Don’t make job cuts the first option in a financial crisis
IN uncertain economic times, there is one area that businesses often turn to when thinking of making savings.
But leading insolvency expert Deborah Lockwood says that redundancy is not always the way to weather a financial storm.
And as companies begin to assess the damage caused by the Covid-19 pandemic, she is urging them not to assume that job cuts alone will provide a solution to commercial woes.
“As the government’s furlough scheme begins to wind down and other financial support start to withdraw, businesses will have to start thinking about how they will proceed if they want a secure future,” said Deborah, a partner in Sheffield insolvency and recovery practice Graywoods.
“It’s inevitable that businesses will say that in order to survive they will need to cut costs but they should stop and ask themselves if redundancies are really the answer.
“Look at a wage bill for a full year and it might initially seem like a lot of money to be paying out but when you break those figures down over 52 weeks, the saving might not seem so big after all.
“And by going down the redundancy route you are most probably be going to cut one of your company’s best assets and the thing that helped to create the success in the first place.”
In some areas, Deborah added, it seemed almost inevitable that redundancy would be the only possible route.
“If, for example, you are in the events sector, there seems to be little chance of any return to full operational success in the short term ans reduction in staff will be the only sensible option,” she said.
“But in many cases, when the question of redundancy comes up we would advise that you take a step back and undergo a full business health check.
“That will give you the chance to look at every area of the business and provide the clarity of vision needed when making such big decisions.
“Take stock, look at how well is your company coping with the challenges that it is facing.
“If you can you see light at the end of the tunnel but you are worried that your company won’t survive long enough to reach it, there are steps you can take.
“It might simply be that your company needs time to get back on its feet and with a careful plan set in place it could be possible to keep a workforce onside for future success.”
This was posted in Bdaily's Members' News section by John Highfield .