| | Companies must manage
their people with
greater flexibility in
order to sustain their
business strategy in
adverse market
conditions, according to
PricewaterhouseCoopers.
And with a wave of
negative economic news
over the last 12 months,
employment costs – which
include pay, employee
benefits, national
insurance contributions
and administration –
require close scrutiny.
Debra De’Ath,
director at PwC,
comments: “Reducing
headcount can be a
knee-jerk reaction to
difficult trading
pressures but
organisations need to
remember making
redundancies can prove
costly, both in terms of
payments in lieu of
notice and recruiting
new staff in an upturn.
Companies in all sectors
could benefit from
thinking creatively
about how they reward
and deploy their
employees as
alternatives to
redundancies.”
Alternatives to
reducing headcount
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There are a number of
potential alternatives
to making employee
redundancies. Businesses
can consider introducing
flexible working, job
share arrangements or
reduced hours. Other
options include
seconding staff to
charities or clients, or
encouraging employees to
take career breaks.
“In a difficult job
market, some people
would rather keep their
job under a different
arrangement, such as
with reduced hours,
rather than be
unemployed,” says
De’Ath. “Strategies like
this also mean that when
the market picks up it
is easier, cheaper and
quicker for companies to
react,” she adds.
Employment costs
and remuneration
planning
Employment costs can
account for up to
two-thirds of business
costs and, in times of
market uncertainty, it
is not surprising that
CEOs put pressure on
their HR and finance
functions to manage
these costs closely.
Tactics for bringing | |
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| | costs under control
range from improving
expense management to
assessing bonus and
commission arrangements.
Reviewing recruitment
policies and processes,
together with assessing
the use of contractors,
can also bring cost
benefits.
De’Ath comments:
“Employers and employees
alike can benefit from
cost-effective
remuneration planning.
In practice, this might
mean introducing
flexible remuneration
and benefit plans or
offering salary
sacrifice options.
Simple changes at no or
low costs can result in
significant financial
savings for employers
and enhanced benefits to
employees.”
Below are some
examples of how
companies can improve
their cash flow by
managing their
employment costs more
effectively:
Employee share
plan deductions
These are easily
missed as the
legislation (Schedule 23
Finance Act 2003) is | |
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| | still relatively new and
can apply to many
companies, especially
private companies where
options are only
exercised on a change in
control, and therefore
they have not previously
been in a position to
claim. Entrepreneurs who
are thinking of selling
a company or business
could increase the sale
price by looking more
closely at their
employee plans and/or
employee benefit trust
shareholdings to make
sure this tax benefit is
factored in.
Salary sacrifice
arrangements
Salary sacrifice
arrangements can help
employers save on
employment costs without
reducing the number of
their employees. They
may be used to structure
the provision of, for
example, pension plans,
childcare, mobile
phones, accommodation,
travel, car parking,
staff
restaurant/canteens and
company cars. Managed
well, they can be cost
and time effective ways
of providing benefits to
employees yet still | |
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| | fully compliant from a
tax, employment and
consumer law
perspective.
Reducing
workforce
If reducing the size
of the workforce becomes
a necessity, there have
been a number of changes
in the law since the
last economic slowdown
which companies must
consider. For example,
the business rationale
that causes redundancies
has been brought firmly
into the consultation
process by recent case
law; HM Revenue &
Customs’ (HMRC)
interpretation of when
payments in lieu of
notice (PILON) should be
made is continuously
changing; age
discrimination laws
affect selection
processes and the
legality of redundancy
payments; and there have
been several court
challenges to incentive
plans under restraint of
trade and age
discrimination laws.
Companies can save
significant sums with
the right combination of
tax and legal support. | |
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