There are no easy ways to make staff redundant.

Francis Toye, who had to cut a fifth of the workforce at his IT services business – Unilink – in the wake of the dotcom slump in 2001, recalls the period as “very painful and depressing”.

However, the experience taught him some lessons about the whole process.

The first thing, he suggests, is do it quickly. “If you need to cut costs, do it sooner rather than later to protect your business,” he says. Unilink had to reduce costs after a sudden drop in revenue, so Toye had to think fast.

As soon as he knew he needed to make the cuts, Toye spoke to his operations head, who also took responsibility for HR matters and devised a plan.

“We were doing it relatively early in the cycle, and most of those who left got other jobs fairly quickly,” Toye says. Acting quickly also meant that Unilink had the funds to pay for the redundancies before income dropped significantly.

Toye notes that he discussed the issues with the individuals whose jobs were on the line, but made it clear that the business kept an open mind if there were other ways to make up for the fall in revenue.

For instance, there might have been a way to keep people if they agreed to work for a lower basic rate of pay and a higher commission.

“You don’t just say you are redundant, here is a cheque, goodbye,” Toye explains. “Maybe they can come up with an idea.”

His message to those affected was that redundancies were possible and that he would hold a meeting with them 48 hours later to discuss the options. He then sent them home. “You don’t expect them to work after telling them that.”

Toye chose not to bring in outside experts to help with the process, preferring to use HR information that he had received in an e-mail from the website Indicator.co.uk.

“If you don’t do the processes properly, you deserve what you get,” he says, noting that he has never been taken to an industrial tribunal in 14 years of trading.

Unilink has rebuilt its revenues in recent years and is actually advertising at the moment to add three employees to its workforce of 30.

Toye says the experience of having to cut jobs has made him more cautious about increasing headcount again, and he carefully considers the alternatives – such as outsourcing – before adding to the company’s wage bill.

Netcel, which specialises in website and intranet development for trade associations, is another business that has had to consider redundancies recently.

Because of the steady nature of its client base, orders have not been drying up in spite of the current economic downturn, according to Nigel Culkin, one of the company’s two non-executive directors.

However, earlier this year, the St Albans-based business which turns over about £1m, was facing a cash squeeze due to delayed payments.

One of the options was to cut the headcount from 22 staff to 14, Culkin says. “What we were looking at was real cash flow problems. We said that we would need to look at making some redundancies if nothing came in.”

Instead, the board decided to turn the downturn on its head and instigate a short-term profitability drive.

Tim Parfitt, managing director, worked with the heads of each of the company’s product group areas and identified 45 initiatives, described as “small shiny things”, which could make a material difference to cash flow.

Some were small moves, such as making more efficient use of management reports at board meetings.

Others were more fundamental, such as introducing a 20 per cent upfront payment once a contract was signed.

The latter bore fruit in the last two months when the signing of two contracts totalling £230,000 brought an immediate cash injection of £46,000.

“If these projects had not come in, I believe we wouldn’t have had any choice but to make redundancies,” Culkin claims.

“In no way is this rocket science, but as someone once said to me, the trouble with common sense is that it’s not that common. Certainly not in these troubled times.”

Cutting pay to avoid redundancies is a bold move, but not necessarily the right one for every business, according to John Maxted, managing director of Digby Morgan, an HR recruitment services business.

“It will have significant long-term effects on the business well after the immediate problems have gone away and should definitely not be a knee jerk reaction,” he says.

“If your company usually enjoys a high level of productivity, employee morale and staff loyalty then involving staff in decisions like this may well, ironically, work in your long-term favour.”

Redundancy should not be taken lightly, says David Higgins, non-executive deputy chairman of Harvey Nash, a recruitment company. He cautions against allowing management to arbitrarily decide who is made redundant as this will potentially lead to conflicts.

“Most businesses will need to be restructured if a recession is deep and long enough as demand will fall,” Higgins says. “The only other options are redeployment to another business unit, if the individual’s skills fit, or to introduce significant basic pay cuts so that earnings are totally results orientated.”