To what extent do organizations need to involve employees in decision-making processes? Base your answer on a country of your choice.
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148hrm_redundancy.pptx148HRM
Redundancy
Understand the main legal issues
Understand best practice approaches to handling redundancy
Objectives
When dismissal occurs because:
Employer ceasing to carry on business
Employer relocating the business
Requirements for particular kind of work have ceased or diminished (generally or in a particular location), i.e. need to reduce headcount either generally or in a particular location.
Can also be expanding business (due to technology)
What is redundancy?
Two forms of redundancy
VOLUNTARY REDUNDANCY
COMPULSORY REDUNDANCY
A financial incentive offered by an organisation to encourage employees to voluntarily resign, typically in downsizing or restructuring situations. The purpose is to avoid layoffs or, in certain cases, to circumvent union employee regulation laws.
When organisations have no options but to dismiss employees from their jobs.
When economy growing – approx. 400,000 redundancies p/a
In 2009 there were 939,000
In 2012, it was 595,000
2008-2013 3 million people made redundant
= > 10% of workforce
Impact of recession
Why is legal definition important?
Entitlement to redundancy payments
HMRC (tax free if < £30,000) + no payment for National Insurance (NI)
Different procedural approach to dismissal
Must meet Employment Termination (ET) standards of ‘reasonableness’
Eligibility to make claim of unreasonableness in ET = same as dismissal.
Why is legal definition important?
What is a reasonable procedure?
Have steps been taken to minimise no. of redundancies or avoid altogether?
Either:
Steps to prevent situation arising in first place (long-term approach)
Steps to take once redundancy becomes likely or necessary (short-term)
What is a reasonable procedure?
Effective HR planning
Flexible working
Early retirement schemes
Long-term approaches
If downturn or change in business processes can be foreseen (big ‘if’)
Can reduce no. of new recruits
Focus on retraining existing employees for new roles
Allow ‘natural wastage’
Retire
Resign
Pass away
HR Planning
Maximising Flexibility
Multi-skilling employees
Organisational flexibility (multi-functional teams, flatter hierarchies - organizational structure with few or no levels of middle management between staff and executives.)
Subcontracting peripheral tasks
Using contracts with broad definitions of job content and hours.
Maximising Flexibility
HMRC allows this from 50 yrs old. Attractive for employees (can draw pension and still work)
BUT
Organisation must have successful occupational pension fund which is in surplus.
Early retirement
First step usually = ask for volunteers
But expensive:
long-serving employees entitled to most payment
Loss of best talent
Other pitfalls of asking for volunteers:
Too many applicants
Those not selected become demotivated
How to avoid this?
Short-term approaches
- Target particular grades or departments
Target individuals with poorer performance and longer service (early retirement options?)
Beware of age discrimination…
Tell them their job is likely to disappear in restructuring anyway
Don’t raise false hopes – establish criteria e.g. employees with good performance, long-service and valuable skills won’t be selected.
Short-term approaches cont’d
Other actions to avoid/minimise redundancies:
Only advertise vacant posts internally & only fill with employees at risk of redundancy.
Or only fill with agency workers or short-term contracts.
Cut staff costs by:
Reducing overtime
Cutting hours (e.g. KPMG)
Pay freeze or pay cut
These should be negotiated with staff reps!
Cut other costs (rent, meal incentives, travel allowances)
Redeploy (inter-departmental/ regional).
Short-term approaches cont’d
Whatever approach, law requires consultation with unions or staff reps, and with individuals at risk.
‘Last in, first out’ (LIFO)
Age discrimination? Lost talent/Performance?
Matrix approach
Scoring according to criteria (e.g. competence, performance, attendance, disciplinary/conduct records, skills and experience/qualifications, attitude, performance, specialist skills)
Must be able to provide objective evidence!
Selecting people for redundancy
Restructuring approach (downsizing)
Decide on new structure first, then figure out how to fit existing employees into new structure
Where 2 or 3 jobs will be replaced by one, existing employees must apply for the new position. Redundancy for those not selected.
Advantages of this approach?
Disadvantages?
Selecting employees cont’d
Not much law on this except must give employees reasonable time off to find another job.
But most large orgs offer practical assistance with job search and counselling.
Counsellors must be trained professionals otherwise disastrous!
Help for redundant employees
Straightforward rules for calculating – based on age and no. of years service
But maximum payment employers obliged to make (for 20 years service) = only £13,500
Therefore most orgs go beyond statutory minimum
Problems:
Where full-timers switched to part-time
Just base pay, or overtime & bonuses considered too?
Redundancy payments
Remaining employees often feel guilt, ‘shell shock’, fear, demotivation, mistrust.
But HRM improve anxiety by:
COMMUNICATION is key – organisation’s recovery plans shared transparently.
Ensuring to survivors that the selection, compensation and treatment of redundant employees was fair.
Explaining to remaining employees their importance to the business.
Coaching them to redefine their value to the reshaped organisation.
Linking employees’ personal goals to company objectives.
Encouraging managers to ask their teams to air their concerns and communicate fully with them – check on coping abilities.
Demonstrate how everyone fits into the business’s overall structure.
Find creative ways to help staff bond with each other again.
Encourage people to look after themselves to reduce stress (H&S) – workloads and longer working hours.
Performance management programmes and personal development plans.
Those promoted or on new jobs – training and development schemes.
Line manager skills and capabilities upgraded through training.
Managing survivors
22
Gilmore and Williams (2013) Human Resource Management (ch.9)
Taylor, S. (2014) Resourcing and Talent Management, CIPD
Further reading
