Navigating redundancies is a challenging and sensitive process for all involved. Proper support and management before, during and after the process can mitigate risk, protect morale and ensure compliance.
Managing the redundancy process can be one of HR’s most complex and emotionally taxing tasks. It requires not only rigorous adherence to legal obligations, but also a compassionate approach that recognises the impact a redundancy can have.
And, in an era where employers are under increasing pressure to do more with less, and where emerging technologies are fundamentally reshaping the way work gets done, the need for cuts and redundancies is becoming an uncomfortable reality for an increasing number of businesses.
AHRI’s latest Australian Quarterly Work Outlook report shows that the share of organisations planning redundancies in the September quarter rose to 27 per cent, up from 23 per cent in the June quarter.
Even though businesses may be facing urgent situations that necessitate making redundancies, such as financial difficulties, it’s crucial to acknowledge that these decisions can have a profound impact on the lives of affected employees and the overall morale of the workforce. As a result, the way redundancy decisions are handled before, during and after the fact, can make or break a culture.
The following will guide you through each phase of the redundancy process, ensuring that the organisation navigates this difficult terrain with care and compliance.
Before a redundancy: Legal obligations
Before commencing a redundancy consultation process, evaluate whether alternative cost-saving measures could be implemented, such as restructuring roles, reducing work hours or exploring the possibility of voluntary redundancies.
Prior to delivering a redundancy decision, it’s crucial to engage in meaningful consultation with employees. Consultation is generally a legal requirement under an award, enterprise agreement or employment contract; it’s also an essential component of a transparent redundancy process.
Employees should always be given reasonable written notice of any intention to hold a formal meeting on work-related matters such as a potential redundancy, and should be given the opportunity to bring a support person.
“AHRI’s latest Australian Quarterly Work Outlook report shows that the share of organisations planning redundancies in the September quarter rose to 27 per cent.”
Avoid impersonal communication methods such as emails and, where feasible, face-to-face meetings are always recommended to show respect and allow for an empathetic discussion.
Note that decisions about redundancies should not be made in these consultation meetings; their purpose is to explore alternative avenues and solicit the employee’s input to mitigate the impact of a redundancy. Employees should be offered access to employee assistance programs or counselling services from external providers at this stage to help them navigate what is likely a stressful time.
Understanding employers’ legal obligations relating to redundancies, in particular what constitutes a genuine redundancy, is another critical step to take before putting the process in motion.
The Fair Work Act provides criteria for a genuine redundancy; namely that the employer no longer requires the person’s job to be performed by anyone because of changes in the operational requirements of the employer’s enterprise, and that the employer has complied with any obligation imposed by an applicable modern award or enterprise agreement to consult about the redundancy.
Employers might be tempted to make a role redundant to avoid carrying out a lengthy performance management process, but they should exercise caution and ensure that the redundancy is genuinely justified, according to this definition.
Before finalising the redundancy, consider any redeployment options that might be available across the organisation.
Read HRM’s article ‘What does a reasonable redeployment offer look like?’
Document all efforts to find alternative roles and maintain detailed records of this process, which may be vital in the case of a future dispute. Ensure that redeployment is discussed during consultation discussions, providing clear information on whether or not there are available role opportunities for the employee to transition into.
During a redundancy: Decision and final pay
Once the decision to proceed with the redundancy is made, communicate the decision clearly and compassionately, including the reasoning behind it and the next steps. Again, it’s ideal that this meeting takes place face-to-face so the employee has ample opportunity to ask questions and receive immediate support.
Following this, issue a final pay letter that details the employee’s entitlements, including payments of their outstanding wages, leave balances (and annual leave loading, if applicable), and redundancy pay, as well as their notice period and their final working day, to prevent any confusion or disputes.
It’s crucial to be aware that some awards or enterprise agreements include extra obligations for redundancy and notice pay. Be sure to review these thoroughly.
Employers can ensure that severance packages are fair and legally compliant by reviewing the redundancy entitlements under the relevant industrial instrument. The Fair Work Ombudsman’s Redundancy Pay Calculator is also a good tool to ensure accurate payments.
Once the news has been communicated, provide affected employees with access to immediate support through employee assistance programs or counselling services.
The organisation should also review what additional support it has the resources to provide. For instance, when Airbnb was faced with having to cut 25 per cent of its workforce in 2020 due to the impact of COVID-19 lockdowns, it not only met its legal severance requirements, but also covered up to one year of health insurance for redundant employees to help them navigate the global health crisis.
It also allowed employees to keep their company laptops to assist them in searching for a new role. Additional offerings such as these, if financially viable for the business, can help preserve wellbeing and goodwill, and help cushion the blow of a redundancy.
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After a redundancy: Supporting employees
To assist employees with the transitional period following a redundancy, employers should consider what long-term support they’re able to provide.
This could include providing access to career transition programs, which can include support such as assistance with resume writing, interview coaching and job search support. If feasible, employers can also offer financial planning support to help employees manage their finances post-redundancy.
To help employees in their job search more directly, consider reaching out to other organisations within your industry to gauge new opportunities for them. This not only eases the job search process, but can also foster a sense of collaboration and goodwill within the industry.
For example, Airbnb’s strategy for supporting redundant employees in their job search included temporarily appointing a portion of its recruitment team into an alumni placement team to assist departing staff, as well as creating a dedicated website to connect them with potential employers.
Finally, employers should also remember the impact redundancies can have on the employees who remain in the business. Ensure transparency by keeping employees informed about the reasons for redundancies and how the organisation plans to move forward. Address any concerns, and ensure employees are aware of the organisation’s employee assistance program or other wellbeing supports.
Emphasising the positive aspects of organisational changes, such as opportunities for growth, can also help employees see how the changes align with their long-term goals.
While HR can never erase the difficult aspects of a redundancy, following these practices before, during and after a redundancy can soften the impact and ensure organisations navigate the challenges with compassion and a focus on the wellbeing of departing employees, the remaining workforce and the business itself.
This article first appeared in the 2024 October-November edition of HRM Magazine. Skye Smith CPHR is an employee relations and HR consultant.
Photo by Anna Shvets via pexels.