Media agencies: thriving beyond the crisis – cutting your headcount isn’t the only way to reduce staff costs
Your people are likely to be your agency’s largest cost. Keeping salary costs in line with your fee income is vital for your continued success. Ideally, people costs should stay within 60% of fee income. However, you might be finding that this ratio has shifted because of the Coronavirus crisis.
This article – the third in our series on how the media sector can thrive beyond the crisis – explores the alternatives open to agencies who might be thinking about redundancies. While they are an option, redundancies are expensive and often have no short-term financial impact. There are other options available to you that have a similar effect but retain your talent.
For agencies needing an immediate impact but wanting to retain all their employees, they can offer pay cuts as an alternative to redundancy. There is no maximum pay cut but you cannot let your employees fall below minimum wage. Unlike short-time working, pay cuts can be temporary or permanent.
Clearly, a permanent change will be much less favourable. You could implement temporary cuts by getting buy-in from your staff without a formal consultation process, whereas a permanent change is likely to require a full formal consultation with those affected.
In the current climate, we have seen agencies whose employees are agreeable to salary reductions, where reductions continue until the agency’s financial position improves.
Deferred pay works in the same way as salary reductions but employees have the reduced amount returned to them in the future. However, you may not wish to offer this unless you are sure business will return to normal.
Over the past three months, agencies have been introducing short-time working. This is not just an initiative for the Coronavirus period; you can implement it at any point. Short-time working allows you to reduce an employee’s working week and, in turn, pay. This will reduce the overhead cost but you should be clear with your employees about their priorities for the remaining hours.
This reduced working schedule also gives agencies the opportunity to not only reduce working weeks but change the working pattern for an employee, such as working two full weeks out of the month.
Short-time working is a temporary measure and should only be utilised for the minimum period required. Obtaining consent or a full consultation may be necessary.
Two birds in the hand
You might consider changing your team structure in a way that retains your employees. For example, your agency has a team of four Production Assistants but you only have enough work for two. Instead of making two redundant, all four Production Assistants become part-time. You still reduce your Production Assistants to an FTE of two but you keep all four employed, retaining the full skills set and talents of the team.
You may want to relax any restrictions in their employment contracts relating to other work. If employees can continue working for you as well as take up other paid work to increase their income, they are more likely to be agreeable. This option also allows you to increase hours again when in the financial position to be able to.
“It’s not you, it’s us”
You may have considered all your options and decided that redundancy is still the solution that will work for you. Importantly, it is job roles that are made redundant, not employees. In the case of redundancies, you must carry out a fair selection and follow the correct process.
It is never a nice process to have to manage but keeping an open dialogue with your employees and being transparent throughout will maintain trust and help the process run smoothly.
Get help from the experts
At Moore Kingston Smith, our HR Consultancy team has been helping agencies understand their options. We working with agencies across all disciplines to implement cost-saving measures. At all times, we remain sensitive during this distressing time, ensuring everyone is given space to talk and ask questions.
For a no-obligation chat, get in touch with one of our team.
For the other two articles in the series, click the links below.