Labour changes will increase costs, risks and time taken for employers planning redundancies
With increasing costs and the very real prospect of tighter UK labour laws, many employers are contemplating reducing their dependency on labour wherever this may be possible.
With changes coming from the new Labour government, our advice to get on with these changes as quickly as possible.
Using redundancies to achieve efficiencies
Headcount efficiencies might be possible via new technology, or by restructuring operations, concentrating on revenue generating activities that are less people-dependent.
Given the current economic and political environment, employers should not be lambasted for pursuing such goals.
In my early days when I was responsible for HR for Coca-Cola’s UK operations, we had a very clear and simple policy on ‘headcount creep’ and every year the exec team responsible for Coca-Cola’s manufacturing operations would meet to review the organisation charts of our 6 manufacturing sites and supporting operations.
Our goal was simple – to review and adjust the ratio of ‘case makers’ vs non case makers. A ‘case maker’ was an employee directly engaged in front line activity – in a manufacturing site that would be a line operator, in our finance teams it would be the people processing invoices – each team would have a blend of ‘doers’ and those employed to support the doers with the latter being the ‘non case makers’.
Our annual objective was to ensure the ratio was unchanged, and if it had changed adversely, to review what had changed and to challenge the particular business unit on how to return to the permitted ratio.
To bring the issue to life, we would often illustrate indirect labour costs through pictures of articulated lorries full of our products – it was quite an effective visual tool.
Our annual exercise would often result in a round of redundancies, but it wasn’t the only reason we would make redundancies.
When our UK company was acquired by a Coca-Cola owned global bottling business the new owners sought to achieve pan-European functional efficiencies and this resulted in my having to make 60+ senior management reductions.
I had to let talented people go, some of whom I had recruited and including one poor sod who hadn’t even started with us, and was surrounded by removal boxes when I rang to give him the news.
The last redundancy letter I penned was to myself, after which I embarked upon a consultancy career.
In my first position as an interim Head of HR with British Bakeries I spotted an opportunity for James, the man I made redundant before he’d even started with Coca-Cola. He got the position and his career flourished – silver linings and all that.
Under Labour, redundancies will take longer, come with higher costs and higher penalties
Redundancies then (and now) were easier than they will be in the future. The Labour government has stated that it will change redundancy laws, making it more difficult and expensive for employers to achieve necessary efficiencies.
Those necessary efficiencies will often stem ironically from the increases in Labour costs via NICs, SSP etc. forced upon employers by a government that self-proclaimed to be a friend of employers.
Collective consultation rules to change
In its wisdom the government have stated that it will change collective redundancy laws so that in future the collective threshold of 20 redundancies (which triggers the requirement for collective consultation to take place) will apply to employing entities rather than single establishments.
Why is this a problem? A multi-site employer may have a clear and compelling reason to make a service team redundant in say its London operation, but if it had earlier made redundancies in its Scottish team, it may find that it’s hit the collective trigger and must embark on up to 45 days of consultation before serving notice, even if such consultation is completely pointless.
Minimum consultation periods will lengthen
It gets worse, because our new political leaders have also said they will increase consultation periods, potentially extending the pointless consultation in our example from 45 to 90 days – that’s 3 months wage costs where previously the reductions could have been done entirely fairly to all concerned in a couple of weeks.
Day 1 unfair dismissal rights will increase redundancy risks to employers
Adding to employer’s woes will be the introduction of day 1 unfair dismissal rights and an extension of the time period to bring an unfair dismissal claim from 3 months to 6 months. Where it was previously felt that redundancy of short term employees was fairly straight forward and risk-free, this will no longer be the case, and ‘last in first out’ can no longer be assumed to be the default selection position and with a heightened threat of litigation from short service staff, employers will need to carefully consider whether selection methods inadvertently trigger discrimination claims.
Penalties for failure to properly consult to increase
On top of all that is Labour’s intent to increase the penalty for failing to consult properly (which is often a rather subjective exercise conducted by the tribunals) from the current award of 90 day’s wages to 180, or possibly to remove the upper cap altogether.
Is a fine equivalent to 6 months wages (or more) really a fair and proportionate response for an employer tripping up on a collective consultation technicality?
Employers can be forgiven for thinking that with friends like the Labour government, who needs enemies?
For employers needing to make redundancies time is now very much of the essence
The conclusion for employers is that if efficiencies are necessary and achievable, time is very much of the essence. Completing a round of redundancies ahead of the new legislation, most of which is ‘TBC but soon’ in terms of dates.
About the author
Bill Larke has held senior HR positions in some of the world’s best known companies and was founder of myHRdept, an HR outsourcing company of 23 years standing, today providing services as one of a group of like-minded businesses aiming to buck the UK trend of poor quality call centre based ‘HR support businesses’. myHRdept and its partners take pride in providing high quality end to end support for SME employer’s wide-ranging people-related needs.
HR support from JCHR
Our HR team at myHRdept can design and manage end to end redundancy programmes, including collective and non-collective. The team is available via an annual retainer or on a one-off project basis. With hourly charge rates from just £130 + vat, the HR service provides a cost effective and pragmatic alternative to employment lawyers.
Labour’s changes will also require significant updates to HR policies, handbooks and contracts – All JCHR clients who opt to add HR to their payroll provision will have provision in their contracts for these updates, and in most cases this will not impact on HR support hours available for ad hoc issues arising.
If you’re thinking of outsourcing your HR, payroll or employment law needs, why not contact JCHR? Call us on 01635 553 299, email us at info@jCHR.uk, or contact us via our website and we’ll call you back.
