Restructuring the workforce with flexible and part-time working arrangements are increasingly common and, on the whole, have been successful. But employer beware! There are hidden dangers to consider warns Jonathan Maude, Partner at McGuirewoods.
Employers have already cut deep and many will have implemented alternatives to further redundancy, such as flexible working and part-time arrangements. But here lies a number of hidden issues, if redundancy rears its head again. Decisions and choices made in the first wave of redundancies, and changes to working arrangements could impact on the second wave. If it becomes necessary to declare further redundancies and to select in relation to the same, the employer needs to ensure that it does not treat employees with whom it may have agreed flexible working arrangements in the past differently, or in a detrimental way, when compared to others. For example, if an employer has agreed part-time working arrangements with employees in an effort to maintain them within the business, any adverse treatment of those employees in a further tranche of cost-cutting measures may well breach the Part-Time Workers Regulations.
The same is true in relation to fixed-term and contract workers, who may have been with the employer for some time. Any adverse treatment of these workers in relation to selection or termination of their working arrangements may breach the Fixed-Term Workers’ Regulations. Faced with additional personnel cuts, or in the event of a merger or acquisition, decisions about which employees should stay or leave must be based on a strategic review of the company’s goals. By reviewing where the business is going over the next two to three years, you need to identify criteria, which enables you to score and select employees for retention or dismissal. The Courts agree that the selection of employees on the basis of suitability to a business’ future needs is fair and those employees that can best help their employer meet its future challenges should be selected to stay. However, care needs to be taken as to the criteria used against which selection might take place, and also any scoring mechanism used in connection with these criteria. Any adverse treatment which may be caused by having agreed an alternative working arrangement may lead to liability.
Care also needs to be taken in connection with agency staff, as there is an understandable belief that agency staff may not be covered by employment protection legislation. Of course, this is not always the case, in particular if the staff member has been with the principle employer for some time. Successful claims have been bought in the Employment Tribunal by agency workers against the principal employer, and thought needs to be given should the employer decide that the contract with the agency worker, or the agency itself, should be terminated. A second wave of redundancy and cut backs will have a negative impact on staff morale. How to keep the business functioning well and profitably when staff are demoralised by job uncertainty or the loss of colleagues, is a significant challenge. As always, the fear is that the best staff will walk first. Motivation and incentives for the remaining staff are vital. If the business has had to make redundancies due to difficult trading conditions the options for awarding salary increases and bonuses will be next to non-existent.
For management, an incentive plan may include stock arrangements, but these will very much depend on the nature of the business and how well the company is doing. In smaller companies, if cash-based incentives are out of the question, softer incentives, such as training and professional development opportunities or foreign travel may hold more sway. There will need to be a great deal more focus on flexible benefits in employees’ compensation packages. HR Directors will need to get close to employees to find out what they really want, above and beyond financial incentives, such as giving employees a sense of ownership in the business and giving them roles and responsibility that allow them to achieve and get recognition. Chief executives, presidents and chairmen who responded to the CEO Challenge study by the Conference Board highlighted human capital and operational excellence as two of the top four challenges for 2013. In the absence to growth, business will need to get better at what they are good at and retaining top talent will be critical to achieving this goal. For employers, the key will be to differentiate themselves from the competition so that employees feel their business is the best place to work.
