With major social media platforms recently announcing highly-publicised cuts in staffing, many businesses are wondering if this could be their answer to rising costs.
As businesses continue to deal with the impact of the recent increases in inflation and interest rates, many are looking to reduce their workforce in the hopes of beating the squeeze. Other contributing factors like soaring energy costs, supply issues, and materials price hikes are also forcing employers to look at streamlining staffing budgets to off-set their outgoings.
Earlier this year, data from the Office for National Statistics showed the number of redundancies planned by businesses had increased by a staggering 103% for 2022 – from 8,869 in January to 18,043 in February, alone.
Acas’ YouGov survey of more than 1,000 employers found that nearly one in five (18%) employers are considering making staff redundancies over the next year (up to March 2023) and that businesses with more than 250 people are more likely to make redundancies than small and medium sized (SME) businesses.
So, does the current economic situation provide legal justification for such large-scale redundancies?
Facebook owner Meta is cutting 11,000 jobs due to a downturn in revenue, with the chief executive saying Facebook is overstaffed and “inefficient”. Following Elon Musk’s acquisition of Twitter, as many as 3,700 redundancies are expected worldwide.
In the UK, employers are required to launch consultation if planning more than 20 redundancies. Business secretary, Grant Shapps, has written to Twitter to ensure it is complying with UK law when dealing with its British staff, stating he is seeking “reassurance that they will be following all relevant statutory requirements”
Usually, a business’s reason for making employees redundant would be because of closures (partial or certain sites, or the company folding altogether) or diminished need for certain duties or roles. Legally, if an employer wishes to reduce their headcount due to the increased cost of living, they will have to demonstrate a correlating reduction in the requirement for a certain kind of work.
For example, where a business is looking to save, it may, combine two roles into one and dispense with, for instance, a management post, which is then absorbed. Employers do not need to evidence that profit or demand is reduced, just that the reason for dismissal is legitimately because there is a reduced requirement.
With consumer demand on the wane and many businesses adapting to cope with less income and increased expenditure, it seems that the cost-of-living crisis is likely to provide legal justification for most employers when considering making redundancies. However, hopefully employers remember that redundancies should only ever be a last resort and any arising tribunals will expect decision-makers to show that they have considered all reasonable alternatives. In addition, consultation legalities required to ensure a fair redundancy process also need to be considered and adhered to by any business thinking about reducing staff numbers.
Hear more on redundancies and how to deal with them in our podcasts:
What to do in the aftermath of the dreaded restructure announcement
Know your legal rights