Redundancy — business as usual or risk hotspot?

Analysis

Redundancy — business as usual or risk hotspot?

Redundancy is a valuable tool in effectively managing a workforce, but how you handle it can affect your business long after the employee has gone.

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Redundancy is a valuable tool in effectively managing a workforce, but how you handle it can affect your business long after the employee has gone.

The increasing pace of digital disruption is accelerating the rate at which businesses need to review the mix of skills they need to operate at an optimal level.

As new roles are required, and established roles fall by the wayside, redundancy is becoming an increasingly important way for businesses to manage their workforce.

Handle it badly however and you risk causing enormous harm to your business.
 

Identifying risk hotspots 


Although redundancy no longer carries the stigma it may have done in the past, people may understandably be upset when it is their job and way of life on the line.

Angry workers can lash out on social media, bad-mouth your business to colleagues and clients, steal confidential information or contact details, or even set out to sabotage your business.

“You hear all sorts of horror stories,” confirms Dr Robyn Johns, Senior Lecturer in Human Resource Management and Industrial Relations at UTS Business School.

“If people are made redundant and it hasn’t been a positive experience for them, then they can potentially go and bad-mouth your organisation, and that doesn’t have a good follow-on effect, rightly or wrongly, when you’re trying to attract good talent in the future.

“It can also have a big impact on employee morale amongst those people who stay. We refer to that as ‘survivor syndrome’.”

In many cases, when a redundancy is handled poorly, employees you want to keep may start updating their resume, assuming they’ll “be next”.
 

What does best practice looks like? 


If you do need to make an employee redundant, Joe Murphy, Managing Director – National Workplace at Australian Business Lawyers & Advisors (ABLA), stresses the importance of knowing your legal obligations and working through them, to avoid an Unfair Dismissal claim.

“In the first instance you need to have an operational reason for making that role redundant,” he says. “It might be that you want to have a more senior person performing the work, for example.

“After that you need to look at your obligations around consultation. That’s important from a unfair dismissal perspective and also from a compliance perspective, because these obligations usually arise when someone is covered by an award.

“Once you’ve consulted with the employees that are affected, the third consideration is whether or not you can redeploy those employees and where – new roles that have been created, or roles that are available elsewhere in your business, or associated entities.”

Businesses that can tick all the boxes are in a better position to successfully fight a legal challenge, if the need arises.

Making sure you carefully think through every element of the process can also help avoid making a mistake of another kind.

“I know of one instance where a company made an employee redundant then a couple of months later realised that no-one else had a good understanding of what she’d been doing and hired her back for $20,000 more a year,” says Johns. “She’d already walked away with a $30,000 package, so you really have to say that wasn’t a good decision on the company’s part.”
 

Involve employees in decision-making 


Redundancies are generally less distressing for affected employees if they are involved in the decision-making process.

In some cases offering voluntary redundancies may be a good option, particularly if you need to reduce your headcount by a certain amount, however you may find yourself losing valuable employees you’d rather keep.

“Generally, it’s the people who are the most marketable out in the labour market who are going to be the first to put their hand up, knowing they can get a lump cash payment and easily get a job somewhere else,” says Johns.

In cases of involuntary redundancy, offering employees choices, where possible, can help ensure they leave the business with no hard feelings.

“Ask them if they want to work out their notice, for example, or if they would like to come back for a farewell,” Murphy suggests. “Giving people options, however small, allows them to feel involved in the decision-making process and gives them a level of empowerment.”

Removing the “walk of shame” from the redundancy process also helps to lessen the embarrassment and demoralisation of remaining staff.

To march or not to march? 


You’ve made the decision to make a role in your business redundant and double-checked your workplace relations obligations. Do you ask the employee to leave immediately or offer them the option of working out some or all of their notice?

While it is important to allow the employee involved to leave with dignity, you also need to take into account the impact their departure will have on your business operations and culture.

For some businesses, where industrial sabotage is a possibility for example, or the loss of customers’ contact information would be catastrophic, a decision to “march” them on the day may well be the prudent one, however there’s no one-size-fits-all solution.

“Some businesses do have a policy of marching employees, often because they’ve been burnt in the past or there are highly sensitive trade secrets or confidentiality involved,” says Murphy.

“Or that may be a decision you make after you gauge the employee’s response. There might be circumstances where people start to feel disgruntled or start engaging in behaviour that could be damaging to your business. Have a plan and be ready to implement it at a moment’s notice.”

If you do ask an employee to work out the notice period, “be aware that some Awards allow them to leave during that period, as well as take time off to search for employment and attend job interviews”.
“It’s going to depend on the situation,” agrees Johns.

While some people will prefer to “take the money and run”, others may prefer to remain gainfully employed for a period while they look for another job.

“Depending on what sort of role it is, your age, and the other opportunities that are out there, it’s always easier to find a job when you’re in a job,” she says.
 

Transparency helps manage the aftermath 


Whatever your exit strategy, keeping lines of communication open, both with the individual who is leaving and other employees, is vital. Plan ahead to ensure that you have answers to any questions that may come up about not only the redundancy process, but also the future operation of the business, such as if other employees’ job descriptions will need to change.

When communication channels break down, gossip often fills the void, particularly where the perception is that jobs are at risk, which can lead to your workplace culture suffering.

In smaller businesses where everyone knows each other well, and may think of the person who is leaving as a close friend, the potential risks of handling an employee’s exit from the business badly may be even greater.

“It’s very important that employees who remain in the business can see that the person who is leaving has been treated fairly,” Murphy adds.
 

Author & disclosure


This article was first published by the NSW Business Chamber, which also owns WorkplaceInfo.com.au and Australian Business Lawyers & Advisors.
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