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How employers can manage redundancy responsibly

Companies should take a long-term and holistic approach when it comes to letting people go. It’s better for those who are losing their jobs and for the business’s reputation
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As concerns of a possible recession continue, mass redundancies are perhaps to be expected. Payroll is often the largest and most regular company cost, which makes it the first item under scrutiny when firms need to reduce outgoings. 

Facing the headwinds of the post-lockdown economy, circa 11% inflation and higher energy bills, businesses in different sectors are already taking action. Three tech giants intend to make large-scale redundancies this quarter. Up to 18,000 jobs are set to go at Amazon, which is closing three UK warehouses; Google will cut about 12,000 roles worldwide; and Microsoft is to axe 10,000.

Also in Q1, Goldman Sachs will shed 3,200 employees, while publishing group Reach, which lists the Daily Mirror and Daily Express among its 130 titles, plans to reduce its headcount by 200.

Protecting a brand

While the stark reality of the UK economy means that some layoffs are unavoidable, and even those who might lose their jobs do appreciate that, there is a right way and a wrong way of handling redundancy. 

“Businesses should think about the long-term risks to their reputation of a rushed or flawed redundancy process,” warns Lloyd Davey, a partner at the employment law firm Stevens and Bolton. “This is particularly the case for any business in the public eye as redundancy processes can significantly damage a brand and reduce customer engagement and loyalty.” 

Take Elon Musk’s takeover of Twitter last year. The billionaire’s acquisition of the social media platform saw its 7,500 global workforce halved. Many who lost their jobs were notified after the decision had been made and they found they had been locked out of their work computers. Cut off from internal company systems, the newly laid-off employees were effectively suspended from being able to do their jobs or access emails, during what was theoretically their notice period. 

Businesses should think about the long-term risks to their reputation of a rushed or flawed redundancy process

Some former workers at Twitter’s UK operation have accused Musk of “unlawful, unfair and completely unacceptable” treatment during a “sham” redundancy process. Winckworth Sherwood, the law firm representing 43 people who lost their jobs at Twitter in this country, has, according to a report in The Guardian, raised the possibility of employment tribunals.

Dr Luke Fletcher, associate professor in management at the University of Bath, says that companies need to think about the potentially negative impact that poorly handled redundancies can have on the staff “left behind, who may feel their former colleagues have been badly treated”. 

Internal reputation matters too. In a poll conducted by the workplace app Blind, which verifies employees through their work email addresses and allows them to share information anonymously, 42% of 180 registered Twitter staff indicated that they intended to resign in response to Musk’s running of the company. 

Communication is key

How someone exits a company, Fletcher points out, will influence how they speak about it to other people. “They may recommend a great person to apply for a position at the company or they may actively discourage them. They may become a valued customer or client and recommend the company’s products and services to others, or they might not [if they’ve been treated badly].”

According to Jemma Fairclough-Haynes, the CEO of Orchard Employment Law, it is important that employers take a personal and dignified approach to redundancy. “I would say fairness, transparency and compassion help to make a sustainable redundancy policy. The law states that large redundancies of more than 20 people must be done through a collective consultation that involves either a union or elected staff representatives. 

“A sensitive approach is to communicate face to face if possible and allow staff to ask questions. If that isn’t practical, the company could choose a virtual method but it should still be a two-way communication rather than a pre-recorded message.”

Jill Aburrow, the CEO of the consultancy Heartfelt HR and author of Redundancy with Love, says news of redundancies should be communicated “even before a final decision has been made”. Progressive employers, she suggests, might even want to consider brainstorming with staff, because some employees “may have ideas about how to avoid redundancies.” 

As staff are likely to have questions, Fletcher notes, companies should have an appropriate mechanism in place to deal with these, such as a town hall or Q&A forum “where you can pool questions and responses together in the most meaningful, respectful and effective way”.

While it did not change the reality of mass redundancies, Meta, the multinational tech conglomerate which owns Facebook and Instagram, can be praised for how it communicated its difficult decision to cut 11,000 jobs after a sharp decline in revenue. CEO Mark Zuckerberg penned a lengthy email to all staff in which he apologised for the outcome, took accountability, and explained the decision-making process in detail. 

Making an informed decision

Businesses have a wide discretion in terms of the selection criteria they can use to decide on who gets made redundant. But these should, notes Petra Venton, an employment solicitor at Whitehead Monckton, be “objective and capable of independent verification”. Appropriate selection criteria, she suggests, might include length of service, performance or attendance and disciplinary records. In contrast, Venton says, selection based on an employee’s perceived attitude or a particular manager’s opinion might be viewed as subjective and difficult to prove if challenged legally.

Job performance, Fletcher argues, should be measured holistically. Focusing on just quantitative output, such as sales figures for instance, runs the risk of the company missing out on “a lot of important performance-related information that relates to the wider set of skills, knowledge, experience and influence of the person”.

I would say fairness, transparency and compassion help to make a sustainable redundancy policy

Aburrow says it is important for employers to remember that redundancy is foremost about a job becoming redundant rather than the person, who may have much more to offer. “My approach is to look at the company’s goals for the next three to five years and decide on what skills will be needed to achieve those goals. You are then selecting people to keep, based on what skills and aptitudes they have, rather than selecting people to reject based on something which may or may not have been their fault or within their ability to improve.”

Soft skills, such as “being able to get on with others, an aptitude to learn, being enthusiastic or helpful, or even being the only person who knows how to work the printer”, Aburrow says, should “all get points” when it comes to making redundancy selections.

A parting gesture can go a long way

Legally speaking, companies don’t have any responsibility to help the people they let go to find a new job beyond allowing them to attend interviews during their notice period. But, according to Aburrow, “Most employers will offer more. Even for small businesses with small budgets, outplacement support can be provided at a low cost and will be money well spent in terms of employer reputation and making redundancy an easier passage for everyone involved.” 

When Meta let go of staff, it gave generous severance packages, above the statutory requirements, and continued certain benefits, including health insurance, for six months after people had left the company. Of course, not every company has as deep pockets as Meta, but even offering something beyond the minimum can improve people’s perceptions of a difficult situation.

Davey notes that basic outplacement support is often inexpensive, straightforward and makes good business sense. “The best outcome is for an employee who has been made redundant to secure new employment as soon as possible,” he says, “and from the former employer’s perspective, this will reduce the amount of compensation payable if the employee is successful in an employment tribunal claim brought in relation to the redundancy.”

Be aware of demographics

In 2023, all business decisions should be considered within the context of diversity and inclusion and redundancies are no exception. “Remember,” Fletcher says, “you have a legal and moral responsibility to uphold anti-discrimination principles and practices. Think about the demographic and individual characteristics which are legally protected in your country of operation and are relevant to your workforce population.”

If a company selects redundancies on an arbitrary “last in, first out” basis, Fletcher adds, it runs the risk of disproportionately getting rid of junior staff. “Younger workers may be unduly affected and if you focus on those minority contracts – those that aren’t full-time or permanent – you may find that it impacts women, those with caring responsibilities and so on,” he warns. 

Failure to factor in demographics when compiling a list of redundancies runs the risk of a company being accused of not taking diversity seriously or, worse, of being actively discriminatory. 

Tough decisions deserve due process

Deciding which role to cut is a difficult process that deserves a calculated and considered approach. And while a redundancy might be prompted by a spreadsheet, any company worth working for would remember that people warrant more respect than numbers on a screen.

Redundancies should be a last resort, but where they happen, they should be communicated early and empathetically. Those who do end up leaving a company should be given as much support as possible to help make their next steps more manageable.