We recently lead a change and restructure process within a business which unfortunately lead to multiple redundancies. This is the aspect of HR consulting which can be the most challenging. However, the case was very strong for change. The situation was this; too many people + not enough work = some people need to go in order for the business to survive.
Deciding on who and how many?
Considering the significant financial costs associated with redundancy payments, these decision don’t come lightly. The first stage is determining which people need to go and ensuring there is a clear logic to the decision making. We use a spreadsheet which details all the staff names and each person is given a rating based on the specific role expectations within the business. This process needs to involve the collective wisdom of the entire leadership team to prevent favoritism and ensure an objective view is maintained.
Redeployment and consultation
Everyone who deals with redundancies understands the new complexities involved in the current Fair Work system. The old approach of sitting down with an employee and issuing a redundancy letter in one meeting is well and truly over. You can blame or thank the previous Federal Labour Government for the current system depending upon your political leanings. If we put politics aside and focus on the requirements of the current Fair Work Act. The key points are ensuring redeployment options are carefully considered and you undertake adequate consultation methods. If we deal with redeployment first. Redeployment simply means: Are there any other meaningful jobs the person could do within their skill-set? If the answer is no, this needs to be discussed with the employee because they might have ideas that the business hasn’t considered. Some businesses fail at this part of the process by advertising roles externally during the redundancy process. This sends a confusing message to staff and may get you in hot water if the employee challenges the process at Fair Work.
The consultation aspect is usually a frustrating aspect for Managers involved in the process. Once decisions have been made, the Manager is usually very eager to speak to the employee and issue a redundancy to get the process over with as quickly as possible. Keep in mind, the Fair Work Act has several aspects around consultation which must be considered carefully and it’s not about the Manager’s personal discomfort levels. Some HR practitioners recommend a 5 day consultation process to limit any future claims. From bitter experience, this approach just isn’t commercially viable because it delays the process to the detriment of all involved. A compromise to this, is limiting the time-frame to 2 days. For example, speak to the employee on day 1 so they can consider redeployment options etc and meet the following day to listen to their thoughts. Failing to take the time to do this part may get you in hot water later on.
Crunching the numbers to ensure redundancy payments are correct
This is an area to get right because any financial errors may de-rail and unnecessarily confuse the process. The first step is confirming how much notice period and redundancy payments should be paid. The first step is to check the Enterprise Bargaining Agreement, Award and/or Employment Contracts for any specific terms. Most will reference the National Employment Standards calculations based on a sliding scale of weeks per years worked. You need to consider the preferential tax treatment which redundancy payments receive. Payroll is best to take the lead in this part and need to ensure any residual leave entitlements are included in the final calculations.
Being mindful of the human impact
Some Managers like to use a redundancy process to show how ‘hard-nosed’ they can be in order to impress the leadership team. Others, avoid the process completely. From our experience, this is due to the high levels of discomfort and anxiety created. The redundancy process needs to be considered as part of the whole employee brand proposition. Its ok to mention your own levels of discomfort in being forced to make these tough decisions. But don’t make it all about you! Remember that it's a very difficult and challenging time for the person being made redundant as they are dealing with feelings of rejection and uncertainty. The old adage of ‘treat people as you would like to be treated’ is the best rule of thumb.
Ideally use a HR Consultant to guide you in the process as we have done this many times and can help navigate you and your business in the right direction. Email us at Your HR Team if you need assistance with your redundancy process.