How can Councils save employment costs without cutting staff?
Tuesday, 23rd May 2017
Given the on-going austerity measures, Councils across the UK continue to be forced to find ways to make their budget stretch further.
Staffing costs form a huge proportion of each Council's budget, so are always kept under review.
Whilst making employees redundant may appear to be a "quick fix" way of saving money, redundancies carry certain risks - and there are always alternatives to consider.
Risks when making employees redundant
Any dismissal carries the risk of Employment Tribunal claims, including unfair dismissal, discrimination, and protective awards for failing to follow the collective consultation rules (when they apply).
Asking for volunteers as part of a redundancy process risks employees coming forward who would not necessarily have been selected for redundancy. Volunteers often also tend to have the longest service, have the greatest experience and can be the most expensive to deal with, particularly if they are members of a defined benefit pension scheme, such as the LGPS.
A flawed redundancy process could therefore wipe out the anticipated savings, and could also lead to a significant loss of talent and experience.
Issues that may lead to redundancy-related claims include:
- Collective Consultation
Employers must ensure they conduct a full and effective consultation process. If they fail to do so the dismissal may be unfair. Where it is proposed that 20 to 99 employees within the same organisation be made redundant within a three-month period, the collective consultation rules apply, dictating that formal consultation must begin at least 30 days prior to dismissal - and where 100 or more redundancies are proposed, the consultation must begin at least 45 days prior to the first dismissal.
When setting redundancy selection criteria, employers should ensure that these criteria do not discriminate against individuals or groups of individuals in any way, directly or indirectly. For example, female staff who have taken maternity leave or those with disabilities may be discriminated against by criteria relating to extended periods of absence.
Alternatives to compulsory redundancy
Councils should always therefore consider how else to make changes to workforce to generate costs savings.
Making any such proposals is a core part of the collective consultation process.
- Reduce use of external contractors and agency staff and re-deployment of employees
It can be expensive to rely on contractors and agency staff. Provided that any contractual provisions in place are complied with, there are unlikely to be legal consequences of reducing reliance on such people. While this may require some re-structuring in terms of how internal employees are utilised, re-deployment may help eliminate or reduce the need for redundancies.
- Put a freeze on recruitment
Whenever a vacancy arises, many Councils re-deploy staff from an over-resourced department (or a department where employees are at risk of redundancy) to the department with vacancies, before recruiting new employees.
Hiring a new employee while others are facing redundancy is unlikely to be popular with existing employees.
Councils should consider re-training staff to perform a certain role if particular skills are required.
- Reduce hours or salaries of existing employees
Working hours and salaries are core terms of an employment contract, and so can therefore only be varied by express agreement between the parties.
As part of a formal consultation exercise, Councils could consult with their employees see whether employees were prepared to agree to temporary or even permanent changes to their hours and pay, as a way of avoiding redundancies.
A full and effective consultation process will ensure that all alternatives to redundancy have been explored, and that there is also a degree of buy-in from employees - which will in turn reduce the risk of claims.