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Redundancy

Posted by: on 28 March 2016 in Human Capital Management, Human Resources, Payroll

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Redundancy is a delicate area. Dismissing and terminating someone is not easy, for the employee or the manager. Retrenchments need to be handled carefully. Managers not only need to understand the sensitivities, they should also be mindful of legal issues and, for that matter, doing the job in an ethical way. 

If you make someone redundant the right way, people will leave your organisation sad but not furious. And in this economic climate, it makes it easier for people to come back when you need them. Mess it up and you could be burning bridges and alienating those who stay. You could also be damaging the company’s reputation, making it more difficult for your organisation to hire talent in the future. 

The first and most important thing is for managers to be aware of the legalities so that they can avoid potential unfair dismissal claims. The Fair Work Commission makes it quite clear who exactly is covered by the law and who isn’t (like those employed by a small business with less than 15 employees). Business Victoria  also gives you a run down on key issues like, for example, whether you have to consult with employees, how much notice you need to give and final payments. 

Making someone redundant also causes a lot of stress for managers. An often-cited 1998 study found that managers double their risk of a heart attack after they sack someone. 

So what are the ways to do it? Specialists say there are a number of key rules that need to be followed. First, is the initial conversation with the employee.

This needs to be handled in a business-like manner. It should be free of emotion.   Preparation is critical. Managers not accustomed to doing this might need training and they certainly need to monitor their body language, their expression and the way they handle it.

The discussion with the employee needs to cover such issues as the departure date and the package. There is no law requiring employers to provide outplacement services or financial counselling.

However, it is advisable to at least look into this. It is not only regarded as best practice but it will help preserve morale for remaining staff.

“Survivor guilt” is one of the most difficult passages for those not targeted for redundancy and employers need to manage it carefully to ensure staff remain productive and focused.

This is why remaining staff need to be kept informed of developments. In small companies, this is usually done with a meeting. Larger companies can do it by email.

Companies also need to be aware of leaving themselves open to claims of discrimination on the grounds of race, sex, disability or whether the person belongs to a union.

They also need to be mindful about potential claims of indirect discrimination. A company, for example, might have only started employing women in recent years but if they then implement a “last in, first off” policy, they could be open to claims they are discriminating against women. Companies also need to be very clear about their legal obligations including the required levels of severance pay.

Negotiating how much time one allows the person to stay once they have been declared redundant is a sensitive issue. This depends on the circumstances. If the job is complex, some companies would require the employee to continue working for some time to complete a handover.

If the job is less complex, and if the transition is likely to be smoother, the employee might be required to leave at the end of the week.

If there are security issues, the employee might be required to leave immediately. The danger with that, however, is that this could send out a punitive message to remaining staff. Regardless of the circumstances, very few people do inappropriate things during the workout period.

But, it is also damaging to have a workout period that is too long. A three-month stint can be demoralising all around. Smart employers find a middle ground.
To protect intellectual property, employees should be required to return everything belonging to the company, and they should sign an undertaking that they have done so.

From 1 January 2014, all modern awards have been updated to include a consultation period. This requires employees to be consulted when the company is planning anything that impacts their working conditions or hours. Being paid a redundancy is impacting the employee’s hours, so they should be involved in discussions at the early stage. Companies have had to pay compensation when employees lodged claims with the Fair Work Ombudsman because they didn’t consult them about their redundancy plans.

In the end, it is important to plan what is going to be said. It would also help having someone else present with you when you are undertaking this task. This could be important both from a legal perspective and also to chip in if you forget to say anything. 

Written by: The Connect@ADP Team

Originally published July 7th 2014

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TAGS: discrimination employment HR Human resources Managers redundancy

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