Top tips to avoid redundancies

by | Apr 26, 2023 | Redundancy & Restructuring

My measure of the state of the economy is how much recruitment I am doing v’s how much redundancy work I am doing.  Sadly, the balance has now tipped (for the first time since COVID hit) to redundancy.

There are a multitude of reasons for this, but the bottom line for most small businesses is that any cash reserves have long been depleted, and they simply cannot carry on as they are. 

So, if you are feeling it tough, here are my top tips for keeping your business viable:

  1. Act sooner rather than later – if you are already amassing debt, putting off paying bills etc, you are already acting late, and the situation is unlikely to change unless you actually make changes to right-size your expenditure v’s your income/cash flow
  2. Ditch low profit-generating clients – NB high revenue-generating clients are often not actually generating a lot of profit, and sometimes may even be costing you to keep them
  3. Spread your income sources are much as possible – if you have a high proportion of your income from 1 or 2 key clients, this is a very high risk if you lose one of those
  4. Be prepared to act – even if you may not yet be ready to implement major changes (e.g. restructuring), be prepared so that you know when the milestones are (e.g. turnover below $X, profit below $Y) that will put your business at risk, and you know what to do if there is a sudden change (e.g. loss of a major client)
  5. Know your numbers and monitor them closely – 1 bad month may be OK, but 6 bad months is generally pretty bad for a small business, so don’t wait until the 6-month mark before you realise there is a problem
  6. Put up your prices – scary I know, but everyone knows costs are going up so I very much doubt any of your customers will be surprised.
  7. Check your productivity/efficiency – it is easy to fall into the trap of believing that it is all due to the macro environment that things are so bad.  However, my observation is that there is a heck of a lot of lackadaisical inefficiencies around at the moment.  For example, a café owner who I know is screaming out for staff (even closing some days because of it), but when I was in the café recently there were 3 staff behind the counter gossiping, whilst I was left waiting for my order to be taken.  Another example was a company that did 3 small jobs in Opua (a 2 hour round trip from the office) on 3 separate days, rather than co-ordinating to do all 3 jobs on 1 day.  I.e. 6 hours travel time instead of 2 hours.  Work smarter, not harder, and manage the gossipers!
  8. Business owners are actually allowed to earn a living!  It certainly doesn’t feel like it at times, but if you are earning lower income than your staff then don’t be ashamed to say “That’s not OK, I am allowed to earn and income”!

Payroll is the biggest cost in virtually all businesses.
And small changes can make a huge difference.

As an example, ACME Ltd employs 10 staff at an average of $50K each (NB minimum wage on a 40 hour week = $47,216 per annum).  So, their annual payroll spend is $500,000 per annum.

  1. 10 minutes per day of wasted time = 40 hours per year, or 2% of your annual payroll spend or $10,000, from profit – manage the inefficiencies, they will be a lot more than 10 minutes per day
  2. Rather than making people redundant, could you move to a 4.5 day week and give them each a 2.5 day weekend?  10 staff at $24.04 per hour, 4 hours a week = $50K per annum.  Though they may not necessarily want to reduce to a 4.5 day week, when this means that someone’s job is saved, and no one is made redundant, often the staff will work with you to make this happen.  This is a particularly good approach if you want to retain skills, but also weather a short to mid-term drop in work. 

Consult, Consult, Consult
If you are making any significant changes (and a change to income is significant) then you have to consult.  The templates are available in the document library, though I do recommend that you have a chat with me before going into any consultation process as this is the highest risk point of employment law.  That having been said, though it is high risk, done right, the risks are minimal, and the earlier you involve your team the better.  Ultimately, your goal needs to be to avoid having to go to redundancies, but if you have to do it, then do it to save the majority.

Open Forum with Max Whitehead
This month’s webinar is on Friday 28th April at 10am and is an open forum with Max Whitehead where we will be discussing what is happening in employment law and what to anticipate for 2023 and beyond.

Here to help
As ever I am just a phone call away, so feel free to call me on 021 741 544


Lisa Mackay
Founder, HRtoolkit

Contact Us

957 Paihia Road, Opua
Northland, 0282

0800 HRtoolkit