In the current economic climate, most businesses and organisations are seeking to cut costs. The employees of a recruitment business are usually its biggest asset but they can also be its biggest cost. Therefore the workforce is often the first place management looks to make cost savings. Many employers assume that the way to solve a financial crisis is to make employees redundant. However, there are alternatives.

First, it is important to identify the key objective. It may be to reduce headcount but it might also be to cut costs (they are different), re-focus the business, clear dead wood, ensure a better functioning department or ensure that achievement and reward are more closely aligned. From the outset, an employer should consider the key objective to ensure that it properly addresses the problem and follows the correct legal procedure.

OPTIONS: Redundancies
A redundancy will only be appropriate when the statutory definition of ‘redundancy’ is met. That is:
- where the employer has ceased or intends to cease (i) to carry out the business for the purposes of which that employee was employed… or (ii) to carry on that business in the place where the employee was so employed;
- or the fact that the requirements of the business — for employees to carry out work of a particular kind or for employees to carry out work of a particular kind in the place where the employee was employed by the employer — have ceased or diminished or are expected to cease or diminish.

If an employer is seeking to dismiss a person from a department with sound financials or on performance grounds or intends to replace dismissed employees, then it is unlikely that the criteria for the definition of redundancy will be met. That is not to say that an employer
cannot dismiss, it just needs to identify the right reason and go through a different procedure.

Performance management
If an employer wants to dismiss for performance reasons and avoid an unfair dismissal claim, it will have to go through a ‘capability’ procedure, which will require a system of warnings, perhaps training and providing an opportunity for improvement.

Enforce existing contractual rights
An employer may have powerful rights built into the contract of employment, which it can enforce. For example, the right to re-locate or change the job description. Employers must act reasonably when exercising contractual rights.

Variation of the contract
An employer could seek an employee’s consent to vary the existing employment terms. For example, it may seek to amend remuneration terms, impose stronger restrictions or reduce salaries while increasing the commission element. This might reduce costs in the short term and
incentivise in the longer term. This will also nicely position the business for any upturn. In certain circumstances an employer can impose a variation.

Other commercial solutions
It may be appropriate to sell off the whole or part of the business (which might involve TUPE [Transfer of Undertakings (Protection of Employment)] issues).

Dismissal
As an alternative to redundancy, an employer could dismiss an employee for one of the five other potentially fair reasons for dismissal, which are:
1 capability
2 conduct
3 some other substantial reason
4 illegality
5 retirement

Each of these potentially fair reasons will require a different procedure to avoid an unfair dismissal claim.

COST BENEFIT ANALYSIS
An employer should carry out a thorough cost-benefit analysis for each option available to it. An employer should balance factors such as cost, time to effect, legal risk, management time and resources, stress and morale when deciding which option to pursue.

Employers are under a duty to consider ways in which redundancies can be avoided before and throughout any consultation process. The
alternatives set out above are a good starting point for an employer exploring its options.