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PUBLISHED: 17:13 07 September 2012 | UPDATED: 21:50 20 February 2013



When business needs dictate that a business must lose staff, often the cost of redundancies themselves are prohibitive for a company struggling with cash flow. Seems like a catch 22.


When business needs dictate that a business must lose staff, often the cost of redundancies themselves are prohibitive for a company struggling with cash flow. Seems like a catch 22. It must be said that banks can be sympathetic to loaning to cover the cost of redundancy but it is by no means guaranteed. We have all heard the horror stories of banks withdrawing funding when approached to finance a redundancy programme, and before any bankers out there write and tell me it isnt so, I have heard this from clients numerous times.

Sadly, once in this position there is little that can be done and often this is so unnecessary. There are often alternative means of finance and in the Cotswolds we are fortunate to have a number of wealthy individuals open to acting as dragons for good businesses when in difficulty. There are however other ways this can be dealt with by means of forward thinking.

For example, lay off clauses in the contract of employment are becoming more common, although not as common as they were back in the 70s. By this I mean a clause in the employment contract which allows the employer to send employees home without pay for a finite period. If such a clause exists in the contract, then an employer wishing to reduce the wage bill in the short term could, for example, send home 3 workers for 2 weeks at a time on rotation. If you have a workforce of, say, 15 this would allow you to take out three full time wages for 10 weeks. This is sometimes all that is needed.

If you have to make redundancies, pick those with the lowest redundancy entitlement (among other things). Many MDs are under the impression that you cant legally do this because of age discrimination but that is simply not the case, it is perfectly acceptable to consider the cost of making individuals redundant when choosing who should go.

What you cannot do is forceably retire people.

Best advice on this is to get a lay off clause in the contract before the need to use it arises. Most staff understand the climate we are in and accept that measures designed to save their own jobs are a good thing. (There will always be exceptions). You might be glad you did.


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