HR clinic: You can't survive without staff

Should we make redundancies to balance the books?

Your grant from the council has been cut, but the local authority has suggested that you tender to continue providing services on a contractual basis. This has left your director of finance urging your organisation to make redundancies in order to make ends meet.

No doubt the council wants to get better value for money, but it seems likely that would occur at the cost of your infrastructure. You need to explain to the local authority the problems the change of approach is creating for you and seek to secure some transitional arrangements that would ultimately lead to contracts based on full cost recovery.

Your finance director is right to be prudent, but redundancies should be the last thing you consider, not the first. It would be far better to fundraise, consider restructuring the services that you provide, rely on staff turnover or cut back on non-salary costs before you start losing your most valuable asset - the staff who deliver the service. That should buy you some time for negotiations with the council.

If none of that works, or it doesn't work well enough, then you might have to consider making redundancies. However, you could well end up in the peculiar situation of having to do the same amount of work but with less money. Cutting back on staff would reduce your earning potential and could ultimately lead to even less income. So be careful. You might finish up in the position of finding the service completely unviable. In that case, you might then be forced to close down, and that would be a far more drastic outcome than you expected.

If you are going to make redundancies, you should be completely open with staff. Tell them your reasons. Invite their suggestions for avoiding redundancies or for mitigating their effect. Offer alternative employment within the organisation, for example. Also, ask if anyone is prepared to take voluntary redundancy and what kind of pay-off they would expect.

You might not be able to agree to everything your staff would like to see, but accommodate employees' wishes as far as you can - particularly over the calculation of redundancy lump sums. After all, it's not their fault the council is reducing grant funding - and, if the service does end up going down the pan, its loyal staff should at least benefit to a limited extent.

- John Burnell is director of Personnel Solutions

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