Alternatives to redundancy: lower costs and keep your people

Key takeaways

Alternatives to redundancy let a UK employer lower costs while keeping its people. Start with measures that change no one's contract: stop overtime, freeze recruitment, cut agency spend and remove wasted work. Then consider agreed changes such as reduced hours or redeployment. Employers are expected to consider alternatives before making anyone redundant. This article is general information, not legal advice.

• Start with options that change no one's contract.
• 8 alternatives, from an overtime ban to redeployment.
• Changes to hours or pay need the employee's agreement.
• Redundancy has its own costs: pay, notice, morale and rehiring.

Why look for alternatives first?

Look for alternatives first because redundancy is costly, slow and hard to reverse, and because a fair process requires it. Employees with two years' service are entitled to statutory redundancy pay, and notice must be given or paid. Skills and knowledge leave with the person, and recruiting again when work returns costs more.

• How BPO can help businesses reduce operational costs
• Redundancy vs contract exit: the cost of scaling down

What are the eight alternatives?

The alternatives fall into two groups. The first four can be done without changing anyone's terms. The second four need agreement or an existing contract clause.

• 1. Stop or limit overtime.
• 2. Freeze recruitment and do not replace leavers like for like.
• 3. End agency, temporary and contractor arrangements.
• 4. Remove wasted work so fewer hours are needed.
• 5. Offer voluntary reduced hours, part-time or job sharing.
• 6. Redeploy or retrain people into roles that are needed.
• 7. Use short-time working or lay-offs, if the contract allows.
• 8. Offer voluntary redundancy or early retirement.

• How to reduce labour costs without cutting your team
• Hiring freeze? How to keep growing with the team you have
• The eight wastes of lean in an office, and how to cut them

What does the law say about lay-offs and short time?

An employer can lay staff off or put them on short-time working only if the employment contract allows it, or the employee agrees. Employees who are laid off may be entitled to statutory guarantee pay for up to five days in any three-month period. An employee laid off or on short time for four weeks in a row, or six weeks in any thirteen, may be able to claim redundancy pay.

If you plan 20 or more redundancies at one establishment within 90 days, collective consultation rules apply. Check GOV.UK and take advice before acting.

• TUPE and outsourcing

What does the cost comparison look like?

Take an illustrative firm needing to save £35,000 a year, roughly one £30,000 role with employer costs. Instead of a redundancy, it ends regular overtime (about £9,000), does not replace a part-time leaver (£14,000), and simplifies two processes so remaining admin overflow can be bought as managed hours at lower cost (£12,000 net).

The same £35,000 is found with no redundancy pay, no notice period and no one leaving against their will. These are example figures. The mix will differ in every business.

• Rising overtime costs: when outsourcing is cheaper
• Overflow outsourcing: hand off only work above your limit

How can work be redesigned to protect jobs?

Redesign work by separating what needs your people from what only needs doing. Remove steps nobody uses. Standardise the routine. Move people towards the work that earns revenue, and buy any remaining routine volume as a flexible service. Used this way, outsourcing absorbs variable workload and protects permanent roles from the next downturn.

• Process standardisation: one best way, lower cost per task
• Outsourcing and cash flow: fixed costs to variable
• Outsourcing in a downturn: capacity without fixed cost

When is redundancy unavoidable?

Redundancy is unavoidable when the work has gone and will not return, when a site closes, or when the gap is too large for other measures. In that case, follow a fair process: genuine consultation, fair selection, notice, redundancy pay and consideration of suitable alternative roles. Getting it wrong risks unfair dismissal claims.

• Cost cutting and staff morale: how to keep your team on side
• How to tell your team you are outsourcing

What does this look like in practice?

A pattern we see in a slow year: the owner assumes the only real saving is a role, and spends weeks dreading the conversation. Adding up overtime, an unfilled vacancy, agency cover and work that could stop often closes most of the gap. The role that seemed unaffordable was carrying costs that were never its own.

• See client work
• BPO Solutions for UK businesses

Alternatives to redundancy checklist

Work through these before starting any redundancy process.

• The saving needed is stated as an annual figure.
• Overtime, agency and contractor costs are totalled.
• Vacancies and expected leavers are reviewed.
• Wasted work has been identified and stopped.
• Voluntary options have been offered.
• Redeployment has been considered.
• Contracts have been checked for lay-off clauses.
• Professional advice has been taken.

• A 90-day plan to reduce operational costs
• How to run a cost review in a small business

Next step

Tell us the saving you need and your current team, overtime and agency costs. We will show you how much of the gap can be closed through the work itself. For the employment law, speak to an HR adviser or solicitor.