Managing rising costs in retail and hospitality

A group of leading retailers have written to Chancellor Rachel Reeves urging the Treasury to reconsider some measures announced in the recent Budget.

With employer national insurance and the national minimum wage set to increase in April 2025, we consider the options available to retailers and hospitality businesses concerned about potential job cuts.

Alternatives to redundancy

Retail and hospitality businesses struggling with rising costs may feel that making compulsory redundancies is the only option available; however, some alternatives will reduce the risk of job losses and enable businesses to retain skills and expertise.

• Making redundancies can affect an organisation’s long-term success, making it challenging to meet customer demand. However, headcount can be reduced in other ways, such as enforcing a recruitment freeze, redeploying or retraining existing employees, and seeking volunteers for redundancy.
• If a business is struggling temporarily but believes it can weather increased costs overall, temporary arrangements may assist employers, such as offering sabbaticals or periods of unpaid leave and temporarily laying off employees.
• Employers may be able to cut costs by reducing employees’ working hours, such as by adopting shorter working hours on a temporary or permanent basis and banning overtime.
• Employers can also reduce employee remuneration by implementing a pay freeze, reducing pay and benefits, and/or withdrawing or reducing bonuses.
• Employers who are considering adjustments to employee benefits can continue to provide a good benefits package by using salary sacrifice schemes under which an employee gives up part of their salary in return for a benefit, saving on both salary and national insurance costs. Benefits that can be provided through a salary sacrifice arrangement include pensions, cycle-to-work schemes, electric-vehicle leasing and holiday trading. Employers who have yet to use pensions and other salary sacrifice schemes may consider doing so now to mitigate the impact of increased employer national insurance contributions.

Comment

Employers considering any of the above alternatives to redundancy must be mindful of both the legal implications and the potential impact of such changes on employee relations.

Most of the above alternatives will involve a change to employees’ contractual terms of employment, requiring consultation, compliance with the relevant codes of practice/policies and/or employee consent.

Further, how any such proposed changes are introduced should be carefully considered to minimise the impact on employees and stand the best chance of securing employee ‘buy-in’.

To discuss the impact of rising costs within your business or any other aspect of people solutions reimagined, contact your integrated HR, employment law and health & safety team at AfterAthena today.