UK: Redundancies: Avoidance And Alternatives

Last Updated: 8 September 2008
Article by Graham Paul

Following on from Dundas & Wilson's recent seminars on Redundancy and Rationalisation Procedures and Practical Routes Forward, Graham Paul, Employment Partner provides the following comments:

As the economy moves towards alleged stagnation, and businesses prepare themselves for the long haul of economic depression, many employers are still looking at ways of rationalising costs. The past 12 months have shown that many companies still need to become leaner.

In most sectors, it remains the case that staff cost is the biggest overhead. The bluntest instrument in terms of reducing employee costs is to reduce the number of employees i.e. make redundancies.

For many businesses, though, that won't be the best approach:-

  • Even in these times of economic constraint, the negative publicity generated by redundancies can be a cause for concern: affecting the public image of a business's short-term viability, scaring suppliers into being tougher on credit terms or adversely impacting its future recruitment strategy. Few businesses want the reputation of wielding the knife too quickly in testing times.

  • For some businesses it may be that the one-off hit on cash-flow of making large-scale redundancies is not possible.

We turn then to the practical and commercial routes available to businesses who need to look at making immediate and significant savings in remuneration without resorting to redundancies?

  • Negotiating pay cuts or payment holidays with their employees

This is probably the most drastic option, and in reality would only be seriously considered where redundancies were otherwise inevitable. Self-evidently any salary reductions require employees' consent, and the likelihood of that consent being forthcoming will depend on a myriad of factors:

  • how, if at all, will the employees ever get back what they forego (often there will be agreement that waived salary will be paid as a bonus once cash-flow is back on track, or shares in the business are awarded in lieu of pay);

  • what are the prospects of the employee getting work elsewhere;

  • how long is the cut proposed for, and how deep is it; and

  • does the employee see a long-term future for the business.

From a legal perspective, however, even although this is the most drastic of the approaches it is in many ways the easiest. As no employer would effect these changes without getting employee consent it is usually an agreed solution. Strategic consideration should be given at the outset in order to tactically approach the employees or their trade union in the first instance. The messaging aspect needs to be carefully managed: with the correct degree of carrot and stick applied for the relevant situation. The benefit to this route is that employees are provided with options, they consider themselves integral to the business itself and where the employees' understand the business needs, the negative influence of this step is genuinely mitigated.

  • Overtime freeze and changes to shift patterns

Few employees will have a contractual right to overtime, and so a temporary freeze on overtime is likely to be relatively unproblematic. Claims that employees have a right to overtime by reason of custom and practice are unlikely to succeed. Obviously in certain industries employees will rely on regular overtime as a significant part of their normal pay. Employee relations issues, rather than legal claims, will be the concern here. Again companies need to get the messaging correct – consultation with the employees from the outset is recommended – the more the employees understand, the better the option will be in their eyes.

Overtime freezes will often be considered in conjunction with shift pattern changes. A business needs to ensure that it is managing its required output without the overtime. If its output falls, any savings on overtime payments are lost in reduced sales income. Shift pattern changes can be more difficult to implement legally:-

  • Even if there is a contractual right to vary shift patterns, that right must be exercised reasonably in order to reduce the risk of breach of contract and constructive dismissal claims. In all cases, but most particularly where any right to vary shift patterns has never as a matter of fact been utilised, there should be prior consultation with employees before effecting the change. Even if that consultation process involves one mass meeting.

  • Where there is no express contractual right to vary shift patterns, a greater degree of care should be taken on the consultation exercise. Ideally employees should agree to the change in shifts: so the consultation should be a selling exercise for the Company. If agreement cannot be reached with employees there are essentially two options: (i) go down the route of terminating employees' existing contracts and offering new ones with the new shift patterns (this will necessitate collective consultation if more than 19 employees are affected), or (ii) taking the view that adhering to the new shift patterns is a reasonable instruction and disciplining staff who fail to do so.

  • Businesses need to be particularly sensitive to the impact of proposed changes on those with childcare responsibilities or religious beliefs that impact possible work patterns. Any enforced shift change would need to be objectively justified in the context of a discrimination claim. In the context of the justification defence, the company would effectively be required to show that there was no practical alternative to the enforced change.

  • Sabbaticals

Sabbaticals are increasingly being offered by businesses, and used by employees. The employee takes an agreed period of unpaid leave - often up to 1 year - with arrangements agreed in advance in respect of the employee's return to work. This has the obvious benefits to the business of (i) immediate cost savings, and (ii) the hope that an experienced and 'known' employee will not be lost to the business, as well as tapping in to the increasing trend for lifestyle opportunities. The biggest issues here are what the individual's status is during the sabbatical period, and clarity around the terms of that return. In most cases a business will provide that the individual is not employed if the sabbatical is for more than 3 months. This has implications for the employee if he/she is dissatisfied with what he or she returns to at the end of the sabbatical period. Assuming there is no discrimination claim, the employee is unlikely to be able to bring an unfair dismissal claim because there will be insufficient continuous service. Of more importance, however, is clarity around the return terms. There cannot be a guaranteed job - no business has the necessary crystal ball - and so there needs to be a commitment to try to redeploy the employee with, ideally, an articulation of what will happen if that is not possible.

  • Withdrawing discretionary bonuses or benefits

Finally, businesses should look to see if discretionary benefits can be withdrawn from employees in order to make cost-savings. This does need, again, to be balanced against the impact on morale (and therefore, indirectly, on productivity). However if a benefit is genuinely discretionary in nature, provided that the decision to withdraw it or not to pay it is not irrational, then it is lawful. The one issue which will merit some consideration is whether or not the benefit is genuinely discretionary or, rather, has become contractual by reason of custom and practice. Any businesses considering the withdrawal of bonuses which could arguably have become contractual due to custom and practice, should assess the risk of claims of breach of contract at the outset and proceed with this route when that assessment has been undertaken only.

Graham Paul, Partner
Dundas & Wilson LLP

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.