Is reducing staff benefits a sensible way to reduce costs during difficult financial times?
Well, it can be but you need to follow some sensible processes to make sure it doesn’t itself become a huge cost reaping no benefits whatsoever. Your first step is to determine whether the benefits you intend to reduce are a contractual benefit and if so, whether there are provisions in the terms of the contract to allow flexibility. The most likely scenario is that the benefits are contractual obligations. This being the case you will need to agree the changes you intend to make with each employee before you can make them.
What if they don’t agree?
The alternative is termination of the employee’s contract which of course entails the risk of unfair dismissal claims. To avoid or at least drastically reduce this risk you must ensure you follow a fair process – this also provides further potential for you to reach an agreement with affected employees.
What is a fair process?
This will depend on the number of employees affected by the change. Dismissals resulting from refusal to contractual changes will be regarded as redundancy dismissals (for consultation but not pay entitlement purposes). Therefore, if 20 or more employees are affected you will be subject to redundancy consultation obligations. This means that non-compliance holds the risk of costly protective award liabilities. The aim of the consultation however is not just to avoid legal hassles or fines but to genuinely consult with your employees. You should explain to those who might be affected, the reasons that you would like to make the changes – they might be understanding. Ensure that you are as understanding as you can be too and be flexible where possible. For instance they might accept a change but suggest viable alternatives to those you are proposing.
They might not accept your proposed changes or viable alternatives and in cases where there is general or majority disagreement you would be well advised to take a step back to consider how appropriate and helpful it would be for you to continue to pursue this course of action. Other cost saving options centre around who provides your benefits and in what way, and include rebroking, salary sacrifice schemes and offering flexible benefits.
If what you are proposing is fair and you have good reasons to make the changes it is likely that the majority of your employees will agree to them. Where there are disagreements leading to dismissal there is always the risk of a claim for unfair dismissal but in such cases employment tribunals will recognise the reason for dismissal being within the definition of "some other substantial reason". The agreement of the majority should also influence their decision. making it more likely that they’ll rule in your favour.
If you would like further advice on changing contractual benefits or cost saving alternatives contact Campbell on 01494 451 681 or
Campbell@hradvantage.co.uk.
