Case Study: Restructuring a Software Company in Crawley to Ensure Financial Viability

Summary

How we helped a Crawley business make redundancies to make it more efficient and financially viable.

The situation

Code-A-Lot Ltd approached us because over the previous two years, they had suffered a gradual decline in sales. This drop in revenue meant that the company had been running at a loss for some months. This was unsustainable and the company needed to reduce its annual costs by £250,000.

The Directors had identified a number of areas where smaller cost savings could be made but realised that their main overhead was the salaries of their 45 employees.

Code-A-Lot also wanted a more efficient structure which would be much more customer-focused.

The Directors wanted to ‎keep redundancies to a minimum so that employees we redeployed where possible. The Directors wanted to treat their employees as fairly as possible whilst safeguarding the future of the business.

What Martin Searle Solicitors did

Our Crawley Employment Law Team met with the Directors and their HR Manager to explore the Company’s current structure and to discuss the various options they were considering.

We identified that the best solution was a business reorganisation whereby a number of existing senior roles would be removed and replaced with less senior roles. We advised which options were likely to simplify a redundancy process whilst minimising the company’s exposure to claims.

We set out in writing what steps the business needed to follow to ensure that a fair redundancy process took place.

We also offered hands-on support‎ by:

• Helping Code-A-Lot to prepare the documents needed for warning and consultation
• Assisting the HR Manager in offering voluntary redundancies: recommending and drawing-up offers, helping the HR Manager to deal with an employee who threatened claims, and advising on the use of Settlement Agreements
• Advising the HR Manager on how to approach individual consultation meetings
• Assisting Code-A-Lot’s Directors by finalising their response to the consultation, which included making changes to the proposed structure ‎and guiding the HR Manager through a further round of consultation
• Advising the Directors on how to carry out a fair competitive interviewing process for the new posts, and the paper trial they should produce
• Adapting the Company’s contracts of employment for the new posts, including appropriate provisions for trial periods, improving the protection of confidential information and intellectual property, and updating post-termination restrictions for senior roles
• Drawing up compulsory ‎redundancy notices to issue to any redundant employees

The result

This restructure was completed in three weeks and all redundancies were voluntary.

Code-A-Lot offered one of those employees a fixed-term consultancy agreement to start four weeks after termination under which she would provide services to the Company for two months at a reduced cost. This enabled Code-A-Lot to make cost savings whilst ensuring that it did not lose the expertise it needed in the short-term.

In the case of an employee who threatened to pursue claims, we advised that their redundancy process would ensure that any claim in the Employment Tribunal would be successfully defended. We advised the HR Manager about legal costs in defending any claims and the Directors decided to negotiate an amicable termination. We helped them secure a Settlement Agreement where the compensation was only marginally higher than the compensation offered for voluntary redundancy.

Five high-earning executives were deployed into newly created roles and all accepted their revised contracts. The Directors were satisfied that they had selected those employees rigorously but fairly, and they were confident that the new contracts would protect their business. The new roles, with reduced salaries but including performance related bonuses, incentivised their employees and enabled them to attain 60-70% of their earnings in the existing posts.

Code-A-Lot achieved its £250,000 target saving and were able to move forward with their improved structure within four weeks.

Code-A-Lot’s HR Manager commented: “Martin Searle Solicitors have really guided me through the process, been proactive and pragmatic with their suggestions for how to approach the trickier issues, and have been amazingly quick at answering queries. I have felt supported and reassured as well as being very confident in the efficacy of their advice. They have made a difficult time a lot less stressful for me”.

If you need expert Employment Law advice and support in Crawley, contact us on 01273 609911, or email info@ms-solicitors.co.uk to find out more.