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Cost Saving Measures that Could Help Businesses Avoid Compulsory Redundancies

February 03, 2023 | By: Becky Edwards

In the current climate, with growing concerns about the rise in cost of living, energy prices at an all-time high, and increased inflation and interest rates, many employers will be looking at ways of saving costs without having to make staff cuts.

Even when forced to consider redundancies, these should always be a last resort and it is therefore imperative to look at any alternatives to avoid letting staff go, which in turn could also help with talent retention and avoid negatively impacting staff morale.

In this article we look at some of the options available to you when faced with increasing costs, shortages of work and economic uncertainty.

Before considering the initiatives outlined below, we would recommend looking at your existing documentation to check it is working for you, and that it allows you to look creatively at your options. The documentation team at Wirehouse work hard to ensure you have as many options as possible available to you, so it important to have these drafted or reviewed and signed off by us.

We also want to emphasise the importance of communication and consultation with affected staff, so that they fully understand your reasons and rationale when faced with tough decisions.

  1. Lay off/ Short time working
  2. Flexible working
  3. Sabbaticals
  4. Restrictions on voluntary overtime
  5. Recruitment
  6. Voluntary redundancy
  7. Use of annual leave
  8. Restrictions on use of contractors/ agency workers
  9. Review of benefits
  10. Reductions in pay

Lay off/Short time working

In situations where there is a downturn in work, and it is likely that this is going to be for a temporary period, an alternative to redundancy is to either consider reducing the working week for affected staff members or laying them off completely for a period of time.  You are able to do so only when the employment contract explicitly allows for it or you able to gain agreement from the employee(s) in question.

Lay off: Typically, when you have no work (or pay) to offer an employee for a period of time and for at least one working day.

Most employees will be entitled to statutory guaranteed pay for any 5 days in which work is not offered in a 13 week period.

Additionally, they will still be able to request a redundancy payment if they remain laid off for 4 consecutive weeks, or any 6 weeks in the 13-week period. You are able to decline this request if you believe you will be able to reinstate their normal hours within 4 weeks of the request.

Short time: When working hours are reduced, and pay is reduced to reflect the hours worked.

You may also have the right to vary or reduce hours for certain staff depending on their contractual arrangements, including custom and practice.

Flexible Working

Being pro-active in your offering of flexible working, such as inviting staff to reduce their working week, or hours is a non-confrontational mechanism to try and reduce your wage bill, or tackle a reduction in work.

Alternatively, allowing employees the opportunity to work from home from time to time could be used to negotiate a reduction in remuneration packages or could save on some of the costs of running a workplace.

Consideration will be needed of how this is worded in contracts, of how agreement can be elicited and more practically around monitoring, IT and H&S implications.

However, such arrangements have the added bonus of tackling work-life balance.


Another way of trying to retain valued employees during difficult periods is to consider inviting requests for sabbaticals (career breaks or unpaid leave).

An employee in one of these scenarios would have an extended period of leave, meaning that you would save on wages costs (albeit annual leave and other benefits would still accrue). The contract and job security would be maintained to allow them to return at an agreed time.

This may become problematic if the situation changes during any period of extended leave. If so, you would need to consider how to select and consult fairly if faced with a redundancy situation. It would be useful to have a written agreement in place setting out how such situations would be managed should they arise.

Restrictions on voluntary overtime/ the build-up of TOIL

For some employers, this could be a fairly simple way to reduce costs. It applies to situations where overtime is not guaranteed but optional, otherwise you run the risk of claims being made that you have unilaterally changed contracts.

It is not necessarily going to be well received as not only will it impact on take home pay, it may also require a closer look at productivity during core hours. Communication will be key in managing this so as not to affect morale.


Another relatively straightforward option to consider is to apply a recruitment freeze for a temporary period. This should initially be applied to external recruitment, allowing you to consider options to move staff around internally if you have core vacancies that need filling, yet are facing a reduction in work in other roles or departments. Retraining existing staff is likely to be cheaper than embarking on external recruitment drives.

It is important be mindful of the effects this has on existing staff members as it could result in staff burnout.

Voluntary redundancy

Offering the option of voluntary redundancy could help you stave off compulsory redundancies, and thus reduce the risk of affecting staff morale.

If accepted, this would still be classed as a dismissal for employment law purposes. It is important that offers are not made to targeted groups who could claim you are acting in a discriminatory manner (such as on the basis of age), that a fair procedure is followed, and communication is documented.

Use of annual leave

You can ask employees to consider using their annual leave during quieter work periods. You can also consider offering this as an alternative to lay off/ a reduction in hours, where by employees pay will be maintained.

Ultimately you are also able to enforce periods of leave to suit business needs as long as you give double the period of notice of any leave you require to be taken (e.g., 2 weeks’ notice to enforce 1 weeks leave).

Restrictions on use of contractors/ agency workers

As long as the employment status of different categories of worker is carefully considered to ensure that those who are actually employees are not inadvertently affected, restricting the use of often expensive contractors and/or agencies could help reduce costs.

This is also an essential exercise before you consider any wider redundancy programme that will affect existing employees.

Review of benefits

Before making any changes to the benefits on offer to employees you will first need to identify whether or not the right to such a benefit is contractual or discretionary.

Contractual (explicitly or through custom and practice): Any amendment to it would need to be agreed by the employee, unless you are able to formulate a business case that demonstrates reasonableness and necessity. If so, you would have to consult with a view to agreement and ultimately terminate the arrangements and reengage on the new terms if such an agreement cannot be obtained. Whilst such a process would not safeguard against any claim of unfair dismissal, it will help mitigate and offer a defence to such a claim.

Discretionary: Typically, where you are able to choose whether or not to pay it, the amount to be paid, and how it is calculated. Removing such benefits could help with potentially large amounts of savings, this would have to be weighed up against the impact on employee morale.

Reductions in pay

Such reductions will only be an option if employees agree, as otherwise would result in a breach of contract.

This may be a useful alternative to redundancy and help save jobs, if carefully pitched and explained to employees.

More information about the process to follow when looking to vary terms and conditions can be found in our guidance note here.

Wirehouse clients must consult with our HR/Employment Law Advice Team before embarking on any variation process or if you are considering any of the options outlined above so we can guide you through any pitfalls you need to be mindful of and ensure you have a robust business case and fair process in place to support your proposed actions.

If you are not a Wirehouse client, get in touch with us today for advice and support surrounding any HR issues you need help with

About the Author
Becky Edwards
Becky Edwards
Becky Edwards, Author at Wirehouse Employer Services

Becky started her career supporting access to the workplace for disabled applicants and employees. From there she progressed into an Employment Law role advising organisations on contentious HR issues, implementing Terms & conditions and HR policies and delivering HR training. Becky has also accrued several years’ experience defending businesses at Employment Tribunals enabling her to be able to give advice with a strong understanding of the potential legal pitfalls.

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