Redundancy: who does it affect and what are the implications?


Redundancy: who does it affect and what are the implications?

With more than 7% of Australian workers having gone through the redundancy process at some stage, the management of redundancy and related issues was an important policy decision for this country, according to a leading academic researcher.


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With more than 7% of Australian workers having gone through the redundancy process at some stage, the management of redundancy and related issues was an important policy decision for this country, according to a leading academic researcher.

The director at the University of Sydney's ACIRRT, Ron Callus, told an Australian Industry Group conference on redundancy, outsourcing and entitlements last week that although the latest Retrenchment and Redundancy figures available from the Australian Bureau of Statistics were dated, with the last survey released in 1997, they still provided important and comprehensive information.

The figures show that 38% of workers who have undergone redundancy have been in their jobs less than one year - a finding he said had significant implications for the debate on entitlements, given that redundancy payouts grew more costly as the length of service increased.

Another policy issue is highlighted in the finding that workers over the age of 55 experienced 'quite dramatic effects' - remaining out of work for almost a year (43 weeks, compared with 31 weeks for other workers) before getting what was usually part-time or casual employment to replace their full-time job.

Australian redundancies - a snapshot

Over a three-year period to mid 1997, some 7.3% of all Australian workers had been retrenched one or more times. Over a two-year period up to 62% of all large organisations reduced their workforces, primarily through redundancies. Thus, said Callus, the situation was ongoing in Australia and affected 'a significant minority' of workers.

The situation was more likely to occur in certain industries with, over the five years from 1996 to 2001, manufacturing losing 44,000 workers, 43,600 jobs disappearing in wholesale trade, 8,400 in communications, and 7,600 in mining. This downward trend was declining.

Men (9.1%) were more likely to be made redundant than women (5.2%), while workers in South Australia, Queensland and Tasmania were more likely of losing their jobs than colleagues in other states. Full-time employees were more likely to be made redundant than part-timers, as were less-skilled workers, and those at either end of the age spectrum - either in the 18 to 24-years age group, or 55 to 64 years of age.

Is it being managed?

Surprisingly, given these figures, managing redundancy does not figure highly in Australian industrial agreements, although Callus cautioned that this did not mean companies weren't managing it in practice anyway. Mining ACIRRT's Agreements Database and Monitor, Callus found that while 42% of registered agreements had some redundancy provisions, most contained 'nothing particularly unique or innovative', instead simply referring back to the relevant award.

Only 20% contained provisions covering consultations on redundancies, 15% had redeployment provisions, 11% had provisions for voluntary redundancy, 8% mentioned a merit-based redundancy system and in 5% of agreements the first-on, last-off principle applied. No forced redundancy provisions were 'relatively rare - almost unheard of', Callus said, contained in only 2% of agreements.

Redundancy provisions were more likely to be found in public administration, community services, and recreational and personal services. Public sector agreements (56%) were more likely to contain provisions than those in the private sector (38%), and agreements registered in NSW most likely, and in Queensland least likely to contain them.

A minimum qualifying period - usually 12 months - was provided for in only 20% of agreements, while 28% carried a minimum (usually four or fewer weeks) and maximum (usually 24 or fewer weeks) number of weeks' severance pay. Some 5% of deals had age differentiated severance pay provisions and 18% gave retrenched workers time off to job hunt during the notice period - something Callus said made all the difference between those companies who handled redundancy well, and those who didn't.

Some agreements offered redundancy clauses which gave retrenched workers hope - like the wholesale industry agreement which said retrenched employees would be given preference for re-employment should a suitable vacancy occur within six months. Others gave the employer added security, in post-Emwest times (see 71/2002), like the agreement which offered one extra week of pay for every completed year of service provided industrial harmony was maintained and no further claims were made.

As expected, Callus said union deals offered much more to workers than non-union deals when it came to redundancy, including: greater consultation (22% for union deals, compared with 13% for non-union agreements), voluntary redundancies (14%, 4%), redeployment alternatives (17%, 12%) and maximum severance of more than one year's pay (11%, 3%). Non-union agreements however were more stringent about stating minimum qualifying periods (26%) than union agreements (18%).

Some final words of advice

Six years ago, ACIRRT was commissioned to compile a best practice report for the former Office of Labour Market Adjustment, and Callus said from that experience learned there were a number of ways organisations could lessen the negative consequences of redundancy. 'The result of doing it correctly is quite significant,' he said.

Methods included consulting the workforce on change as soon as the problem was 'on the horizon'; exploring alternatives to redundancy; looking beyond the enterprise to place workers in industry labour pools; agreeing on notice periods and having transparent and fair methods of selection if redundancy was called for; and offering counselling, financial planning, assistance and a useable reference.

On the latter point, Callus said while many organisations were now holding back for legal reasons from writing much more than that a worker had been employed for a stated period, in industries like manufacturing, in particular, where job losses were high and competition was fierce, a more detailed reference would be invaluable to a retrenched employee.

Finally, Callus said he felt compelled to add his two cents worth on the issue of entitlements, also being discussed at the conference. 'To be honest, I can't see an argument at all that people shouldn't be given their entitlements,' he said. He said it was 'ludicrous' to treat employees as unsecured creditors, as they were usually dependent on a single employer, and needed entitlements to fund what could be a long period of unemployment.

Like the AiG's Stephen Smith, he thought trust funds like Manusafe (see 7) were too costly for employers, although he said he could understand why the manufacturing workers' union had put up the proposal. Instead, he considered that Australia should do as the United Kingdom had done, and introduce a compulsory national insurance scheme which would cost businesses roughly $20 per employee per year to cover full entitlements - 'an impost, but not a significant one', he said.

The next up-to-date snapshot of redundancy should be forthcoming later this year, with the AiG announcing at the conference that it was conducting a redundancy survey of members (see 71/2002).


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