Do you need to restructure and make redundancies? Careful planning will help avoid costly mistakes and employment tribunals, advises Nick Lawson-Williams.
In January 2020, few could have predicted how the business and economic landscape would change. But change it has, and many businesses owners have had to alter their business plans accordingly. Unfortunately, this has often meant downsizing to stay competitive – which in most cases, means having to make redundancies.
Rather than making hasty decisions, however, Nick Lawson-Williams Portfolio People Director at People Puzzles, warns business owners to tread carefully. ‘Planning is key,’ he advises. ‘When business owners shoot from the hip regarding redundancies, they risk getting things wrong. Then we have to step in and advise on how to sort out messy situations – that are often avoidable with a bit more strategic thinking.’
The ‘messy situations’ Nick refers to can be expensive. He cites an example of a business hurriedly making an employee redundant without consulting, before realising that the employee’s notice period took them over two years of service and therefore greater employment rights. The business is now likely to have to make a settlement. ‘That decision might cost them many thousands of pounds that could have been avoided if they’d followed the correct process,’ says Nick, ‘which defeats the objective of the redundancy process if it’s being done to cut costs.’
These situations can usually be avoided if the planning is done upfront, and Nick advises starting with the business plan. ‘Based on the current environment, is your business plan going to work? If not, map out what needs to change and consider different options before rushing into anything.’
In most cases, it’s advisable to consult with employees first. If you don’t, any redundancies you make will likely to be seen as unfair, and you risk being taken to an employment tribunal.
While someone on probation or with less than two years’ service can’t claim unfair dismissal, Nick still advises consulting with them, particularly if they’re nearing two years of service. ‘The closer you get to their second anniversary, the riskier it is,’ he says. ‘If they’re on a long notice period, this might take them over that two-year line.’
Even if you’re not legally obliged to carry out a consultation, Nick advises that clients do anyway. ‘It’s respectful and makes the process more collaborative,’ he says. ‘People are more likely to understand why they’ve been made redundant if they’ve explored the alternatives and leave with a relatively positive mindset. It also sends a strong message to those who stay in the business about the kind of employer you are.’
Redundancies are rarely pleasant affairs, but with proper planning and care, it is possible to reduce the stress for all involved. Nick refers to a recent ‘gold-standard’ redundancy process he helped carry out at Chilfen Group. ‘They made their business plans upfront and worked to them, as opposed to “who shall we start with?”, he says. ‘We actually had a couple of individuals who thanked us at the end of the process as they thought they were treated fairly.’
At People Puzzles, we really encourage you to build on your strengths and continue to do what you do well, whilst having the flexibility to adapt to change, and can help you ensure your business is future-proofed and ready to thrive over the next few months.
If you think your business could benefit from a People Director – or you feel you need support to restructure your business, we’d love to have a complimentary one to one chat with you about your people challenges and help you work through the best plans to grow in the current new environment. Call us on 020 3239 3307 for a complimentary call.