No SME owner wants to make redundancies, but sometimes it can seem like the only option. Situations such as the Covid-19 pandemic put a strain on small and medium businesses and mean that business owners have to make difficult decisions. However, making redundancies can not only impact the individual negatively but also the entire business. Client connections can be lost, and when things start to look up, the cost of recruiting can be very expensive. To find out how SMEs can avoid making redundancies, continue reading.
Short time and lay-offs
Short time and lay-offs are an alternative to redundancy. A lay-off is where an employee is given the right to stop working for a short period of time while not being paid. Short time is where an employer can reduce an employee’s hours to less than 50%, and pay them accordingly. These options are only temporary, and can not be used to replace redundancy. However, this is an effective way to reduce the cost of wages without having to dismiss an employee.
Instead of making an employee redundant, consider retraining them to cover a different job opening. Recruitment is expensive, so by closing job offerings your business can save money. This option also means that you won’t have to dismiss a loyal employee.
A salary reduction may mean that you can prevent having to make an employee redundant. By explaining to the employee that the business is struggling, they will understand that taking a salary reduction may be the best way for them to keep their job. It is important to show that everyone in the business is taking a salary cut, including senior management. Or, you could ask if your employee would prefer to defer their pay. By deferring 50% of their salary for 6 months, you can help solve your short-term cash flow problems.
A sabbatical is an unpaid period of leave, usually 6-12 months. Although these are typically more common in the public sector, it is also an option for SMEs in the private sector. You can pay your employee a percentage of their usual salary during the sabbatical to avoid making redundancies. Offering your employee a sabbatical means that you cut costs without losing their talent.
Avoid making redundancies – where to find out more
Making redundancies can cost more in the short term, and some of the alternatives may need cash investment. Talk to us about alternative financing to help you avoid making redundancies. Or fill in our online contact form for further information.