EMPLOYMENT LAW UPDATE – WHAT SMALL BUSINESSES NEED TO KNOW AMIDST RISING COSTS ...
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EMPLOYMENT LAW UPDATE – WHAT SMALL BUSINESSES NEED TO KNOW AMIDST RISING COSTS ...
With the Labour government ’ s new reforms increasing employer National Insurance contributions and raising the minimum wage , many small business owners are assessing their budgets and evaluating ways to manage these higher costs . For some , this may mean difficult decisions about workforce reduction . Understanding the current employment laws around redundancies , terminations , and employee rights is crucial for small business owners navigating these changes .
When Reductions Become Necessary : The Basics of Redundancy Law
If rising expenses make workforce reduction unavoidable , it ’ s important to handle redundancies carefully to stay compliant with employment laws and maintain fairness for affected employees . Redundancy is a form of dismissal that occurs when an employer needs to reduce their workforce , often due to financial pressures , restructuring , or changes in business demand .
In the UK , employers must have a genuine business reason for redundancy and follow a fair process to avoid unfair dismissal claims . This process includes selecting employees fairly , following consultation rules , and providing any eligible redundancy payments . Redundancy should always be the last option and should be handled with sensitivity , especially when dealing with loyal employees who may be adversely affected by the economic changes .
Key Legal Steps in the Redundancy Process
1 . Consultation and Notification : UK law requires consultation with employees when making redundancies . This can be an individual consultation , but if you are considering 20 or more redundancies , a collective consultation is mandatory , requiring engagement with employee representatives . Providing notice is also critical , with notice periods depending on an employee ’ s length of service .
2 . Fair Selection : Employers must use a fair and transparent method for selecting employees for redundancy . Criteria may include skills , experience , and performance , but it must avoid any form of discrimination . A poorly handled selection process can lead to claims of unfair dismissal .
3 . Notice and Pay : Redundant employees are legally entitled to a notice period , which depends on their duration of employment . Statutory redundancy pay is also required for employees with at least two years of continuous service . For those who qualify , this compensation is calculated based on age , weekly pay , and years of service .
4 . Alternative Employment : Before finalising redundancies , employers should explore whether suitable alternative roles are available within the organisation . Offering alternative employment can show a willingness to retain staff wherever possible and may mitigate the impact on morale .
Handling Reduced Hours and Temporary Layoffs
If permanent redundancies are not necessary , businesses might consider other options , such as reducing hours or implementing temporary layoffs . Employment law permits reduced hours or temporary layoffs only when these terms are explicitly included in the employment contract . Consulting with employees and reaching agreements on reduced hours or temporary layoffs is vital to prevent potential disputes .
Alisha Butler from Phoenix Solicitors commented “ The recent Labour government changes present both challenges and opportunities , and business owners may need to reassess staffing needs . By understanding and following employment laws around redundancy and reduced hours , businesses can make adjustments fairly and compliantly . As we adapt to this evolving economic environment , clear communication with employees and transparent decision-making can ensure that businesses continue to operate sustainably while maintaining positive relationships with their workforce ”.
Navigating these changes can be challenging , but knowing your legal obligations and options will make the path forward clearer .
If you need to speak to someone about ensuring your processes are correct , we have dedicated team members who can assist .
Email : ab @ phoenixlegalsolicitors . co . uk
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