Downturn triggers debate over ways to cut staff costs

After a 35-year hiatus, the three-day week is back in vogue at UK businesses, according to data released last week by the Chartered Institute of Personnel and Development.

CIPD’s Redundancy Watch reports that as the UK hits recession, employers are looking at strategies to cut staff costs without making redundancies. The research shows that more than half of employers are hanging on to their workforce by introducing recruitment freezes, while 17 per cent are cutting bonuses, 19 per cent are introducing flexible working and 7 per cent have implemented wage cuts.

‘Making redundancies is a dangerous game,’ explains Alain Cohen, director of employment solicitor Ashby Cohen. ‘Businesses can end up losing really good people, particularly when making voluntary redundancies.’

Ian Cochrane, managing director of management consultancy Ticegroup,agrees that using a three-day week can streamline a business. ‘What took someone five days may easily be done in three, and realising this can make a consultancy more efficient and benefit the client,’ he says. He warns though that this measure should only be applied to backroom staff.

‘Clients don’t understand you’re not going to be there on Friday, so anyone client-facing, including the receptionist, must be in full-time,’ he explains.

At broadcast graphics consultancy Kemistry, which employs nine full-time staff, managing director Omar Honigh dismisses the idea of a three-day week. ‘There would be no continuity and it would make it logistically very difficult to co-ordinate with each other and with clients,’ he says.

Honigh is also suspicious of cutting wages. ‘If you have good people, you should be able to sell them to clients well,’ he claims. ‘Otherwise, you are not doing your job.’

In its efforts to save money on staff, Kemistry has reluctantly suspended its student training programme, which benefited up to three students or graduates a year, paying them ‘a decent wage’. Cochrane agrees that graduates are in a particularly precarious position as consultancies tighten their belts. He says, ‘Students should get out of this business. It is inundated with graduates and there simply aren’t the jobs, especially at this time.’

Backing the argument in favour of redundancy, Cochrane points out that the clean break a redundancy offers is psychologically more attractive than making small cuts here and there.

‘I would sooner get rid of 20 per cent of my workforce and keep the other 80 per cent motivated and on full pay. Get rid of those who aren’t pulling their weight and make the rest of your workforce busy,’ he says.

In terms of employment law, redundancy can also be the more straightforward choice, according to Cohen.

‘You cannot unilaterally lower someone’s salary, and you cannot just change the terms and conditions of an employee’s contract, as they could claim constructive dismissal. If you are making wage cuts, usually everyone has to agree to it. If half your staff agree and half don’t, you will be forced to make the redundancies you were trying to avoid. Then there is the added danger that you will make redundancies from the half who said no to the wage cut,’ he warns.

Michael Peters, design industry veteran, survivor of three previous recessions and founder of Michael Peters & Partners, welcomes the changes that the downturn could bring, viewing it as a chance to cull sub-standard designers. ‘There should be a sea change in the way we structure payment, so that it is results- and performance-based. The days of guaranteed salaries should be numbered.’

The view from 1974
From 7 January until 7 March 1974, millions of British workers were put on to a three-day week to conserve electricity. One of these was Oval Books art director, and former art editor of IPC’s Mother magazine, Vicki Towers. She says, ‘I enjoyed the three-day week. It was different, exciting and there was an unusual sense of camaraderie. I used to catch the bus home along London’s Oxford Street, where all the shops were still trading, lit by candles, which was lovely. But what made it OK for us was that we were still getting paid the full whack – the unions would never have let IPC cut our wages.’