PrintSpeak survival guide: alternatives to redundancy

nil recessus carborundorum

success story...

alternatives to redundancy

This week’s success story is about a printer that hit hard times with the recession and sought to make nearly half its workforce redundant. Fortunately it chose a creative package of pay and pension cuts and its workforce survived intact.

The company was a third-generation family firm, historically very profitable in the general commercial sector. All its staff were highly loyal and many had more than 20 years’ service. But when the recession hit, the company saw its profit margins slump to less than a half of what they had been over a short three-month timescale, and the future order book was also dwindling rapidly.

Prohibitive redundancy costs

In a panic, the company’s board of directors put together a plan to make just under half the company’s 45-strong workforce redundant.

But the cost of redundancy payments proved prohibitive – especially given the time-served nature of many staff. To add to this, the directors were aware that the loss of skills would hit the company hard at a time when it needed to be moving forward – expanding its digital and variable data offerings, and adding an internet storefront.

It was a painful process to go through. But the joint hardship we’ve all suffered has brought about a new spirit of co-operation

The company called in an employment expert to ask advice, and a consultant visited to assess the situation and make some recommendations.

Appeal for pay cut

The recommendations began with an appeal to all employees to agree a pay cut of 10%, and to forego their Christmas bonus and annual pay increase. The staff, when consulted, initially objected, but quickly realised that this was their only chance of continued employment with the company, and a consensus was reached within a week of negotiations. This single action immediately yielded a cash release of £140,000. This went a long way towards filling the cashflow gap.

Following on from this, the company converted several posts into job-shares. This was done in conjunction with staff and met some aspirations towards reduced hours for some working families. The company also cancelled its company contribution to the staff pension scheme, which released a further £42,000. The whole package guaranteed that no redundancies needed to be made.

Review in 2010

The company agreed with its workforce that the situation was to be reviewed in 2010, at which time the payroll and pension benefits might return to normal levels or be continued until the company was clear of the recession.

“It was a painful process to go through, and we couldn’t have made it work without the co-operation of our staff. But the joint hardship we’ve all suffered has brought about a new spirit of co-operation,” said one director.

what are...

alternatives to redundancy?

Think of creative solutions and put redundancy last on the list, says Chris Swerling, Head of HR at the BPIF

Redundancy can be an expensive option, as there are many associated costs – including redundancy payments, the time involved in the process, the loss of skills to the company and the restructuring of remaining roles

There are more creative approaches to freeing up some of the capital currently accounted for by the salary bill. These might include natural wastage, the control or reduction of overtime, modified shift arrangements, the restriction of pay increments, early retirement or the encouraging of sabbaticals/unpaid leave, the termination of temporary contracts or retraining/redeployment

Another option could be flexible working, including home working, job sharing or term-time working for parents. A ‘banked hours’ or annualised hours scheme may also be useful in netting an immediate cashflow gain

All these possibilities must be discussed with staff to secure co-operation – a co-operative workforce will make implementing difficult changes much easier

Terms and conditions of employment are legally binding contracts, and cannot simply be altered without consent from the employee. If it is necessary to change T&Cs, seek specialist HR advice to avoid falling foul of employment law

If small numbers of staff are reluctant to accept changes, it may be necessary to first offer revised terms & conditions of employment, followed by serving notice if the staff are still not willing to accept changes

who can benefit from...

alternatives to redundancy?

Even if the company isn’t in financial difficulties, it may literally pay dividends to seek HR approaches to cashflow fluidity

Companies with large proportions of overtime to regular working hours may benefit from restructuring the overtime premiums that their employees earn

Companies with seasonal fluctuations of work could usefully look at an HR-based solution including a change of shift pattern, or annualised or banked hours of work

Companies with large numbers of working parents on its staff may find their employees appreciative of a move towards working hours or weeks that coincide with the school day or term

Companies whose salaries have not been benchmarked against industry norms may also find that their salaries are higher than average – and if there are financial difficulties on the horizon it may be useful to bring these into line with industry standards, perhaps including banding structures that reflect levels of responsibility

Companies with generous bonus schemes may also benefit from reviewing these in line with employee performance

Welcome to the PrintSpeak Printers' Survival Guide - helping you to ride out the recession

The pages of the printing trade press have recently read like a Domesday roll-call of print's great and formerly glorious. Who could have predicted the failure of Borcombe SP, Kelvin Print Group, Quebecor, Capital, Printhaus, Butler and Tanner, Celloglas and more? With margins on print lower than they've ever been, the current global economic crisis is magnifying the cracks in every print business model.

But for every bad news story, there are plenty of success stories. Here at PrintSpeak, we decided to pull together a weekly newsletter looking at printers who recently hit a sticky patch - and what pulled them through. We hope it will provide our readers with food for thought. A struggling business is not necessarily a failing one - and knowing who to call is half the battle. In the coming weeks we'll be looking at subjects including factoring, debt collection, credit management, VIAMBOs, cost rate reviewing, credit insurance, financial restructuring and more - building a library of business know-how and giving you the contacts and knowledge to ride out the recession.

Karen Charlesworth
Publisher, PrintSpeak
karen@printspeak.co.uk