5 alternatives to redundancy: how HR can break the job-cut cycle
It's no secret that tough times are ahead. Energy prices have soared, and both the UK and US have been gripped by recession. Businesses must find ways of weathering the storm, and so staff cutbacks seem inevitable. But there are alternatives to redundancy, and HR must lead the way.
Last month, Chancellor Jeremy Hunt announced that the UK is now in recession. So, we can expect to see businesses take measures to stay afloat in the coming months. Only time will tell how bad things get. But, in tough times, it's vital that employers support their people.
In times of recession, it's common for businesses to make redundancies. Less people to pay, more money saved. It's the kind of decision employers sometimes have to make when they're economically backed into a corner. But it doesn't have to be your only option, and it certainly shouldn't be your go-to.
Redundancies damage trust, wellbeing and engagement
Redunancies can negatively impact the wellbeing of your people in a serious way. And we're not just talking about the ones you make unemployed. You need to understand that, when your employees suffer, it's inevitable that your business will too. That's why you need to give alternatives to redundancy some serious consideration.
Trust between employees and an organisation's leadership is a delicate thing. It's something every manager must work hard to cultivate within their team. Things aren't any better for HR either, as many employees are distrustful of them.
There's nothing like even the whisper of redundancy to get people panic-filing job applications like there's no tomorrow. And, as soon as you make one round of cuts, everyone starts worrying they might be next. As you can imagine, this is the kind of thing that makes job stress spike in a big way.
Elevated stress makes your people much more susceptible to poor mental health and long-term burnout. And, in the short-term, it makes them much more prone to distraction. It's hard to stay engaged with the spectre of redundancy hanging over you. This was one of several factors that led to global employee engagement falling to 20% during the Pandemic, due to mass economic uncertainty.
Why it's important to look for redundancy alternatives
It's in your best interests to check in with your people about alternatives to redundancy. That's because it's not just your employees who suffer when you let people go. Even if it's necessary for one reason or another, it's still likely to have costs in one form or another. Here are some of the ways staff cutbacks will harm your business:
The loss of talent
You need to carefully consider who you let go when making redundancies. Some people have indispensable skill-sets or specialist knowledge that's valuable to the business. But, regardless of who you choose to make redundant, you're still losing talent. One less fee-earner, one less project leader. Even if that someone is in a fairly minor role, you're losing all that potential development.
Cost of rehiring
Redundancies are a reflection of the times. When and if things get better, it's natural that businesses will try to make up for lost growth. Anyone you let go now is someone you'll have to rehire or replace once the proverbial long night is over.
SHRM's benchmark data puts the average cost-per-hire at $4,700. But, depending on the role, it can cost three times an employee's salary or more. So, if the role paid $60,000, you could end up spending $180,000 just to fill it.
Redundancy damages morale
Redundancies are a grim prospect, no matter who you are. But, as disheartening as it is for managers to have to make team cuts, it's much worse for employees. Not only are they anxious about being next, they can lose faith in their employer's ability to support the employees they keep. This can become a self-fulfilling prophecy, where the expectation of failure makes people stop trying.
Declining quality of customer service
With all of the above, it's inevitable that customer service quality will take a hit. Even if it's just fewer people working tills and stocking shelves, wait times increase and shortages become more likely. And the problem with redundancy is that it doesn't just affect your weak links. You're potentially losing people with great customer service skills, not to mention brand advocacy.
5 alternatives to redundancy that'll save your top talent
Fortunately, HR leaders have several options to help avoid redundancy. Here are five alternatives that can help you maintain stability:
1. Flexible or part-time working
Job flexibility can help you to cut costs without cutting people loose. Job-sharing, for example, helps you retain staff while giving them better work-life balance. Part-time work, while not ideal for once-full-time employees, helps you to support more people. Even increasing your number of remote staff can help by scaling back your office costs.
2. Compulsory holidays are an easy alternative to redundancy
Time off work is essential for our long-term wellbeing. But it's also common practice to pay employees for any unused vacation days. It creates difficult decisions for people. Take time off for some R&R, or get more money. And, in times like these, they probably need the extra money.
In other words, you've got a recipe for presenteeism and burnout. Giving people compulsory holidays is a great way to push them to take a break. But, just as importantly, they can't cash them out. That makes them a great cost-saving measure when you can't afford to have all hands on-deck.
3. Invest in better tech to boost productivity
It might seem counterintuitive to spend money during a time of redundancies. But investing in better tools means your people can be more effective and efficient. And provide a better service. If you're trying every alternative to redundancy, you need your people to be as efficient as possible. And, if you've already had to make people redundant, better tools will help your remaining staff to make up the difference.
4. Temporary career breaks
Sabbaticals and other forms of career breaks can be a welcome change. They're a chance for employees to step back from their hectic work lives. Some choose to spend time with their families. Others go travelling or learn a new skill. Or you could just spend the entire time watching movies and playing video games.
They're a good money-saving alternative to redundancy. You just have to be careful who you give them to. If an employee can't afford to go on sabbatical for a few months, chances are they won't see it as a good thing.
5. Restructuring to balance your departments
Just because a department can technically function without this or that employee, it doesn't mean they aren't needed elsewhere. Before you cut someone from your organisation, ask yourself if there are any areas in the business that are struggling. If so, then it can be better to transfer people. It doesn't even have to be permanent. Staff secondments can even be a great way of revitalising someone's career or helping them to expand their skill-set.
HR must break the cycle with viable redundancy alternatives
The most difficult days may still be ahead. But, if you can find effective alternatives to redundancy, it'll be much easier to support your people. And HR leaders must blaze the trail. After all, it’s HR who have the job of making these alternatives a reality. It’s important to show employees that HR is on their side too, not just their employers. If you can support them through this, you can support them through anything. It'll create the kind of loyalty and brand advocacy you just can't buy.
To read more about employee engagement and performance during a recession, download our latest best practice guide: Managing People in Tough Times.