Opinion: What the experts think of the CBI’s Alternatives to Redundancy proposal

The CBI has called on the government to implement an Alternative to Redundancy (ATR) scheme “as soon as possible”.

Under the scheme firms could place an employee on ATR for up to six months, during which time they would not work, and would be paid an allowance equal to twice the rate of Job Seekers Allowance – half paid by the government, and half by the employer. But is this the solution to the rising tide of redundancies? Or just a way of pushing people out the door on the cheap?

Michael Thompson, partner HR practice group, Eversheds

Employers await clarification about how the Alternative to Redundancy (ATR) scheme would work in practice. Any new legislation must ensure that the ATR payments reach the employees and that jobs are saved for the long term. New legislation must also address how an employee’s weekly pay will be calculated for the purposes of a redundancy payment following an ATR period. If subsequent redundancy payments are based on the lower weekly pay while on ATR, as opposed to weekly pay before the ATR period, employees may resist the scheme for fear of losing out in subsequent redundancy payments.

Rebecca Jobling, associate, Lewis Silkin

The proposal does not sit easily with a range of current legislation and seems potentially unworkable in practice. While the ATR scheme does accommodate a consultation process, it seems to envisage there will be no time for ‘lengthy debate’. However, employers will need to ensure they consult properly with employees, otherwise they will be exposed to the significant risk of protective awards for failure to consult. In terms of the length of consultation, any legislative changes will need to satisfy the requirements of the European Collective Redundancies Directives and the timescales it provides for consultation. Potentially this scheme could be accommodated as one alternative to redundancy during a consultation process.

Brendan Barber, TUC general secretary 

We have concerns about how the proposals would interact with the statutory 90-day consultation period over redundancies. We are also concerned about staff having to take a sharp drop in income and not being able to train while on the CBI’s scheme. It is far better for both the employers and their staff to keep people working or training, even at reduced hours, than expecting staff to sit at home. If income was reduced to the levels proposed by the CBI, it is unlikely that many employees could afford to wait six months for their income to return to its previous level. This would reduce the likelihood of employers retaining workers.

Ruth Spellman, chief executive, Chartered Management Institute (CMI)

This scheme would cost the government no new money and would enable employers to invest in the skills they know they will need, as soon as the upturn comes. We have a growing unemployment problem sitting alongside skills shortages. The CMI is concerned to help employers address this issue in ways that do not result in more cost or regulation. Our research shows that 85% of managers strongly favour tax breaks on training as a vehicle to stimulate productivity and skills development.It is, after all, the employer that is best placed to identify who needs up-skilling, re-skilling or redeployment.

Regardless of whether you agree or disagree with the proposed Alternative to Redundancy (ATR) scheme, one thing is certain: redundancy is a growth market in the UK. Here’s why:

  • There were a total of 286,000 redundancies in the first quarter of 2009 – an increase of 175,000 from Q1 2008. In percentage terms, this is an increase of 157.6% within a year.
  • There were also 27,000 more redundancies compared to the last quarter of 2008 – an increase of 10.3%.
  • The construction industry has been hit hardest, with 32.8 employees per 1,000 made redundant in the first quarter of 2009 – an increase of 21.8% from Q1 2008.
  • Manufacturing is next with 21.1 employees per 1,000 made redundant in the first quarter of 2009 – a rise of 12.7% on Q1 2008.
  • In percentage terms, the 16-24 age group has been hit hardest with 12.7% more made redundant than in the first quarter of 2008. However, the 25-34 age group has struggled most to find re-employment, with 20% fewer people finding a job post-redundancy.

Source: ONS

Alternatives to redundancy

Q Is the CBI’s scheme a good idea?

Tony Burke, Assistant general secretary, Unite

When these proposals came out I told Print Week that I thought they were somewhat half-baked. What they’re saying is, pay people to stay at home. We’d sooner have people at work and using the timewhen production is down or where they would have been laid-off to train, to allow people to upgrade and up-skill. Once you start laying people off you start breaking up a skilled workforce, and that’s the last thing we need at the moment.

Toby Peyton-Jones, UK HR director, Siemens

This is just one idea among a number of different proposals that we should be looking at. And on that basis, it is welcome. But in isolation it is limited, and a lot of homework has to be done.

There is clearly potential for this to be manipulated by either employees or the employer, and that should be carefully guarded against.

Q The CBI’s scheme is effectively suggesting that people be put in a half-way house between redundancy and working so they can re-train and re-skill while their employer is given some breathing space to organise itself. Is this the solution to the nation’s woes?

Burke What we need is a clear policy from the government. Unite has been campaigning for support in the form of a short-time working subsidy. It happens right throughout Europe. It happens in Germany, it’s happening in France. We are the only ones – it seems to me – who haven’t got that sort of policy in place.

Peyton-Jones Sadly, the end result will be that some people will still have to be made redundant. You can’t mitigate against that. In lots of ways this gives the company the opportunity to be more selective about who they might retain. In the end that’s good for the organisation and the individual as people can see there is support to help them move on to another role. It gives everybody the chance to sort their lives out.

Q Should we be looking for fresh ideas from other parts of the world?

Burke Rather than laying people off, other European countries are turning to short-time working, and during that time employees are getting a subsidy from the government. Don’t forget that when you lay people off you have got to pay them unemployment benefit, so wouldn’t it be better to keep people in employment all the time?

Peyton-Jones In Germany they have a way of dealing with redundancy where people effectively go into a holding company so retraining and outsourcing can happen. That is part of their landscape and is a great advantage as both the employer and the employees can use the time for re-skilling and retraining. Something like this would give us much more breathing space to sort out redeployment opportunities.

Q In many ways the scheme relies on trust, as employees will have to give up some of their employment rights to enter into the half-way house situation. Is that something you could ever agree with?

Burke Not really. The reality is that the CBI is asking people to give up hard-won employment rights and take a chance that a company pulls through, with no guarantee that there will still be a job for them, and if it fails, their redundancy money could be reduced.

Peyton-Jones Every employee would look at this as a balance of risk. It is proposed as a risk-sharing tool, and therefore it is very important it is entered into in the right spirit – that this is a genuine attempt by the employer and the employee to share the risk to build to a brighter future. It could be very useful.”

Q Would it help if such schemes were introduced with the backing of some legislation?

Burke It still wouldn’t be workable, even with legislation to back it up. The reason being that you have got some employers that would immediately try to exploit it. Not all of them, as there are good employers out there. But there are some people who would try to utilise the legislation in their favour and find a way around the CBI’s proposals.

Peyton-Jones Neither the employee nor the employer should go into this just as a way to mitigate a particular risk. It has to be guarded against, so the devil will be in the detail. Companies will want legislation to protect themselves so that employees cannot challenge them on grounds of unfair dismissal. But on the other hand, you don’t want legislation that makes it too difficult for employees to enter into the scheme, either.

Q Is there a need for fresh thinking about how redundancy is handled?

Burke Yes. The government redundancy scheme has got to be improved and we are supporting Lindsay Hoyle’s Bill in Parliament on that. What we really need is for the government to come in with some firm policies like the short-time working subsidy and the use of Train to Gain money for training rather than laying people off, so our skilled workforce is kept together and isn’t split up.

Peyton-Jones It is very often a crisis that brings out much needed innovation, and this recession is pretty unpleasant. The upside of it is that we are all looking at how to address a more flexible working arrangement where we can sustain jobs and meet an increasing wish on behalf of employees to have more flexibility on their own behalf. Broadly, we are going to have to find a more cost-effective way of avoiding having to make people redundant and re-recruiting. And having some more flexibility in our working arrangements will help that.

Other cbi wheezes

Alongside the Alternative to Redundancy scheme, the CBI has proposed a series of other measures to help businesses cope with the recession.

These include a government review of the length of consultation for redundancies to check if the laws are working as intended or whether the 90-day period simply prolongs uncertainty and causes delays, and a deferral of the 2011 rise in employer National Insurance contributions as it represents a further tax on employment at the wrong time. A change in legislation to tackle the lodging of employment tribunal claims under multiple headings is also proposed.

The CBI wants all future legislation to be tested on the ground of how it will help create sustainable jobs.

Other proposals include:

  • A raising of skills levels to cope with the increasing demand for science, technology, engineering and maths (STEM) skills in the coming decade.
  • More support for apprenticeships and a closer relationship between employers, colleges and universities to improve workforce skills.
  • Improvement in the way that Jobcentre Plus matches jobs to a candidates’ abilities.
  • Increased government help for 16-18 year-olds, who are being hit particularly hard by the recession and increasingly likely not to be in education, employment or training.

Source: CBI

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