2 minute read
RESTRUCTURING WITHOUT REDUNDANCY: LEADING THROUGH RISING COSTS
By Peter Waller-Flynn CEO, Privilege HR
In recent months, I’ve spoken on the BBC, The Economist and several local Forums about a dilemma facing thousands of small businesses: how to survive rising costs without defaulting to redundancies.
From government-driven increases in employer National Insurance and compliance obligations, to higher borrowing and energy bills, the pressure on SMEs is relentless. Many owners feel payroll is the only option left. But in most cases, redundancy should not be the first move. With discipline and imagination, businesses can restructure, protect jobs, and hopefully prepare for recovery. The experience of specialist advisors, such as accountants or HR specialists, can support you to make the right decisions in these tough times.
Focus on work, not just headcount
Restructuring should start with a review of the work that is required and the skills that are required to perform them. Don’t go straight for the profit and loss accounts - as good as that might sound. Ask yourself the question: what work is truly essential to generate revenue and deliver value? By challenging every activity, many firms find 10–15% of tasks that can simply be paused or stopped without affecting headcount. The conversation shifts from “who can we cut?” to “what work must we do, and how do we do it more efficiently?”
Attack costs before payroll
Before removing jobs, audit the non-people costs. Renegotiating leases, consolidating software licences, and rethinking supplier terms can release as much money as multiple redundancies. Many SMEs carry hidden inefficiencies in duplicated systems or unnecessary services; supplier costs that can be renegotiated. Cutting these first buys time and preserves the capability within your team.
Redesign roles and hours
If payroll savings are unavoidable, consider work redesign over headcount reduction. Options include voluntary reduced hours, job sharing, four day weeks or seasonal contracts. These flexible approaches protect jobs while adjusting spend. Alongside this, standardising roles and automating repetitive admin through the use of AI can free capacity without losing staff. Where possible, redeploy atrisk employees into customer-facing or compliance-critical roles rather than letting them go.
Transparency builds trust
Employees know when costs are rising; silence breeds fear. Be open about targets (“we must reduce costs by 12–15% in 120 days”), explain the sequence of steps (nonpeople savings first, redundancies only as a last resort), and invite suggestions from staff. It never ceases to amaze me how junior staff often come up with the best ideas on cost savings. By taking this step, trust within the workforce is preserved; people feel consulted rather than blindsided.
If redundancy is unavoidable privilegehr.co.uk hello@privilegehr.co.uk
Sometimes cuts are necessary. In the UK, that means following strict legal processes: genuine redundancy, fair selection criteria, consultation, and suitable alternative employment. Leaders must take suitable advice but must also remember to handle exits with empathy and respect. The person is probably fearful for the future and could be someone’s Mum or Dad, Aunty or sister. Help them look forward and support them in the transition. It’s worth remembering that many sectors are small and everyone knows each other. Those same people may one day return as customers, suppliers, or even employees again.
In an era of rising costs and shrinking margins, leadership means making hard decisions openly, lawfully, and empathetically. Redundancy may sometimes be unavoidable, but it should never be the default. The future belongs to businesses that protect their people while reshaping for resilience.
If you would like to discuss options for your business going forward, then please feel free to contact Privilege HR for a confidential discussion. We have significant experience in this field and have helped businesses not only survive, but to go on and flourish.
If payroll savings are unavoidable, consider work redesign over headcount reduction. Options include voluntary reduced hours, job sharing, four day weeks or seasonal contracts. These flexible approaches protect jobs while adjusting spend.
