of tax changes coming into force this month (April).
From April 6, the Employer’s National Insurance Contributions (NICs) will increase by 1.2% to 15%. Employers are also addressing the lowering of the allowance threshold, which means that they will start to pay NICs on employee earnings from £5,000 instead of the current £9,100.
Combined with the 6.7% increase of the National Minimum Wage from £11.44 to £12.21 from 1 April, the financial impact on businesses is significant, Claire Knowles, managing partner at Acuity Law, warns.
Claire said: “We have one Welsh client whose National Insurance bill is going up by £700,000. When that happens, businesses have no choice but to make cuts somewhere.
“Retail, leisure, hospitality, the care sector, construction, manufacturing, anything with a large workforce on lower salaries will feel the full force of these changes. As a result, clients have been coming to me saying, ‘regrettably, we need to reduce our head count’.
“Our initial response is always, ‘let’s think creatively, is there something else we can try which will cut costs but avoid head count-driven redundancies?’.”
One of the first steps that Welsh businesses could consider is to invite people to take voluntary redundancy or early retirement. Although there will still be a cost associated to this, it gives people a feeling of control that isn’t available to them with compulsory redundancies.
Flexible working and job shares are another quick win for lots of businesses. If this is something that you have the capacity for, it’s well worth considering flexible working requests, especially if it’s not something you’ve done much of in the past. Flexible working has been proven to improve people’s mental health, benefit their work/life balance and increase productivity.
Another step which can offer visible results, if it is an option, is to lay off self-employed contractors and freelancers, put a halt on using casual labour and freezing new recruitment. However, as a note of caution, these can put additional pressure on existing staff and should be done with openness and consideration.
Restricting or cancelling voluntary overtime can be an effective, although often unpopular, step. In terms of money leaving the business it’s a quick win, but in companies where it has come to be a regular occurrence, staff often feel they are entitled to it and putting a stop to it should be handled with care.
Claire said: “In all the options suggested above, communication and consultation is crucial. People might not like some of the options you adopt, so people need to understand that jobs are at stake if changes aren’t made.
“Where redundancies are unavoidable, businesses need to be able to demonstrate they have followed a rational, carefully considered, and fair process, which takes into account the particular circumstances of the employees that are affected.
“For businesses that want to make redundancies, there are several steps they need to take”, says Claire.
First, restructure mapping to analyse their structure is crucial. Organisations will need to assess business needs, identify impacted roles, establish a redundancy pool and selection criteria, and consult and communicate with staff.
Every employer will have duties to their staff and legal requirements when it comes to redundancies. Primarily, the redundancy process has to be fair, the consultation process must be followed diligently, suitable alternative employment must be offered if possible, and there must be an agreed notice period and redundancy payment.
Claire said: “Sadly, we’re all too familiar with redundancies at the moment and we’re doing what we can to work with clients to ensure that their processes are fair and transparent. Making redundancies is never going to be pleasant or easy but sometimes it’s necessary and, in those situations, employers need to do everything they can to make sure that the process runs smoothly for all involved.”
