Restructuring Your Business – Alternatives to Redundancy

By Rachel Davis

Principal Associate

UK businesses are now turning their minds to how they will resume operations when the current COVID-19 lockdown begins to lift. What a ‘return to work’ looks like will vary between companies as some businesses have shut down completely during the lockdown, while others are operating more or less as usual, but with staff working remotely.

There are a number of steps employers can consider when planning how to move forwards and beyond the lockdown. Although employers may see redundancies as an immediate way out of the current economic difficulties they face, many will be keen to avoid job losses and to preserve skills and expertise. Alternative measures to redundancy may offer employers greater prospects of survival and success.


Lay-off is a temporary measure whereby businesses lay off all or some employees during a short-time and temporary slow-down in work.

Employees remain employed throughout the lay-off period. This makes the lay-off solution popular: it provides immediate saving of staff costs, together with the flexibility to restore the workforce when work starts to pick up.

However, employers do not have the automatic right to lay their staff off just because there is a shortage of work. An employer must have a contractual right to lay off, and the contract should make clear that employees will not receive their normal salary during the lay-off period. Otherwise, any enforced lay-off could amount to a breach of contract, entitling the employee to resign and claim constructive dismissal, or an unlawful deduction from wages.

If the contract does not give the employer the right to lay off, then any proposal to lay off will need to be the subject of consultation and will require employees’ agreement.

Short-time Working

Short-time working is a reduction in the hours that employees are required to work and a corresponding reduction in pay. Like lay-off, it can be an effective way of avoiding redundancies but it does not represent a complete cessation of work. Employees are guaranteed some work and corresponding pay and are more likely to accept this as an alternative to possible redundancy.

The same legal principles apply to short-time working as to lay-off:

  • Without the express contractual right to place employees on short-time working, an employer is in breach of contract if it does not provide work and pay for employees.
  • Even if the employer has the contractual right to introduce short-time working, where the employee has more than two years’ service and has been kept on short-time working for at least four or more consecutive weeks, they can claim an entitlement to statutory redundancy pay, unless the employer can demonstrate that there is a likely need for future employment in the future.
  • If an employee gives or is given notice of termination during a period of short-time working, they might be entitled to be paid their normal salary (based on their normal hours) during the notice period.
  • It is important that the short-time working arrangements make clear that the arrangements are intended to be temporary and that the employee should be available to return to a normal pattern of work when the employer requires them to do so.

Unpaid/Paid Leave

Arranging for employees to take periods of unpaid leave is another way of stopping or reducing work temporarily.

Employees’ consent is required unless the employment contract contains a clause allowing the employer to place employees on unpaid leave.

As an alternative to unpaid leave, an employer could request that employees take their annual holiday allowance at quiet times. Although employees are entitled to their normal pay during the leave period, by forward planning holiday allowance, the employer is able to ‘write off’ quiet times and ensure employees’ availability once business picks up.

Reduce Pay and Benefits

Short of job losses, reducing pay is perhaps the most controversial and potentially problematic practice employers may adopt.

An employee’s pay is a condition of the employment contract so an employer who pays less than it is required to might face a claim for breach of contract and/or unlawful deduction from wages

Employers who plan to reduce pay should inform employees in advance, setting out the benefits of such a proposal. Ideally, the measures should be limited in time with, perhaps, a promise for long-term improvement once market conditions change.

Any pay cut is likely to affect employees’ motivation and commitment to the organisation. Employers who explain clearly why they seek to adopt this option and the overall positive impact they are trying to achieve for the organisation’s employees are more likely to secure employees’ consent.

Employers may also consider stopping discretionary, non-contractual benefits such as Christmas parties and team away days. However, where benefits are contractual, withdrawal of the benefits will usually require the employee’s consent.

A well-managed reorganisation can achieve greater efficiencies for businesses, enabling employers to save costs and become more effective for the future. However, any proposed changes need to be carefully thought out and, wherever possible, consent obtained from the employee.

If you have any queries or concerns please contact Rachel Davis on 01279 712582 or via email