The “R” word
The big “R” word being spoken about this year is of course Recession. I want to talk about another “R” word, which is Recession’s natural companion - Redundancy.
There is a lot of it about. Many businesses are reducing their headcount as a direct response to financial difficulties. Some are restructuring for leaner, more efficient teams. And of course the news is full of very public redundancy processes in the public sector and news industry in particular.
With an increase in employment processes comes an increase in claims made. And in recessionary times, when jobs are harder to come by, more claims are likely to be made, by employees who could be facing unemployment for an extended period, and need a financial package to get them through to the next part of their careers. Most employment agreements don’t contain redundancy compensation, so if not treated fairly and reasonably, employees will use the tool available - making a personal grievance claim - to try to obtain the necessary financial buffer.
So what are some key things for employers to think about when starting restructuring and redundancy processes? Below are my thoughts on how to approach these processes, and some things to avoid:
[Please note that it is vital to treat each process individually - there is no “one size fits all” process, and templates can be dangerous. Taking advice about your particular situation is highly recommended.]
Before you start, review your employment agreement(s), especially if you have a collective agreement. You may be required to consult not only with your staff but also the union(s). And the agreement might set some parameters for redundancy, or processes that you need to follow. It will also tell you if you need to pay redundancy compensation.
Redundancy is, at least at first, about roles, not about people. What is the organisational structure that you need now, in the current context? What roles will ensure you have the best structure for the business? If you sketch out your perfect structure, then you can compare it to what you have now, and that will reveal where the changes might need to be made.
There are two critical legal aspects that apply to any proposal to make an employee’s role redundant:
They need to be given access to information, relevant to the continuation of their employment, about the decision; and
An opportunity to comment on the information to their employer before the decision is made.
How much information must be given? That depends. It needs to be the information necessary to enable them to make informed comment on the proposal to make their role redundant. It is information that goes to the heart of why their job is being considered for redundancy, and not someone else’s job. If the reasons for the proposal are financial, this will include financial information.
Consultation needs to be meaningful, and approached with an open mind. Too often this step is not treated seriously by employers, and is rushed. Consider the purpose of consultation. It is not so that your employees can tell you what to do. But the law assumes that when making this (rather huge) decision about whether an employee’s role should be kept, one of the people who has relevant information is the person currently doing the job. It may seem obvious to you why a role has to go, but your employee will have their own valuable take, from their perspective.
Your proposal document is crucial. This contains the business case for the proposed redundancy(ies). This needs to contain all of the relevant information, and the process that will be followed. It needs to explain what is proposed to happen, and why, and why this option is the one that will deal with the situation the business is in. It is useful to include the current organisation chart and the proposed organisation chart. It should cover off on alternatives that have been considered.
It’s important not to pre-select individual employees for redundancy when there are several people doing the same role but only some of the roles might be going. That is called predetermination, and it makes your decision unjustified. If you are going to be making only some employees in one job category redundant, then you can set your selection criteria to ensure that you retain the best of your team. Those selection criteria need to form part of what is consulted on.
It is vital to consider during the process whether there are redeployment opportunities for employees. In some instances, employees are entitled to be redeployed into remaining roles, and they may not be required to attend an interview or be assessed - it may be an automatic right to be appointed into another role. You will most likely need to open up remaining vacancies to existing staff first. Gone are the days when you could test employees against external candidates as of right.
Some employers use redundancy processes to exit employees who they consider have performance or attitude issues. My strong recommendation is that you do not base your proposal and your processes around getting rid of particular individuals. It may be that they are ultimately exited through the (fair and reasonable) redundancy and selection process. But I strongly do not recommend that you structure your processes around the exit of particular individuals. It will most likely shine through your processes that you have an ulterior motive. But also it may mean that you won’t end up with the structure that you need to take the business forward with success.
Those are my key thoughts. Is that everything? No, there is more to it than that, of course, and I recommend you take advice about your process before you get started. As is usual with employment matters, the sooner you take advice, the more likely you will get a good outcome, and the investment up front usually pays for itself many times over.