How does a Potential Recession Impact You and Your Employees?
With his announcement in the Autumn Statement that the UK is already in a recession, Chancellor Jeremy Hunt confirmed what most of us already know – times are tough and for many market sectors, set to become increasingly tougher. The Office for Budget Responsibility has predicted living standards will plummet, with household incomes set to fall by 7% over the next 18 months[1]. Although unemployment rose slightly to 3.6% in the three months to September 2022, it remains at its lowest level since 1974. However, this is causing an additional challenge for business growth, namely, the country is in the grip of a massive skills shortage. All this bad news will undoubtedly be causing fear and anxiety to ripple through your workforce, especially at a time when the rising cost of living is sending many people into the red. At a time when you need all hands on deck to ensure your business navigates through the next few years, maintaining employee morale and productivity is essential. Below you will find our Employment Law Solicitors’ answers to some of the questions they are receiving from concerned employers.
I am struggling to meet my overheads, including salaries. Are there any alternatives to making redundancies?
Wherever possible, you should avoid making employees redundant during a recession. Studies conducted after the 2008 financial crisis showed that businesses that embraced alternative cost-saving initiatives and held onto all or most of their existing employees fared better than those that relied on slashing staff numbers.
Alternatives to making redundancies include:
- Reducing hours
- Short time working or lay off
- Temporary reduction in wages
You can find out how to legally vary your employment contracts here.
What happens to my employees if I decide to sell my business?
It is likely that your employees will enjoy legal protection under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE). A relevant transfer happens when:
- A business, or part of a business, transfers from one owner to another, or
- A contract is in-sourced or out-sourced or there is a service provision change.
TUPE regulations ensure that your employees are transferred to the new employer under their existing terms and conditions. As an employer, you have an obligation to inform and consult your staff about the business transfer and failure to do this or comply with other TUPE obligations could result in Employment Tribunal claims.
What if I have no choice but to make redundancies – how do I do this lawfully?
Making employees redundant is incredibly stressful for everyone involved. It is relatively easy to breach employment law when making redundancies, therefore, it is crucial to work with an experienced Employment Law Solicitor who can guide you through the process.
While redundancy is viewed as a “potentially fair reason for dismissal” under the Employment Rights Act 1996, it may be deemed unfair unless you can show you have:
- Identified a genuine redundancy situation;
- Identified an appropriate pool for selection (if appropriate);
- Consulted with individuals in the pool;
- Applied objective selection criteria to those in the pool;
- Considered suitable alternative employment where appropriate; and
- Followed a fair procedure
Particular care must be taken to ensure the informing and consultation requirements are not simply checkbox exercises and you consider any suggestions made by affected employees and/or their representatives.
Can I replace employees I have made redundant with lower-paid staff?
No. If an employee has been made redundant, then in theory, there is no available role to recruit another individual into. If you have vacancies within the business, you should always offer those to potentially redundant employees before you make them redundant, providing they are suitable
How can an Employment Law Solicitor help me manage my employees during a recession?
Having an Employment Law Solicitor who understands your business and your industry by your side will give you a significant competitive advantage during a recession.
Benefits include:
- You can be confident that your Solicitor is up to date with fast-changing employment law.
- Your employment law contracts and staff handbooks will be meticulously drafted.
- Any job advertisements you place or decisions you make that could conflict with the Equality Act 2010 will be quickly spotted, protecting you from an Employment Tribunal Claim and reputational damage.
- You will have a legal professional by your side if you need to dismiss an employee via redundancy.
- If you plan to sell your business, you can be certain that you have complied with TUPE and other related employment regulations.
Most business owners will confess that managing employees is the hardest aspect of running a successful business, especially in challenging economic times. Through our Ask HR scheme and HR Genie we can alleviate the burden of staff management, so you can focus on your business rather than worrying about an employee bringing an Employment Tribunal claim.
To talk to us about any points made in this article, please call us on 02476 231000 or email enquiries@askewslegal.co
