Planning for redundancy
The amount of work that goes into preparing for redundancies can’t be underestimated. It’s not something that is done on a whim and all possible alternatives should always be explored.
Putting in the time up front will help with the smooth roll out of the consultation and ensure everyone is clear on why redundancies are necessary. Effective redundancy planning can also help mitigate risks and ensure a fair and transparent process.
Announcing redundancies unsettles the whole workforce, even those who aren’t directly affected. Customers and suppliers will want to know how these redundancies could affect them, and Company brand and reputation are at risk when entering into a consultation process.
If you’re redundancy planning for the first time, or maybe it’s been a while and you want to make sure you’ve got everything covered, this blog is for you. I’m going to cover the 10 questions you need to ask of the leadership team before entering into a redundancy consultation process.
Are redundancies necessary?
There are only a few genuine reasons for redundancies:
- The entire business shuts down or moves
- Part of the business shuts down or moves
- The employer needs fewer people to do a particular kind of work – this can be due to a need to decrease costs, a decline in customers, a requirement to increase efficiency, deploying new technology to improve business processes or outsourcing (beware of TUPE applying here)
Have alternatives to redundancy been exhausted?
Once you’ve established redundancies are necessary it’s crucially important that all reasonable alternatives are explored. Redundancies should be a last resort. Being able to demonstrate the company has explored all the alternatives also helps form part of the rationale in the announcement.
Here are a few things to consider before resorting to redundancies:
Recruitment freeze – this is generally the first thing a business will do when times are tough. There are situations where recruitment may have to continue in areas where there is a need to recruit specialist skills. However, in general, and definitely in those teams who may be impacted if redundancies do take place, recruitment should be frozen. No one should be recruiting knowing that redundancies could be on the horizon for new recruits.
Withdrawing job offers – this is a difficult one and something I’ve had to do in the past. However, if you’re freezing recruitment, then this is another way to protect jobs. Bringing someone into an organisation and then putting them at risk of redundancy shortly after is probably worse than withdrawing a job offer. There is always the option to pay those individuals some compensation for withdrawing their job offer if that’s available to you, but it still makes it a tough thing to do to someone, not to mention the impact on company reputation.
Overtime ban – this is relatively straightforward. There may be specific situations where overtime is necessary but a general overtime ban should be in place with approval required in advance from the senior team.
Pay freeze – this will depend on the timing of your annual pay review and there’s also the option to put promotions on hold.
Reducing hours – there could be individuals who are looking to reduce their hours for more work life balance and it is something you could consider offering out to the workforce for a pro rata decrease in pay.
Unpaid leave – this could be an option for some people looking to take extended time off for personal reasons.
Withdrawing agency staff and contractors – this can be tricky where you employ contractors with specialist skills. However, you should take a look at all agency and contractor staff and consider withdrawing them, especially in those teams who could be potentially impacted by redundancies.
Internal redeployment – review those areas where you potentially have more staff than you need and where redundancies may be required. Consider redeploying staff who have transferrable skills into alternative roles, especially where you’ve had to implement a recruitment freeze.
What's the rationale and business case for redundancies?
Can you demonstrate a clear and robust rationale for the decision to contemplate redundancies? Does the business case stack up – check out the financials in terms of the savings that will be realised. How does the decision to make redundancies align with the strategy for the organisation? Seeking redundancy advice for employers can be particularly useful at this stage to ensure compliance with employment laws and best practices.
What roles are going to be impacted by the proposed restructure?
You’ll need to avoid solely relying on job descriptions and organisation charts. You need to get under the skin of what everyone associated with the potential closure / reduction in numbers actually does on a day-to-day basis. Consider employees who do similar work and whether their skills are interchangeable, as well as those who carry out similar work at different locations.
Once you’ve established the roles that are potentially impacted you need to consider objective and fair selection criteria. Criteria such as Performance, Skills and Experience are generally considered fair. These should be accompanied by a clearly defined criteria and system of weighting that relates to the skill required for current or future needs of the role and refers to written records, such as appraisals, rather than personal opinion. This will form part of the consultation process if you’re proposing to make 20 or more redundancies.
When will you involve the Trade Union or other representatives?
It’s best practice to engaged recognised Trade Union or other elected body as early as possible. It helps to build trust – they will have valuable insights to share, and engaging with them early on helps with the communication further down the line. Confidentiality is always paramount in the planning stages so you could consider NDAs for representatives as well as others you need to bring into your confidence.
Who will be part of the restructuring project team?
Depending on the size of the organisation you will need to consider who is appropriate to be involved in the redundancy planning stage. The more people involved before the announcement the greater the risk information could be leaked (consider NDAs where necessary). However, it’s really important to have the right people who are close enough to the detail and the day-to-day operation to contribute to the business case. It’s also a delicate balance in deciding who to involve at this stage as some of those you need on the team could also be impacted themselves. You’ll need to prepare the MD to have those difficult conversations.
How will you approach Voluntary Redundancies?
How and when will you ask for volunteers? How long will the VR programme run for and will certain critical roles be protected to retain key skills? Remember VR are still dismissals to be included in the total number of headcount reduction so be aware of tripping collective consultation thresholds. You may want to consider using Settlement Agreements for those who take voluntary redundancy.
Do the leadership team understand the implications for recruitment after redundancies have taken place?
It’s not impossible to recruit after making redundancies, although there is a risk in doing so that the redundancy will not be deemed genuine. There are inevitably situations that will arise where there is a need to recruit after making redundancies such as winning a new client, but the reasons for recruiting must be clearly justified as separate from the rationale to reduce headcount. There is no set period of time to wait, although it’s recommended to put as much distance between redundancy and recruitment as possible.
Will you be offering enhanced redundancy payments?
You may already have a redundancy policy outlining your approach. It’s important to dig that out especially if you’ve not had to make redundancies for some time. Does it still apply and how will you approach redundancy payments?
Will you offer Outplacement Support?
Responsible and values led employers see the value in offering Outplacement Support. There are many benefits to businesses as well as individuals. Deciding whether or not to offer it is part of planning for redundancies. You’ll need to gather information from potential suppliers on what they can offer on an individual and group basis depending on numbers, and figure out what budget you can allocate. It’s something that is likely to come up during consultation so it’s a good idea to have an answer upfront and have a supplier lined up to support you if it’s something you want to offer.
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