Redundancy maybe an inevitable response from firms to the Coronavirus pandemic.
Businesses have used the Government’s furlough scheme, loan guarantees and other special measures, but as we come out of lock-down economists are predicting a gradual recovery in demand, leaving many SME firms having to make tough choices to reduce headcount. However, redundancies need to be made in a responsible way and firms need to allocate time and resources to the process or risk getting it wrong costing time, money, employment tribunal claims and reputational damage, warns Peter Lawrence of HR Consultancy, Human Capital Department Ltd.
Making staff redundant should be an action of last resort. But if there's no other option, allocate plenty of time and resources to do it in a responsible way.
The manner in which a company handles redundancies shapes its future. Managed badly, remaining staff, customers and suppliers will lose confidence in the business. Handled responsibly, the business can look forward to future growth with a committed workforce.
Remaining staff can become insecure, inspiring the most able and marketable to seek jobs elsewhere. Those who stay may become dispirited and less productive, so the ultimate impact of redundancies is far greater than expected.
If 20 or more employees are being laid off, you must inform the Secretary of State for Business, Innovation and Skills, at least 30 days before the first dismissal. You should also consult trade unions or elected employee representatives at least 30 days before the first dismissal if 20-99 staff are being dismissed, and at least 90 days where 100 staff or more are involved. What's more, case law on unfair dismissals makes it clear that consultation is also required individually with any employee selected for redundancy.
'Courts and tribunals expect employers to consult employees with a view to minimising the number of redundancies, and to establish a fair set of criteria for selecting employees,' says Rod Lee, Director of Human Capital Department. Consultation has to be meaningful. In group redundancies it must cover a range of issues, such as the reason for the job losses, possible selection criteria for redundancy, the procedure, timescale and any possible ways to avoid or reduce the job losses. Individuals also have the right to consultation on issues such as why they have been selected and possible ways to avoid the redundancy. If you stray in any way from these legal requirements, you could lay yourself open to unfair dismissal claims.
The best way to avoid ending up in an Employment Tribunal is to seek the professional advice of an HR Consultancy.
One of the most conflict-free methods of choosing those to be made redundant is asking for volunteers. The problem with this, however, is that all your most able staff, those who are most confident of finding new work, will be the most likely to apply. Therefore, it's probably in your best interests to select staff on criteria that keep the most able and lay off the least productive.
Criteria must be objective and based on measurable factors, such as skills, competencies and qualifications, or disciplinary, performance and attendance records. Any method of selection that could, even inadvertently, lead to accusations of race or sex discrimination must be avoided. 'You could include absences for sickness, but not absences for pregnancy or pregnancy-related illness,' warns Lawrence. 'If you do, you will be clobbered by sex discrimination legislation.' Whatever the selection criteria, where possible no one should be selected for redundancy by their immediate line manager since that lays the selection process open to allegations of bias.
Once staff have been selected for redundancy, you should ensure that they are told the news without unnecessary delay. To avoid gossip and rumours, as few people as possible should know which individuals have been selected, until those individuals have been told themselves. hand in another room to explain the severance package in detail.
Redundant employees with two or more years' continuous service are entitled to statutory redundancy payments based on age, length of service and average weekly earnings, although your business can offer more generous packages if it wishes.
Reactions, when told that they are to be made redundant vary; some staff may want to escape as quickly as possible; others may freeze, and some may become aggressive.
Once you have told staff that they have been made redundant, how long they stay at work depends on individual circumstance. You may want some to work their full notice period. Our recommendation though, is to pay them for their notice period but not require them to work.
Disaffected staff could try to sabotage the business in some way, for example, through computer virus or be generally disruptive. Where employees do work their notice period, they must be given ‘reasonable’ time off to attend interviews and for job search.
If you are a medium-sized firm, think about employing an outplacement consultant to help staff update their CVs, and train in interviewing skills, and provide further counselling and support.
Redundancies may attract negative publicity -the key when responding to enquiries from your staff, customers, suppliers, shareholders and even the press, is to explain the business rationale for the job losses.
Staff who keep their jobs also need support. Some may feel guilty about avoiding redundancy, a phenomenon known as 'survivor syndrome'. Others will still feel anxious about their own security. You and all the other managers in the business need to keep a prominent profile, to speak confidently about the future of the business and to act with sensitively.
Do's and Don’ts of Redundancy:
- Consider all the options before laying off staff
- Invest as much time and capital as possible in the redundancy process
- Follow legal requirements
- Explain the company's position as clearly as possible
- Consider giving staff access to outplacement specialists
- Give leavers time off to go job hunting
- Work to raise the morale of staff who remain
- Underestimate the impact of redundancies on staff morale and productivity
- Ignore the need to consult with staff on the redundancy selection process
- Deny staff the opportunity to offer solutions that could avoid redundancies
- Hide management away, but make them accessible
- Forget that the company's reputation with employees, suppliers and customers depends on how responsibly it handles the redundancy process.