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Alternatives to Redundancy

Published 01 Jun 2009

As an alternative to redundancy an employer can agree with an employee to the variation of the employee's terms and conditions of employment. These can take a variety of forms. For example — changes to:
  • hours of work;
  • wages and/or
  • duties.
Most employment agreements do not provide sufficient flexibility for employers to alter terms and conditions of employment without agreement. Therefore it is necessary first to ascertain whether a change can be made following consultation or whether agreement is required. The rule that one party cannot unilaterally alter an employment agreement without the consent of the other party is well established.

Options for varying terms and conditions of employment include:
  • Varying Pay. — The rate of pay will be a contractual entitlement. Any reduction in salary, commissions, bonus or contractual superannuation arrangements will usually require the employee's consent. Timeframes for the variation should be considered and agreed upfront. Is the change to be permanent? For a specified period of time (for example, 12 months)?
  • Wage Freezes. — The carrying out of a wage freeze needs to be carefully worked through. Employment agreements should be reviewed to determine whether the business is required to review salaries (albeit that no increase is guaranteed) or whether a firm wide announcement as to salary freezes (without an individual review process) is possible.
  • Reducing Hours of Work. — This can include a reduction in the number of hours worked each day/shift or a reduction in the number of hours worked each week;
  • Reducing Discretionary Benefits. — Such discretionary benefits are provided to employees notwithstanding that there is no contractual obligation to do so.
  • Unpaid Leave — This allows the business to decrease staffing levels on a temporary basis without making redundancies.
  • Varying Duties — Job sharing arrangements and redeployment can be used to avoid redundancies.
  • Requiring Employees to Take Annual Holidays — Less a cost-saving measure than a method of managing future cost, another option available to employers is to encourage employees to take annual holidays to reduce accrued leave balances. Under the Holidays Act 2003, an employer and employee should first consult about when annual holidays will be taken. If agreement is not possible an employer may require an employee to take annual holidays on at least 14 days notice.
  • Offering early retirement.
  • The nine-day fortnight.
  • Retraining and redeployment.
  • Reduce overtime.
  • Freeze on recruitment by not replacing departing staff.
  • Unionised Work Forces. — While all of the above relates to both unionised and non-unionised employees, any changes to unionised workers' conditions can only be negotiated with the relevant unions in terms of the appropriate collective agreement.

To vary your Employment Agreements you must use a Letter of Variation. Employer Support Package members please see the Library section of the Employers Toolbox online for this variation letter, others maypurchase this online.

The letter of variation is also included in our 4 Employment Agreements Package