Employment law and the economy

We are seeing an increase in the number of employees contacting us regarding settlement agreements. These are typically used where an employee is exiting the company due to redundancy issues, or other reasons such as allegations of constructive dismissal that have resulted in an agreed settlement or compromise. Typically, it is where a breach has occurred by the employer resulting in the employee being decremented potentially unlawfully. The rise in enquiries is a very clear sign that many companies are looking to trim staff, often using performance management to increase production or manage out those deemed to be underperforming. In many cases, however, they are doing this without taking advice from HR experts, which results in process failures and ultimately employment tribunal issues. Typically, employers will pay for the employee's legal costs to review the agreement and provide independent advice.

The demand for early talent is still strong as many recruiters either need to address their succession plan, hire on a budget or require specific skillsets that only graduates offer. The shortage of the 18-25 demographic is further creating a war for talent that may be unaffected by wider economic issues.

The biggest issue for most businesses is that they are currently carrying too much fixed cost (ie. their people), that is why we are already seeing the likes of Twitter, Meta and other big firms making huge global cuts to their permanent workforces. Operating model change is required to move day to day teams from a cost and budget management structure, to an ROI-based team and management structure, in fact it is absolutely paramount. By becoming mutable, businesses will alleviate the need to make redundancies and will find an enviable ability to protect our talented UK workforce in this dangerous cost of living crisis.

I have not seen any clients reneging on employment commitments for economic reasons. Whilst businesses are being cautious, most are implementing measures to retain their current employees and are struggling to fill existing vacancies. The picture is mixed and although a minority of my clients are planning to restructure and/or make redundancies, the majority are actively recruiting and are struggling to find the right candidates to fill vacancies. However, it must be noted that most of the recruitment I am seeing right now is replacing outgoing staff rather than increasing headcount. In many sectors employees are still in a strong bargaining position. The main reason I have seen for employment offers being retracted is the receipt of poor references and/or the discovery of inaccuracies in CVs. Candidates should ensure that all information given as part of their application is accurate and do what they can to ensure positive references.

The majority of our clients are recruiting rather than reducing resource, but with applicant numbers remaining low, it remains a candidate-led market with fewer active job seekers. Employers not offering hybrid or remote working where possible are missing out on applicants who continue to bypass employers unwilling to offer this flexibility. What we are seeing is employers turning to the self-employed market to flex the resources available to them and moving to outsourcing services that they may have previously run in-house, effectively passing on the recruitment and resourcing headache to service providers. We've seen an increase in requests for pay benchmarking and job grading work over the past three months by employers keen to remain competitive and retain staff rather than face the challenge of recruiting.

Lose your employees at your peril. With the economic outlook somewhat bleak, satisfied and happy workers will help protect your business and keep productivity levels high. Now is not the time to risk losing your employees. All sectors are finding it tough to hire workers, and hiring will remain challenging into 2023 and beyond. Even if the labour market softens and redundancies increase in the short term, the UK is an ageing population. Talent remains a valuable resource – and industries like hospitality and healthcare are feeling the biggest brunt of the employee shortage. Today’s economic uncertainty has forced companies to re-think costs, but cutting corners on employee and workplace experience will be detrimental to businesses in the long run. High turnover is bad for business – worker productivity improves over time so too many new hires may slow down business just when good decisions are most needed. Glassdoor research shows that dissatisfied workers are more likely to start new job applications elsewhere, while the culture and values of an organisation are the most important drivers of employee satisfaction. Creating excellent workplace culture doesn’t necessarily cost money, but it takes time and commitment from senior leaders to implement properly. Job seekers should look at industries that are likely to grow even if the overall economy softens, for example healthcare, education, and the skilled trades. All these sectors need a wide range of staff in different roles so don’t assume that your skills aren’t transferable or needed outside of your current role. In a slowing economy, job hunters should be open to different modes of work, from hybrid to remote to fully in person.

What are the main challenges employers are facing right now and what should they be doing to address them? The UK’s rapidly changing economic and political environment is impacting employers in the UK. As a result, employers are reconsidering long and short-term hiring plans, restructuring and some are already making redundancies (including Meta and Twitter). Employers looking to make cost savings should plan ahead with care and ensure they inform and consult with their workforces appropriately so as not to fall foul of the law or create unwanted employee relations issues. Employees are taking longer to find new roles when out of work so those with potential meritorious claims are more likely to pursue them. Many employers are facing challenges relating to hybrid working and beginning to review office and home-based working policies. Whilst the coronavirus pandemic led to a substantial shift away from office working for office workers, the push and pull of the economic advantages of limiting office space rental against the rise and fall of co-working space hire together with the social and productivity arguments surrounding in-person working have left many employers and their long-term property leasing decisions in a state of flux. Employers would be well advised to remain open-minded to flexible and home working. Happy employees are more productive and forward-thinking employers retain talent. On the other hand, we are seeing businesses with international reach winding down their UK based operations and offices (if they have them) and outsourcing and redirecting work abroad. In the private sector employers are competing with the need to increase salaries in line with inflation and the increase in overheads and reduction in profit. Employers will do well to budget in advance for wage increases alongside projected increased expenditure on overheads. In your work, are you seeing examples of companies reneging on their commitments? If so, what trends are you seeing? The biggest 'promise' we are seeing reneged is that of job security. We have seen a sharp increase in redundancies, especially large scale but often of very senior and more expensive employees with cost-cutting becoming necessary for many businesses. More senior employees tend to be exited with an agreed package and we have noticed a surge of new clients seeking our advice on negotiating exit packages. We are seeing employers withdraw offers of future employment due to business changes. In these instances, newer joiners are being confronted with “last one in first one out” processes as employees with shorter tenures are shown the door first. Changes in direction with management and hiring decisions and employers holding off on previously promised promotions are a contributing factor to the “Great Resignation”. What can job candidates and employees do to protect themselves? Candidates and employees starting new roles will do well to get job offers and employment terms agreed sooner rather than later. If you are going to negotiate your employment terms, read the small print in your contract and focus on the most important elements to you. Avoid relying on promises not contained in the contract. All elements of the terms of your job offer should be expressly incorporated into the contract. All terms should be clear and should avoid the employer the luxury of being able to default on promises at a later stage. Think carefully about probation and notice periods and for how long you are willing to wait to start that new job. A lot can happen in three months. If there is conflict between your notice period and the start date in your new role, all is not lost. Establish whether there is any flexibility on your start date with your prospective employer. If not, your current employer may be open to negotiating a shorter notice period. It is advisable to have this discussion with your current employer sooner rather than later to give them time to consider suitable handover arrangements. For those already in employment concerned about job security, keep a careful contemporaneous record of any concerns you have. If you are placed at risk of redundancy, seek advice at an early stage on how to protect your position and maximise any exit package. Make sure you proactively engage with any redundancy consultation and be prepared to challenge the process. For those who feel they are being singled out in any redundancy process for unlawful reasons, such as discriminatory reasons or for blowing the whistle it is important to take early action as tribunal claims for discrimination and whistleblowing have short time limits.