Top tips for employers – planning for a recession

With the Reserve Bank Governor announcing a deliberately engineered recession to bring down inflation, all businesses need to prepare for challenging economic times. DTI Lawyers specialist employment law team have summarised strategies for smart employers to mitigate the impact on their business:   

Communicate with your people.   

• Retaining valuable employees through strategies for personal connection and ensuring staff know they are valued should be a priority. If you haven’t maintained effective communication channels since Covid-19 lockdowns, reinstate these. Regular and effective communication with employees is consistent with your good faith obligations, but also helps create employee confidence, trust and engagement in the business. Employees should be able to trust that you will keep them informed of changes that may affect them and be able to provide feedback for the business about how these could be addressed. Be honest. Don’t say everything is fine if it isn’t. Don’t make guarantees that can’t be kept. 

Be proactive and plan ahead. 

• Conduct an internal audit making sure all employment compliance is up to date. Review employment agreements. Ensure that all employees have clear, current written terms of employment.   
• Review compliance with wages and leave obligations. Ensure staff have been paid accurately. 
• Review leave liability. Manage high leave balances, particularly over the summer months, where public holidays can enable long weekends to be more readily encouraged and planned for. If an employee leaves, or is made redundant, a high leave balance is an additional cost for the business to manage at a stressful time. There are different ways that annual leave can be managed in the short to longer term, depending on the scale and impact of leave to your business. Remember that the purpose of annual holidays is to enable employees the opportunity to rest and relax, leaving them refreshed when they return to your workplace. Taking leave is important, particularly in sectors where stress and burnout has been identified as a risk.
• Deal with performance and disciplinary issues now. The past year has been an employees’ market, with the pressure on attracting and retaining staff resulting in many employers overlooking poor performance and conduct. In tough times, the impact of this on business can’t be overlooked. Re-setting expectations early is important for any subsequent disciplinary or performance management to be justified, and to support good workplace culture. It’s reasonable to hold employees to account for behaviour and productivity, provided this is done fairly, and in good faith.   
• Adopt a culture of continuous improvement. Review training plans and budgets for the coming year. Consider whether internal training has been maximised and whether staff are cross-trained to be equipped and effective for varied aspects of your business.   
• Review recruitment plans. Consider whether natural attrition of staff can be used to minimise recruitment costs through the efficient use of existing staff. Consider whether existing vacancies can be filled internally. Raise the bar when hiring. Complete all pre-employment checks to ensure that those joining your team will be qualified, add value and not bring unwanted conduct, culture or performance issues with them. 
• Review overtime costs and how work can be undertaken more efficiently. Consider using casual employees to provide flexibility for short periods of high volume work, rather than hiring permanent staff. 

Engage with staff. 

• Consider working arrangements and invite proposals from staff around flexible options, where possible. These may be reduced hour roles (for example, working school hours or reduced days). Christmas/New Year is often a time for reflection. For some employees, considering alternative ways of working may be an attractive way to start the new year. [1] 
• Recognise and reward staff fairly. Gratitude and acknowledgement for a job well done can pay off in improved productivity, loyalty and morale. 
• Take care of staff wellbeing. While payroll is a significant business expense, your people are critical to the success of your business. Where there may be an impact on staff, consider how this can be mitigated or minimised. Now is not the time to reduce support for staff wellbeing. Remember your people are also feeling the economic crunch in their personal lives. Where there are budget or pay reviews, consider whether cost of living adjustments can be made, or whether staff can be connected with qualified advisors around financial matters and wellbeing services, including Employee Assistance Programmes (EAP).[2]  

Reduce and manage costs. Reviewing office expenses and more assertively managing cashflow can help businesses navigate economic difficulty. Consider suppliers and your business relationships. Where can costs be reduced without compromising the quality of products and services, and your key business relationships? Consider what can be automated to drive internal efficiencies. 

Get the law right. 

• Do not unilaterally vary terms of employment. Any restructure or change to employee terms must only be undertaken following consultation, and should be carefully documented. Restructuring to streamline efficiencies in how the business is operating should not be a knee jerk reaction, but be well considered to ensure the business case can be substantively justified and the process followed is fair. We recommend employers seek advice from the DTI Lawyers specialist employment law team to minimise the risk that proposed changes create liability.  
• Terms of Trade. If you don’t have written terms of trade in your business, now is the time to put these in place. These contracts maximise the prospects of being paid in full and on time, so that you can manage cashflow in your own business. [3[

Planning for challenging economic times is an opportunity to assess your business. While it may be stressful for business owners, it’s also important to consider what you can do to support staff, who likewise, will be expecting to go through tough financial times.   

The specialist employment lawyers at DTI Lawyers have helped many businesses across all sectors and work types navigate through challenging times, including the Global Financial Crisis and Covid-19. We will keep you up to date with insights to ensure that you and your business are best placed well beyond the anticipated economic downturn. For advice, contact our specialist team at 07 282 0174 or by email on [email protected]