Editor’s note: A few weeks ago we posted an article that explored how to cope with being made redundant. Today we’re looking at things from the employers’ perspective, exploring the best way to preserve your human and business integrity when implementing redundancies.
Most business owners stress out at the thought of redundancies.
It is very important to find a middle ground (it will never be a perfect balance) between acting under the legal and commercial requirements and responding humanely to people’s lives being affected so dramatically.
Observations over the last 20 years indicate that most businesses struggle to handle this difficult area of business life. Management can often act out of character or cut and run from dealing sensitively and supportively to the fallout.
Employment Law is also a complex minefield and all business owners should research and seek professional legal advice before taking action.
Here are 21 things you must consider before carrying out redundancies.
- Review your organisational chart. First things first. Review your organisational chart in terms of fulfilment of product or service delivery and the operational necessity of each position. Also consider the impact a redundancy has on customers, continuing employees, team morale, revenue and operational efficiency.
- Review your employment obligations. This is key once you have decided to make staff redundant. Are your employees covered by an EBA or Collective Agreement? Is your work force unionised? Are they under an Employment Agreement? Is there an award that applies also? Be very careful in understanding your legal obligations fully before taking any action.
- Understand what redundancy means. It’s important that you get advice to confirm that your staff cuts are in fact legitimate redundancies. Research first, take action second. After you terminate, it’s too late to reverse your actions.
- Get Advice. This is obvious, but often overlooked. Don’t accept advice from a mate, a website or a colleague as gospel. Spend some money on legal or professional advice here to fully understand your position. Get it in writing.
- Determine the total cost of termination payments. Get your internal or external accountant to create a spreadsheet of all termination payments after receiving the advice on your redundancy obligations. Don’t forget to include employee entitlements and other termination payments applicable beyond any redundancy payout.
- Budgets and cashflows. Once you know the total figure of the termination payments, calculate the impact on your budgets and cashflows from a timing perspective.
- Do all your homework before execution. You have total flexibility in scoping redundancies before execution and absolutely none after execution. The manner in which you handle your terminations is binding so do as much homework beforehand as possible given financial and time constraints.
- Don’t over-react in cutting staff. If your forward demand can change from week to week or a staff member’s performance could turn around in the short-term, don’t cut your head count too dramatically as you may quickly be under-resourced.
- Be human. While all of this is happening and your gut is churning, try and remind yourself to be human in your approach and interpersonal dealings with exiting staff. They will never forget the way you behaved.
- Be prompt in redundancy payments. Once you have budgeted, decided on action and executed redundancies, you must make the payments promptly as agreed. Holding over payments to your advantage is illegal and unethical. Your departing staff will hate you for it and you are potentially causing default on their mortgage payments and rendering them unable to put food on the table.
- Explain the situation fully to exiting employees. Don’t guild the lilly here. Talk human to human. Explain the situation truthfully and outline your committed action. Explain to them their continuing obligations. Let them speak. Let them pause to absorb the news and consider questions.
- Explain the situation fully to continuing employees. Don’t underestimate the impact of the redundancies on your continuing staff. You’ve just sacked their workmates and you may have increased their workload. Again, be direct, truthful and allow grieving and questions.
- Decide on what support you will offer, if any. Consider if you will act as a referee for their future employment. Will you offer counselling services? The provision of any support must be weighed up and advice taken.
- Ensure exiting employees meet their continuing obligations. Protection of company assets, non-disclosure of intellectual property, poaching of customers and other actions are often strictly forbidden under employment obligations that continue after termination. Monitor this.
- Acknowledge that some exiting employees may go legal. Relationships change after a divorce. Never assume this can’t happen to you in a professional context, despite how well you believe you behaved.
- Return of company property. Prepare a checklist to tick off receipt of all company property. Remember that company property can be both tangible items such as cars and intangible items such as computer files.
- Acknowledge that you may have to go legal. As non-litigious as you may be, an exiting employee that creates havoc for your business must be defended against.
- Consider security. Depending on your industry, premises and personality types of exiting employees, be aware that you may have to increase security during and following the redundancies.
- Immediate departure or serving of notice period. Consider whether you wish exiting employees to serve their notice period or exit immediately. Most employers request employees exit immediately to reduce risk and protect morale.
- Consider the transitional impact on continuing employees. Monitor the workload, productivity and morale of your continuing workforce. Stay close to this issue and focus on feedback mechanisms both internally and externally.
- How will you handle customers? The delicate decision of how much or how little to disclose to your customers after redundancies is a case-by-case situation. This needs serious attention around the time of the redundancies and in the weeks following.
Darren Bourke is a Consultant, Business Coach & Mentor who helps small & medium businesses struggling to maximise profitability, productivity, people and performance. His Free Report titled What Successful Owners of Growth Businesses Do That You Don’t, newsletter and updates are full of strategies and tips to make your business boom. Sign up now at www.businessinfluence.com.au
Photo: Gary Denness (Flickr)
