Alternatives To Redundancy


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This "Brief Guide" gives information on Alternatives to Redundancy which may be implemented by a company who is potentially facing a redundancy situation. This document may be downloaded at

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Alternatives To Redundancy

  1. 1. Brief Guide to Alternatives to Redundancy (This is a brief guide only and should not be considered as a comprehensive guide to all alternatives to redundancy) Page 1 of 7
  2. 2. Prepared by CollierBroderick Management Consultants Tel: +353 1 8666426 Fax: +353 1 8666457 E-mail: Web: Disclaimer Whilst every care has been taken by CollierBroderick Management Consultants to ensure that the information contained in this guide is accurate and up-to-date, as the guide is for information purposes, the contents of these pages should not be relied upon as a substitute for your own independent HR or legal advice. We recommend that you always consult a suitably qualified HR or legal professional on any specific matter before relying on any information in this guide. No responsibility or liability is accepted by or on behalf of CollierBroderick Management Consultants or anyone associated with its production for any errors or omissions in the guide, nor for any use the information may be put to. P age 2 of 7
  3. 3. A Guide to Alternatives to Redundancy Introduction Despite the fact that one cannot turn on the television or radio without hearing about more redundancies, one of the least reported items is the initiatives adopted by numerous companies as an alternative to redundancy. Indeed, prior to making any redundancy, a company should (and would be wise to) consider all alternatives to redundancy. Otherwise it may be at risk of losing able and dedicated staff who will be needed when the upturn comes and, from an employment law perspective, it may be unable to defend itself from claims by redundant employees that a genuine redundancy situation did not exist when they were made redundant as other alternatives had not been explored properly. Alternatives to Redundancy Saving Money / Reduce Wastage One of the best ways for a company to reduce its costs is to seek efficiency in everything it does. i.e. by rigorously rooting out any wastage. This is particularly difficult for organisations today as it requires them to change their habits (during the days of the Celtic Tiger, organisations never had the time or need to look at cost saving). However, implementing cost reduction programmes and involving staff in these (i.e. the individuals who are the most knowledgeable about how work is actually completed and where potential savings may lie) is a necessary first step for any organisation who is seeking to maintain its profit margin. For example, may organisations are now being more conscious about their power and heat usage with some going so far as to merge a number of sites / premises which the organisation current holds so as to reduce the cost of utilities. Re-Deployment of Staff Research shows that it can cost up to €15,000 per post to recruit, induct and train a new employee for the organisation. Therefore, it makes economic business sense to fully occupy and utilise existing staff and to re-deploy staff within the organisation to other departments to cover absent employees and ad hoc projects (areas which would previously have been covered off by persons hired on fixed-term or specific- purpose contracts). Natural Wastage / Hiring Freeze One of the most frequent complaints which I hear is that there are “no jobs out there as nobody is leaving their job”. This is not actually the case. No matter the environment, there will always be some level of natural turnover among your staff due to retirement, promotion, statutory leave, dismissal due to poor conduct / performance, etc. Therefore, rather than having to affect redundancies, certain organisations have initiated a hiring freeze for a period of time which will result in a reduction in their staffing levels slowly over time as staff leave. One of the most published examples of implementation of a hiring freeze is within the HSE towards the end of 2008. Due to a shortage in the budget in 2008, the HSE prohibited the use of agency staff and placed restrictions on the hiring of new staff. There is now a hiring freeze across the public sector and many private sector companies have initiated hiring freezes. P age 3 of 7
  4. 4. Early Retirement Many organisations are using this option, in conjunction with other methods, as an alternative to the imposition of redundancy on the general workforce. Indeed, many of those who ‘volunteer’ for redundancy are of the age which will allow them to use a redundancy payment or may also be negotiated as part of a redundancy package. Voluntary Redundancy Many organisations are using this option as a first resort and offering attractive packages (including re- training grants, etc.) to encourage employees to depart their organisation voluntarily. The key for the organisation in this case is to only offer the voluntary redundancy package to employees who meet certain key business-related criteria. Otherwise an organisation may be in danger of losing its best and brightest. Restricting / Cutting Overtime Due to the fact that many organisations pay premiums for overtime completed by existing staff (i.e. time and a half / double time), in certain circumstances, it may be economically viable for an organisation to re- deploy an existing employee who is not busy or to hire an new employee on a part-time and or casual basis to cover off this work. Depending on the level of overtime within the business, this may result in significant cost savings for the organisation. This method of cost savings has been implemented in many public sector organisations and has resulted in huge cost savings. For example, recent reports have shown that the amount of overtime being worked by the Garda Síochána has decreased significantly in the last number of months. In addition, the HSE have implemented a wide ranging freeze on overtime in many operations which it manages and funds. Many private sector organisations have reduced or cut-out overtime altogether or at the very least overtime should be sanctioned in advance. Salary Adjustment One of the main alternatives being implemented by companies here in Ireland in an effort to reduce costs without resorting to redundancy is reductions in salary. This can take many forms with different categories of worker or levels within the business experiencing similar or different percentage decreases in their salaries. For example, recently PricewaterhouseCoopers announced that all salaries would be cut by 10% while rival, KPMG have recently implemented a sliding scale of pay cuts with those earning less than €35,000 per annum experiencing a 5% pay reduction while those earning more than €35,000 experienced a 10% pay reduction. In addition, Hewlett Packard in the US has given employees four choices: • Take a 10% pay cut • Take 8 days of holiday time • Take a pay cut of 5% along with 4 holiday days • None of the above It is important to note in this case the latter option for employees – “None of the above”. Effectively, any change of salary requires the individual sign-off of each employee as this is a change of a contractual term. Failure to attain the consent of the employee in this case may result in the organisation facing claims of ‘breach of contract’. P age 4 of 7
  5. 5. Voluntary Sabbaticals / Career Breaks / Unpaid Leave Many companies are offering sabbaticals, career breaks, unpaid leave or a combination of all three to staff as a method of cutting payroll costs without losing valuable skills in the long term. In November 2008, Permanent TSB offered to pay employees up to €20,000 to take a two-year career break (€10,000 per year) or €35,000 for a three-year break. Accenture in the US now offers between 6 months and 1 year sabbatical leave to highly skilled employees and pay 20% of the salary, provide the same benefits and let the employee keep his or her work phone number, laptop and e-mail. When the sabbatical is finished, employees can return to their old jobs back. Similarly, here in Ireland, AIB Bank has recently offered: • Up to 9 months sabbatical leave on 20% of salary to staff with more than 20 years service; • Up to 6 weeks unpaid leave / double the amount of the individuals annual leave to staff with between 5 years and 20 years service; and • Up to 2 weeks unpaid leave to all staff. Reducing Working Hours / Short-Time An organisation can seek a reduction in the working hours of staff (and hence a reduction in pay) in three main ways. Firstly, an organisation who wishes to reduce working hours temporarily may do so by placing staff on “short-time”. Short-time may be defined as a reduction in the work provided for an employee by the employer so that the employees remuneration for any week is less than one half of normal weekly remuneration or the employees hours of work are less than half of normal weekly hours. In this case, the consent of the individual is not required, however, it should be noted that the employee may claim redundancy where he/she has been laid-off or kept on short-time, or a combination of both, for a period of at least four consecutive weeks, or for broken series of six weeks within a period of thirteen consecutive weeks if he / she gives written notice of intent to do so to the organisation. Secondly, should an organisation wish to reduce working hours for a longer period of time, it may offer reduced working hours to staff on a medium to long-term basis. This arrangement may be particularly attractive to employees who have young children and wish to spend more time with them or to those who are seeking to retire in a phased manner (i.e. drop down to part-time hours and then a period of adjustment retire). In such circumstances, the consent of each individual who is being moved to reduced working hours is essential as the terms and conditions governing the individuals employment will be changed as a result. Failure to attain the consent of the employee in this case may result in the organisation facing claims of ‘breach of contract’. Finally, the Company may seek to shorten the working week of all employees thereby spreading out the affect of the reduction in working hours among all its staff. However, depending on what staff contracts of employment state, an organisation may need to attain individual sign-off from the entire workforce to implement such an initiative. Failure to attain the consent of the employee in this case may result in the organisation facing claims of ‘breach of contract’, In the first 4 months of 2009, the general public has witnessed a huge increase in the number of organisation implementation of short-time and reduced hours. For example, on 29th January 2009 Bausch & Lomb (Waterford) announced that it would be placing 1,400 workers on short-time while on 8th January 2009 it was announced that a number of hotels in the Dublin area (including the Green Isle Hotel, Newlands Cross and the Gresham Hotel, O’Connell Street) were reducing the working week for all their staff. In addition, as recently as the 9th April 2009, Stanley (Waterford) confirmed it has entered into discussions with trade union representatives with a view to putting its 130 employees on short-time working effective 20th April 2009. Therefore, it would seem that the short-time option is an alternative which will be continued to be used for the foreseeable future. P age 5 of 7
  6. 6. Temporary Lay-Off Where necessary, the organisation may temporarily place staff on lay-off. Lay-Off may be defined as a cessation of an employment by reason of the employer being unable to provide the work for which the employee was recruited and the employer has reason to believe that cessation will not be permanent. Once again, in this case the consent of the individual is not required, however, the employee may claim redundancy where he/she has been laid-off or kept on short-time, or a combination of both, for a period of at least four consecutive weeks, or for broken series of six weeks within a period of thirteen consecutive weeks if he / she gives written notice of intent to do so to the organisation. One of the main sectors of the economy which has seen a rise in the use of temporary lay-off is the constructions industry as many organisations in this industry as tendering for work and awaiting confirmation whether they have sufficient business to maintain the workforce which it currently has. P age 6 of 7
  7. 7. For Consultation Services relating to Alternatives to Redundancy, Redundancy, Employment Law, Case Consultation and Management Contact Helena Broderick Managing Consultant Tel: +353 1 8666426 E-mail: Services are available nationwide through our team of experienced HR practitioners and employment law consultants Web: P age 7 of 7