A poorly managed redundancy process can have significant repercussions on your exiting employees, remaining workforce, company image and employer brand. Instead of resorting to random cuts, it’s important to ensure your organisation’s redundancy process is both strategic and compliant with legal obligations. By planning and implementing strategic redundancies carefully, you can safeguard your business and reputation. Here are some essential tips to help you navigate this challenging process.
1. Know when to cut
Understanding the right time to assess staffing levels is key to making strategic redundancies. Common indicators include financial strains like cash flow issues or rising debt levels. If overheads become unmanageable, reducing employee numbers may be necessary. Alternatively, evaluate whether non-core functions could be outsourced. This could improve productivity and cost efficiency.
Another signal is an increase in staff resignations. This can indicate they’re worried about the organisation’s future and are moving to safer jobs. Or perhaps you sense that some employees don’t have enough work to do anymore.
If these signs are present, act swiftly and decisively. Don’t delay addressing loss-making divisions or underperforming product lines.
2. Identify which roles to make redundant
One of the most difficult aspects of a restructure is deciding which roles will be made redundant and which will stay. To ensure strategic redundancies, assess your organisation’s strengths and weaknesses.
If you decide to shut down an entire business division or office, the roles you need to make redundant may be obvious. Often, companies target non-revenue-generating positions, such as administrative roles, first. However, proceed with caution. Cutting positions like sales or customer service roles could cause sales to fall and lead to a drop in revenue, worsening the problem.
In cases where redundancies are less clear, evaluate the importance of each role to the future of the organisation. Analyse each business unit, its purpose, direction and contribution to the overall business strategy. Then conduct an objective review of each position to determine how it contributes to this purpose and direction, and how it fits with other roles. This will help you make informed decisions about which positions can be eliminated without jeopardising the company’s long-term success.
Avoid cutting too deeply. Rather than just a cost-cutting exercise, your goal should be to build a leaner but stronger workforce aligned with both current and future business objectives when market conditions improve. Establish what skills are needed to maintain or strengthen your core business. Make sure the remaining staff possess the skills to maintain and strengthen your core business functions.
Are restraint clauses still valid when making redundancies? If the restraint is reasonable, a non-compete clause may still be enforceable.
3. Comply with legal obligations
Redundancies must be for ‘genuine operational reasons’. You cannot use the process to address individual performance or disciplinary issues or cover up discriminatory behaviour. Documentation is crucial here. Prepare evidence to support the rationale for the redundancies, including financial reports if necessary.
Additionally, be sure to comply with all relevant workplace agreements and legal requirements. Failure to meet these obligations could expose your company to legal risks, undermining the benefits of strategic redundancies.
4. Define notice periods and exit strategies
You need to determine how long affected employees will remain at work during their notice periods once redundancies are confirmed. For staff with access to sensitive data or key business assets, immediate escort from the premises may be necessary to protect those assets. In other cases you might offer employees time to say their goodbyes and wrap up their duties. Regardless of when they physically leave, employees are entitled to be paid for the full duration of their notice period.
5. Prepare clear and compassionate communications
Breaking the news of redundancy is never easy, but having well-prepared key messages can help. Explain the reasons behind the redundancies and clarify that the decision is based on business needs, not personal performance. Key points to cover include:
Why the redundancy is happening
Explain why the role is redundant. Be transparent about the reasons. Employees should know they haven’t just drawn the short straw.
What this means for the employee
Provide details of their severance package, notice period and any other formalities, plus any available support.
What happens next
Provide clear information on next steps. For example, if you will provide an outplacement consultant and whether they should take the rest of the day off.
Read more about preparing for redundancy notification meetings.
6. Deliver the news professionally
It’s important to stay calm, professional and compassionate when you’re informing employees that their roles are redundant. Stick to your script, keeping the conversation as straightforward and respectful as possible. Use neutral language to emphasise that this is a business decision, not a personal one. For instance, say “your role has been made redundant” instead of “you’ve been made redundant.”
7. Provide outplacement support
Offering outplacement services as part of your strategic redundancy process can yield several benefits:
- Specialist support can help employees with their career transition. Research shows that employees who receive outplacement support find new jobs in half the time it takes someone without assistance.
- Employees who receive outplacement support are likely to feel more positively toward their former employer. This can reduce the risk of them taking legal action or publicly criticising your organisation.
- Your external stakeholders will view you as a considerate and respectful employer. This can protect your reputation as an employer of choice.
- Outplacement can also boost the morale and motivation of your remaining workforce and improve retention. It signals that your organisation values its employees, even when difficult decisions like redundancies are needed.
8. Communicate with remaining staff
Address the rest of the team once you have informed the impacted employees that their roles are redundant. Delaying this communication can lead to rumour mongering and speculation, which can harm morale.
Use a similar script to the one used with the affected employees. Reassure remaining staff that the redundancies are business-driven decisions and their former colleagues are being well taken care of. Acknowledge that the news might be difficult, especially when close friends or trusted colleagues are leaving.
Strategic redundancies – a difficult but necessary decision
Making strategic redundancies is a difficult but sometimes necessary decision for the health of an organisation. By planning carefully, communicating effectively and offering support, you can protect your business, maintain a positive employer brand, ensure a smoother transition for impacted employees and support and remaining employees.
For further guidance on making strategic redundancies, feel free to reach out to Glide Outplacement Australia. We’re here to support you through the process.