redundancy: what employers need to know

Going through a redundancy process for the first time can be stressful. Doing so without following help can lead to expensive legal penalties. Thorough consultation with all those at risk, and continuing to look for alternative options to redundancy throughout, are essential steps to getting things right.

Over the past few years we have seen some organizations worsen their situation by handling a redundancy poorly. From botched announcements to mass layoffs via conference calls or withholding severance pay, some employers mishandle redundancies. 

what is a redundancy?

Lets clarify what a redundancy is first of all. A redundancy is when an employer dismisses an employee because they no longer need someone to do that job. This could be because the business is: changing what it does or doing things in a different way, for example experiencing cash flow problems,  using new technology, changing location, or closing down. Therefore, it's important to manage redundancies with decency and sensitivity to boost the morale of your remaining employees.

The COVID-19 pandemic led to economic uncertainty worldwide, and the looming global recession is causing financial problems in many organizations. Companies have considered diverse ways to deal with the crisis, from unpaid vacations to short-term work contracts and layoffs. However, these measures may not be enough to sustain some companies, and the specter of redundancies now haunts many businesses. Employers are faced with reducing headcounts to minimize costs and keep their businesses afloat.

Layoffs have been making headlines, with major household names reporting large-scale redundancies and closing branches. Reports usually focus on big companies and brands, but even small and medium-sized businesses are affected by redundancies. For large companies, redundancies are viewed as restructuring decisions – nothing personal. However, small and medium-sized business owners often have a more difficult time since they are laying off people they know. Fortunately, you can manage redundancies and keep everyone smiling by providing an inclusive outplacement service. In the past, outplacement services didn’t exist for SMEs, but now you can find tailored outplacement support for your employees.

Outplacement support allows you to show respect to the group affected by the restructuring process while achieving your financial goals. You also minimize the impact of negative press and social media that redundancies can cause for your brand.

Since you understand the human and financial impacts of redundancies, we've put together eight tips to help you take care of employees during restructuring.

is there a redundancy situation?

While companies reserve the right to restructure their business model and lay off workers, the process of making mass redundancies should fall within statutory laws. In most countries, a redundancy should only occur due to the closure of a business or diminished need for an employer's goods or services. Some positions become redundant if there is a fall in customer demand for your business's products.

You should explore available avenues to minimize costs before resorting to redundancies. When a company faces financial challenges, you can explore cost reduction measures without laying off workers. Measures include reduced overtime hours, job sharing, transfers, and furloughs. The redundancy process is less likely to cause litigation if you are transparent and honest about the reason for the layoffs.

Some companies restructure to get rid of troublesome or underperforming employees. In such situations, the redundancy selection process is flawed, and an employee can sue for wrongful termination. Using redundancies to eliminate bothersome employees can cost you more than you bargained for and isn't the best way to handle poor performance. Your company should build a strong business case for the restructuring process. For instance, if you can show that business changes or the markets have triggered redundancies, workers are less likely to criticize your actions.

selecting candidates for redundancy

Redundancies don't mean removing workers who are difficult to manage or don't get on well with colleagues. Every worker should have a fair chance in the selection process so you can avoid litigation and tribunals. Some of the factors that you can use to determine redundant employees include:

  • attendance records: frequent absenteeism of an employee diminishes their performance. However, you should examine the reason for the absence. For instance, a hospital admission could lead to high absenteeism records, but it's a one-time occurrence.
  • disciplinary record: when using disciplinary records to determine redundancies, ensure they are up to date. That means the employee has a fair hearing, and a ruling has been made.
  • skills and experience: the personal abilities of employees should be used in the selection process.

Workers should also be informed of the selection process. If a team of managers makes the selection, they should observe guidelines on avoiding bias and adverse impact. While you are allowed to determine the process of redundancies, you should recognize employees' rights. For instance, you should explain to your workers the reason for the redundancy, the positions you are terminating, and the selection process.

Be aware of local nuances though. Some countries have specific labor laws that mean a redundancy comes with legal process and consequences if not conducted correctly. Some countries require a round of voluntary redundancy, before a selection process can begin. 

If you already have a redundancy policy in your employee handbook, ensure the process is adhered to. Also, give every worker equal opportunity during selection.

manager notification training

Large organizations rely on managers and functional leaders to assist with the redundancy process. It is important to hold a meeting to explain the reasons for redundancy and the process. Notification training helps managers understand the need for redundancies in the company. The training prepares them to handle the emotional distress associated with the process.

Involving managers from the beginning of the redundancy process streamlines the process since they come up with ideas for implementing the redundancies. Functional leaders and supervisors are also close to workers and can talk effectively with staff about the redundancies. If you plan to restructure your company, our Randstad RiseSmart platforms offer guidance on the redundancy process and notification training services for managers.

During training, you can define the roles of your managers. The process will be seamless if all leaders support employees during restructuring. Training also helps companies provide a unified approach to the process. It eliminates conflicting information from different functional leaders in the organization. Managers may also assist with making redundancy dismissals, selecting employees, and giving notice of terminations.

planning a redundancy process

It's normal to feel overwhelmed by the redundancy process due to the emotions involved. Don't rush into making decisions or hurry the process. It only leads to more problems. Take your time to plan the redundancies carefully to avoid unpleasant surprises and difficult conversations. Start by checking if you have a redundancy policy in place. It sets out the best practices for termination of employment and notifying employees. The policy should be available in the employee handbook to ensure the affected workers understand the process.

A fair redundancy process assists your business during a tribunal by ensuring the procedure is equitable. If your workers are part of a trade union, check the recommended collective agreement on the redundancy process. After reviewing the policies and procedures, create a redundancy plan that you will put into action. Some of the options to include in your redundancy plans are:

  • the reasons for redundancies
  • the redundant positions
  • the process of keeping workers informed and supported
  • employee consultations
  • timeframes for the redundancies to provide sufficient time for consultation
  • agreeing on the selection criteria
  • whether the company plans to offer severance pay
  • the appeal process for channeling complaints

assemble a team

When a company faces financial difficulties and layoffs are necessary, ensure you consult with various stakeholders. Gather the functional leaders of the organization, like human resources, finance, and operations, to discuss the need for redundancies. When you decide to move forward, you can include managers of the departments impacted by the redundancies.

The role of the team is to assist with key decisions in the redundancy process and provide a unified approach. You can involve legal advisors and payroll services at the advanced stages of the redundancy process. The legal team ensures you comply with employment laws and statutory legislation for handling reduction in force. The payroll and finance teams can evaluate the company's acceptable severance pay and benefits package.

Your team can be large or small, depending on the company and the number of workers affected by the redundancies. If you have a diverse workforce, each group should be represented in the redundancy team to represent all workers' interests. While you can complete the redundancy process without involving other stakeholders, inclusivity and transparency eradicate bias in the selection process.

maintain open communication

Maintaining open communication with your workforce is crucial during redundancy. It is vital to warn the affected employees early about the possible loss of jobs. You cannot terminate an employee's contract suddenly without prior notification. Communicating the business problems that could necessitate redundancies keeps workers in the loop. Some employees may come up with effective solutions for avoiding redundancies.

We've seen the news about companies informing employees they are redundant through email, text, or video calls. It never goes well. Those workers were valuable team members, and they deserved respect and dignity during the layoff. Conducting a meaningful consultation is fundamental for a fair redundancy process.

During the consultation, you should also listen to employees' responses and consider their recommendations. In consultation meetings, avoid conveying that a final decision has been made on redundancies. Until workers have received their redundancy pay and notification of employment termination, they are still your employees. Hence, they should receive clear communication throughout the process.

Good communication throughout redundancy shows you care. It also provides clear information, which reduces the possibility of lawsuits and termination tribunals.

appreciate your employees

When the consultation process is complete, you should meet with each employee at risk of redundancy individually to give them notice of termination. It is best to give redundancy notices face to face and in writing. During the meeting, you should explain the reason for the termination based on the selection criteria. Ensure you give employees a notice period, leaving date, and any redundancy pay they are entitled to. The redundancy notice should explain how to appeal the decision. Ensure you deliver the information with compassion and answer employees' questions.

Employers are usually tempted to advise outgoing employees on what they should do next. That could be a bad idea. After reiterating the rationale for the redundancy, express your appreciation for their hard work. Appreciate the employee's achievements during their tenure and thank them for helping the business grow.

Notifying employees of redundancy is an emotional process that sometimes leads to outbursts. You should keep your cool to avoid further confrontations. Sometimes, it is wise to have a consultant to assist with the dismissal process. A specialist consultant can help your employees process the information better and keep their emotions in check.

partner with an outplacement provider

Redundancies are not easy. While you can handle them without providing outplacement support, managing everything in-house can be overwhelming. The emotional strain on employees and management makes the process difficult. However, having an inclusive outplacement service provider eases some of the tension of letting go of your workers. Offering employees the support they require can help them transition faster.

The trick is to choose a suitable outplacement partner for your company. For instance, different employment groups need outplacement service providers who can offer diverse programs to suit their needs. Employees should be able to access various activities, from group sessions to E-learning tools that are suitable for their career development. A partner that can flex to employees' individual needs can offer tailored support.

The outplacement provider should provide the support that outgoing employees need. For instance, if an outgoing employee wants to switch careers or industries, relocate, or start a business, the outplacement support should have specialist career consultants to guide them. Aside from one-on-one coaching, a good outplacement provider should offer a range of learning tools for career development. Ensure your employees have access to resume building, CV writing, and interview preparation support to fast-track their career transition. When you have a good outplacement partner, your outgoing and remaining workforce is assured of the company's support.

At Randstad RiseSmart, we offer a range of outplacement solutions for small and medium-sized businesses and companies. Check out some further resources and guides on our website.

26 October 2022

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