Laying people off is one of the hardest things you’ll have to do, so you’ll want to make it as painless as possible for all concerned. Here, in the first of a two-part guide, we explore consultation and alternatives to job cuts
There’s no easy way to say this. Unfortunately, your performance hasn’t been at the level required, and in these hard times we’ve had to take that into account. This is not an easy thing to do, but I’m afraid we’re going to have to try to give you some pointers on carrying out redundancy.
Why? Because figures suggest that businesses are getting job cutting seriously wrong. The Tribunals Service last month revealed that the number of employment tribunal claims were up 43% in 2007/08, with more than 11,700 of the total 189,303 claims relating to redundancy
As redundancy is heavily governed by legislation, there shouldn’t be much room for error, yet compensation pay and a failure to consult properly featured prominently in the claims.
Time for leaders
As business psychologist Stuart Duff, a partner at Pearn Kandola, explains: “Entrepreneurial businesses tend to be notoriously unprepared. It’s down to the nature of the business, which is often based on rapid growth without thinking about the process.”
That doesn’t let you off the hook, though. “Now’s the time for leaders to step up to the mark and take responsibility,” adds Duff.
Willie Walsh of British Airways tried this last month by announcing he’d already decided to sacrifice a month’s salary and asked his 40,000-strong workforce to follow suit. As, unlike Walsh, they’re not on £61,000 a month, his request didn’t go down too well. However, he had more luck negotiating new terms and share option deals within specific employee groups.
There are right and wrong ways of engaging your employees when you have to make tough decisions. As Stewart Gee, southern area manager for employment arbitration and advisory service Acas, puts it: “People understand the economic situation and that any threat is related to external factors, but they still take it personally.” Ignore this point at your peril.
To your workforce, you’re suddenly the one pointing the pistol at their heads. Some will understand your position, the likelihood that you’ve tied your own money up in the growth of the business and that, if the company fails, you stand to lose almost everything. But many will not.
They’ll harbour resentment, feel a sense of anger and criticise how you deal with the announcement. The remaining team may side emotionally with the departed, feel a sense of guilt, and worry about the security of their positions going forward.
You’ll struggle to completely eradicate the grievances, no matter how delicately you tread. You can minimise the impact, though. Start with consultation.
Following up
If you want to begin to understand employee mentality, you could do worse than give Acas a call. And many of you have. Just over a third of its enquiries from employers are now redundancy-related, up from 19% at the beginning of the year and 14% for the year to March 2009.
Remember, there are rules about consultation. As Gee points out, if more than 20 are being made redundant, you need to provide 30 days’ consultation beforehand. If it’s greater than 100, this rises to 90 days. For under 19 people, consultation should be “reasonable and meaningful”. This will vary depending on circumstances, but often means
five to 10 working days. Ideally, hold a group meeting, and keep it formal and clear, avoiding ambiguity.
“Follow this up with letters or emails informing employees, making them feel part of the process,” advises Emilie Cole of law firm Bindmans LLP.
“If you don’t do this and people get wind of it, the rumour mill will be far worse,” warns Gee. “Transparency is key. The law requires businesses to consult and explain the reasons for redundancy, defining the selection criteria it plans to use.” This is also your chance to ask your workforce to offer suggestions for ways in which costs can be cut further.
The alternatives
Of course, redundancy isn’t your only option. The managing director of small Cheshire-based automotive parts supplier Alexander Binzel UK, Steve Hallows, has managed to keep his entire 30-strong team by looking at alternatives.
The car industry is suffering more than most, and Hallows consulted David Readman, of Employment Practice & Law, for advice on how to handle the situation. “He spoke to me several months beforehand,” recalls Readman, “and his opening gambit was: ‘I’ve never had to do this before, so what do I have to do?’”
Readman had drawn up the company’s contract terms around two-and-a-half years earlier. “He got staff together and told them what it was about, explaining the situation,” Readman recalls. “The employment documentation included a ‘lay-off and short-time working’ clause. It gives a contractual right to lay-off staff or introduce revised terms.”
A 10% reduction in pay and hours, which included Hallows, was agreed without having to ‘go legal’. Indeed, no one challenged the move. Hallows now consults his team on a monthly basis and furnishes them with sales figures. While the arrangement is open-ended, Hallows hopes it proves temporary and means he won’t have to recruit for specialised positions in welding and robotics when the economy turns. So check over those contracts carefully.
And there’s more…
Alternatively, some employers are looking at secondments, sabbaticals or contributing to training courses, the last of which may not be feasible due to costs incurred unless your business is able to utilise the government’s Train to Gain scheme.
