Employer's guide to conducting a redundancy program

With some commentary now starting to appear around the possibility of a second phase of the GFC, there is also some possibility that employers may be considering employee redundancy programs to align their organisations to the current business conditions.  Whilst I believe that the lessons of the 2008-09 GFC will be fresh in the mind of governments and central banks globally and that whatever occurs will be better managed, we cannot rule out the possibility of a further decline in sentiment and consequent reductions in employment. In fact, Westpac has suggested that interest rates could fall 1% and unemployment increase from the current 4.9% to 5.7%.  This post is to  provide an insight into experience and best practice to anyone who has to conduct a redundancy process with either an individual or a team.

I have been privileged to work through career transition programs with 100s of individuals over the past 5 years who have been retrenched (outplaced, right-sized, down sized, terminated....) from a role in a corporate or professional services organisation. The privilege arises from many of these clients choosing to share many aspects of their life and experiences with me - both personally and professionally - and sometimes I feel like a big sponge absorbing some very emotional feelings and responses to what the employer has done or not done either leading up to or during the redundancy process.

Fair Work Australia and Legal Considerations

I am not an employment lawyer nor aspire to be. I therefore do not intend to advise you on what you should and shouldn't do around the legal aspects of a termination through redundancy - apart from comply with common law, the Fair Work Australia provisions, any terms of an individual's employment contract and the company policies and codes of conduct - and consult an employment lawyer as necessary. (For a recent blog from an employment lawyer on the do's and don'ts of redundancy programs  taking into account Fair Work Australia provisions, please click here.)

That being said, I would say probably 10-15% of clients that I see after they have been retrenched (normally suddenly but sometimes with a long lead time) consider taking legal action against their former employer. Very few actually carry through with this course of action - even if just a solicitor's letter - after we have discussed the options and long term strategic benefit. However, it highlights the importance of following both due process and the law to mitigate the possibility of subsequent legal action.

Choosing people for Redundancy

Due process is obviously important to ensure that there is a genuine redundancy of the position and/or of skills - and particularly to meet the conditions of a "bona fide redundancy" for income tax purposes - and therefore concessional tax treatment.

Most (but not all) of the clients I have worked with normally accept a redundancy - if they also accept they have been treated fairly, the reasons for redundancy are genuine and the redundancy payment is fair.   Perceptions of lack of or unfair due process may cause an employer further time and financial investment if an affected employee chooses to query it.

Exploring other Employment Options

One of the aspects I saw during the GFC was both employers and employees were prepared to consider alternative employment options apart from a straight redundancy - leave of absence, using up accrued annual and long service leave, reverting to part-time work, implementing job share arrangements, supporting sabbaticals or sponsoring extra study (please refer to my earlier blog post Lessons from the GFC )

This approach delivered some significant advantages to the employer in that it retained corporate knowledge, maintained overall morale and gave additional unused capacity when an upturn arose.  For the employee, it was sometimes better to have say 80% of pay rather than a redundancy payment and then no income for a period - plus on an after tax basis - the employee did not notice as much difference.  The other ancillary benefits included potential opportunities for better work life balance, networking and obtaining new skills by remaining with an employer, albeit in a slightly different capacity.

Therefore, a redundancy may just one of a number of options available to the employer.

Advising Affected Employees

Best practice in advising employees from what I have either observed or heard (or perhaps more so, from what has not been done) would include:

• A redundancy notification meeting with an employee should always be attended by both the line manager and a HR representative.
• The meeting should be done in a private office or meeting room away from general work areas if possible
• Tissues and water should be available and offered if necessary
• There should be a script which explains the business reason for the redundancy of the position - not the person - and it is important that there is adherence to this script.  This meeting will normally be relatively short.
• All redundancy payment calculations, including salary adjustments and accrued leave payments, should be available for the affected employee.
• Access to Employee Assistance Programs and/or Career Transition (Outplacement) support should ideally be offered.
• There should be a considered approach to what happens immediately after the notification - does the employee return to their desk, IT security aspects, taxi vouchers home, meet with an external consultant etc. 

Leaving - Immediately or Deferred

There are arguments both ways as to whether an affected employee should be asked or given the choice  to leave immediately or at some future date.  It will to some extent depend on the business environment and risks to the employer and other employees by the employee staying - and also how the employee is feeling after the notification.

As it is a redundancy of a position, and not a performance related issue, theoretically there should be some latitude in this decision.  I always encourage affected employees who have a choice to stay to actually stay and complete their time with the organisation in a respectful way and use it as an opportunity to have appropriate farewells and send thank you type communications.  I recommend people"hold their head high" - it is how they will be remembered and may help facilitate their next role.

OnSite Support

If an external career transition program is being offered (and notwithstanding a vested interest I have here,  I recommend anyway as a good business investment to protect the employer's brand, the morale of remaining employees and to assist the individual deal with the transition out), I consider it important that there is a consultant onsite to talk with the affected individual immediately after the notification of the redundancy.

The purpose of this meeting is to immediately provide immediate impartial support, a "bridge" to the next phase, personalise the experience  and  to provide some instant action and communication strategies.  It can also provide the employee with some optimism about the future - which can also have positive impacts on other remaining employees.

After the Event

Once all affected employees have been individually notified, it is critical that there is appropriate communication, preferably face to face and subsequently confirmed electronically, as to the business reasons for the redundancies and what this means for remaining employees.

Understandably, there will normally be concerns and the remaining employees will also be going through a transition - often without the support of someone like me - so the communication and supportive leadership is essential to maintain morale and productivity.

And what happens with me

For individuals offered a career transition program, I meet with them as soon as possible after the notification date to assist in determining a pathway forward.  I am keen to assist them to clarify their personal values, goals, skills and achievements to date and help determine a longer term career strategy - before we even look at developing a resume, job search and interview techniques, networking skills and online branding skills.

I also ensure that other career options than the previous role or industry are considered - for the reasons that some people have been in the wrong role, company or industry - and the redundancy is an opportunity to rectify that.  Options that can be considered include shifting to a new career (reinvention) , returning to study, travelling, starting a business or retiring - and even if the individual returns to the same industry in a similar role, it is done having considered other options.

The other aspect I am conscious of is operating holistically and understanding the individual's personal situation - a job is just one part of their life.  The time after a  redundancy can often bring forth consideration of other aspects of their life - health, relationships, finances etc - so these may be covered including reference to other appropriately trained professionals as necessary - doctors, counsellors, financial advisors etc.

Conclusion

Undertaking a redundancy process can be difficult for both an employer and an employee.  However, some planning, considered communication using a variety of means, use of appropriate external consultants and a generally respectful approach can make a difficult process anyway better for all parties.

And the bottom line - an employer can meet it's business objectives whilst the affected employees may end up in a better role more suited to their personality, skills and career aspirations after the redundancy and career transition program.

PB
Copyright: Peter Black 2011