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13 Smart Solutions for Employers to Avoid Redundancy

21/02/2023

The last part of 2022 was marked by skyrocketing layoffs across the tech world. Major headlines announcing Apple, Microsoft, Google, Uber, Stripe, Lyft, Opendoor, and many others sacking thousands of employees over the previous period have caused a great deal of worry. And it is not the end… Only a few days ago, News Corp, the parent company of Wall Street Journal and New York Post, made their plans to cut 1250 employees public, following Yahoo, Disney, Zoom, eBay, and others, who have also started the process of rationalization of expenses on the workforce.

As the trend continues into the new year’s shrinking economy, we see that not only the tech industry will suffer and we can expect this trend to spill over Europe, including Serbia.

Therefore, we have decided to let you know what you can do to cut down the cost of the workforce, and (potentially) avoid redundancy. Because one thing is certain – tough times never last but tough businesses do!

Why Should You Consider Alternatives to Redundancy?

The Labor Law (hereinafter: the Law) recognizes redundancy as one of the possible reasons for termination of employment. The very procedure of declaring redundant employees implies a series of obligations for employers and always carries with it a certain risk – the initiation of a dispute by an employee who has been declared redundant.

On the one hand, the procedure for determining the redundancy of employees is quite formalistic and complex. It should be approached with particular care, especially bearing in mind the high standard of protection that the courts have developed in judicial practice in favor of the employee. Of course, the very process of declaring redundancy most often entails large costs in the form of severance pay for employees whose employment agreements have been terminated in this way.

Finally, redundancy can lead to the fact that employees whose knowledge and skills are important for the company are “lost” or, at the very least, demotivated to continue doing good work, which is also a factor that should be taken into account.

Some of the alternatives we explained can help employers successfully continue their business while avoiding the layoff of a large number of employees. In addition to that employers should not lose sight of the time that was invested to train those employees, the loyalty that the employees showed to the employer or the expert personnel that are often not easy to find.

For these and numerous other reasons, employers are ready to find an adequate solution by which their work team will remain unchanged, and the company’s operations will continue with certain modifications.

Therefore, before deciding on redundancy, employers should consider other possibilities determined by law, which could help either in the eventual postponement of the technological redundancy procedure or in reducing its consequences.

What Can Employers Benefit From?

1. Temporarily Freeze Recruiting New Hires

If the company is facing the risk of redundancy, the first step is certainly to temporarily stop hiring new team members. Although new employees are an important resource, they entail large costs and require additional training time for them to be included in the work process itself. Therefore, consider retraining or redeploying existing staff to fill open positions instead of hiring new people.

If there is still a need for new labor, consider the option of hiring staff outside of the employment relationship.

2. Review the Existing Fixed-Term Employment Agreements

If there are employees within the company who have been hired due to an increase in the volume of work, consider whether there is still a reason for their employment, bearing in mind the risk of declaring redundant employees. Although these employees may have contributed greatly to the company when it was operating at full capacity and with an increased workload, now that the workload has decreased, the need for their work may have disappeared as well.

3. Unpaid Leave

In the age of expansion of the IT industry, some IT companies, as an additional benefit, began to introduce options for shorter unpaid leave for employees who expressed a desire for such a thing. In these circumstances, you can suggest that employees consider the possibility of a well-regulated and clearly defined period of unpaid leave. This option allows the company to achieve significant savings while allowing employees to devote themselves to private commitments during that period and not be bound by the number of vacation days. The law does not prescribe the right to unpaid leave in detail, so the introduction of this option is best defined through a general act.

4. Flexible Working Hours and Redistribution of Work Tasks

Another way for the company to achieve savings is to consider modifying the existing work organization at the employer. Thus, it is necessary to analyze how resources are spent, and which personnel at the employer contribute more and which contribute less to the overall business. Reduction of working hours or redistributing tasks, along with a proportional reduction in employees’ wages, would contribute to the achievement of a double goal:

– the business would continue to run to the extent necessary for its survival

– professional staff and loyal employees would not face the uncertainty of looking for a new job.

What are some of the options:

5. Maternity Leave, Childcare Leave, or Special Childcare Leave

Although the law prescribes the length of the leave, certain employees often decide to return to work before it expires. On the other hand, this type of leave allows employees to spend more time with their families, which is always an advantage for them and allows the employer to save costs, considering that the salary compensation falls on the state budget.

Maternity leave can start at the earliest 45 and necessarily 28 days before the time set for childbirth and it ends 3 months after the childbirth.

After the end of the maternity leave, the employee has the right to childcare leave, until the expiration of 365 days from the day the maternity leave started.

Also, it is good to know that the working father can also use these leaves if the mother is unable to use them for justified reasons.

In the case of the birth of the third and each following child, maternity leave and childcare leave lasts a total of 24 months.

The law also allows other types of leaves:

– Leave for the special care of a child with psychophysical disabilities

– Leave of a foster parent or guardian of a child younger than 3 months and/or 5 years old

Unlike the domestic legal system, UK law recognizes the so-called parental leave. A parent of a child under the age of 18 is entitled to up to 4 weeks of unpaid parental leave each year.

6. Consider Employee Perks

Before considering redundancy, employers should take a look at the costs of employee benefits. Although seemingly small, experience has shown that these costs, when viewed collectively, often represent a significant expense for the company.

– Team Building Activities

Organizing team building strengthens the bond and cooperation between team members, to increase productivity, motivation, and employee satisfaction. Although there are many benefits that team building can bring, there are also some situations where it is better to avoid them. Organizing team buildings can be expensive, especially if it is done outside the workplace and after working hours. If the company is already struggling to operate, the additional costs of team building can harm the company’s finances, so it is better to postpone it for the period when the company will be operating at full scale.

– Tax-Free Amounts on Payments

Employers have the option to reduce certain benefits, such as travel expenses or New Year presents to employees’ children, to a non-taxable amount. Thus, in 2023, the compensation for documented transportation costs for arriving and departing from work amounts to 5,017 dinars. Of course, employees would be obliged to provide the employer with evidence of their travel expenses.

– Bonuses

If the company’s survival is at stake, employers should also consider the expenses for jubilee awards and solidarity allowance. It is important to note that the Law does not oblige the employer to pay the jubilee award or solidarity allowance, but rather it depends on the employer. If, on the other hand, the employer wants to reward or help his employee, it is preferable to get acquainted with the non-taxable amount for these expenses beforehand.

– In-House Training

It is also desirable to consider the company’s expenses that are aimed at various seminars, courses, or workshops attended by employees. Of course, we should not lose sight of the fact that the Law prescribes that the employer is obliged to provide the employee with education, professional training, and improvement when the work process and the introduction of a new way and organization of work require it. Therefore, in all other cases, when additional training is optional, for the sake of company survival, training organized by colleagues who have already acquired knowledge in certain areas can be a good way to save resources.

7. Working From Home

The Coronavirus pandemic has taught us what it’s like to work from home, which during the pandemic and the state of emergency preserved the survival of many companies that had difficulty doing business during that period.

Working from home is a form of work in which employees perform their work tasks using technology and communication tools, such as the computer, the Internet, and the telephone, without having to appear at the workplace every day. This allows employees to work in the comfort of their home environment, which can help them achieve a better work-life balance.

Working from home is often used as an alternative to the traditional way of working, to reduce costs for employers, improve employee productivity and reduce stress. However, it is necessary to set rules and boundaries between work and private life, to ensure that the work is done efficiently and effectively.

If the majority of the business is done via computer and the Internet, employees could work from their homes. In this way, the employer saves costs that otherwise would have been spent on paying for office space and all related utilities.

8. Internal Reorientation of Employees to Other Work Positions

Internal reorientation (transfer) of employees in a company is a process in which the employer changes the tasks or duties of employees within the same company, without dismissing them. This can be useful in case of changes in business strategy, reorganization of the company, or reduction of the need for certain jobs. Internal reorientation can be beneficial for both parties, as it allows employees to develop new skills and work on other jobs within the company, while the company can optimize its resources and use the talents of employees in other jobs. It is important to note that the internal reorientation must be under legal regulations and work rules and always follow the professional qualification of the employees.

9. Temporarily Reduce Salaries

As the business of a company goes through numerous stages, a bear market can call into question its survival. In such situations, employees may be interested in the option of a temporary salary reduction of a certain percentage instead of the inevitable job loss. Of course, the emphasis is on the reduction is temporary, for the period the company needs to recover.

10. Salary Compensation During Interruption of Work or Reduction of the Work Volume

Instead of having difficulty continuing with the business despite the reduced volume of work, or terminating the business completely, the employer can offer the employees a leave of absence with compensation amounting to 60% of the average salary in the last 12 months. The salary compensation must not be lower than the minimum wage defined by law, and the absence of an employee can last up to 45 working days during the calendar year, only exceptionally can it be longer than that, with the consent of the competent Ministry. This employer right, however, can be used with great care and employers must approach this option with caution.

11. Early Retirement

By retiring, an employee secures a safe monthly “income”, while otherwise, after a long time, they would find themselves once more on the labor market, faced with the problems of finding a new job, often with outdated knowledge and skills compared to those that are in demand today.

This redundancy alternative is suitable for older employees because they often have a harder time finding employment and are often victims of the so-called. age discrimination.

However, the disadvantage of early retirement is that the amount of the pension is permanently reduced by 0.34% for each month before the age of 65 (for men) or 63 years and six months of age (for women) in 2023.

12. Tax Incentives

The right to a refund belongs to the employer – a legal entity, an entrepreneur, a lump-sum entrepreneur, or an agricultural entrepreneur who hires new workers. This right consists of the refund of a part of the paid tax and a part of the paid contributions based on the salary paid as of December 31, 2023. Tax incentives have proven to be a good means of saving companies’ costs and are one of the benefits that employers should consider.

13. Subsidies

If employers need manpower, the solution can be found through subsidies for deficit occupations, subsidies for the creation of new jobs, or subsidies for the employment of more difficult employable persons.

The subsidy is granted to employers, in a one-time amount, to employ unemployed persons registered in the records of the National Employment Service from the category of difficult employable persons based on the Public Call.

Subsidies are granted to employers and for the opening of new job positions in a one-time amount per one open job, and the funds are provided for persons who are employed in the newly opened jobs, who are also the ultimate beneficiaries of the subsidies.

For example, the Autonomous Province of Vojvodina had the practice of publishing a Public Call for the awarding of subsidies for the employment of unemployed persons whose occupations fall into the category of deficit occupations according to the data of the National Employment Service.

These are just some of the options that employers will want to negotiate with their employees. With their combination, the business gets a better chance of “surviving”, while on the other hand, the dismissal of a large number of employees, which would inevitably cause large expenses, is avoided.

This is an excellent opportunity for employers to proactively approach the bear market and be prepared for all possible challenges and surprises.

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