MANAGING REDUNDACY

Isaac Malagala – MD, RCS Consult

Managing redundancy can be a draining and worrisome process, especially knowing that if one did not follow the applicable employment laws huge penalties could come their way. There are many reasons that could occasion redundancy but the most common ones include: duplication of roles say after a merger, a surge in the financial ability for businesses to support a large workforce, lack of adequate work for a given role, technology (automation), reorganization and rapid pace of change among others.

Can redundancy be avoided?

Yes. It can. Before resolving to render key roles in your business redundant, experts advise that it is prudent for business owners to first look at alternative options through consultations and only consider redundancy as the last inevitable option. Available options could include: work at reduced pay, part time work, volunteer opportunities or taking on other roles within the company.

Below we explain in detail how managers or business owners can avoid redundancy.

  1. Work at reduced pay. Through consultation meetings that precede redundancy, the affected staff can be asked to consider working at reduced pay especially for companies that are going through difficult times financially.
  2. Take on other roles within the company. This is typical of companies that are undergoing a merger, where you have two people for the same role. The affected person could be asked to consider another available role within the company.
  3. Understand productivity results of each of your staff. Clarity in productivity results will help you understand which of your staff is under employed and who is not. Under employed staff could be asked to take on more responsibility within the company and where they cannot, they should be asked to leave. Proper manpower planning would be an important asset in this process – “knowing your manpower needs, revenue targets, etc”.
  4. Hire effectively. Always be clear with the type of skills that you are looking for in your new hires. These should be skills that should complement your current workforce to enable the team achieve planned growth.
  5. Proactive performance management. Businesses should invest in regular and continuous performance discussions with their employees to help make informed and timely decisions to support and retain productive employees while letting go of employees who are not up to the task. You don’t have to wait for years before letting go of employees that are not performing. They are a cost to the company especially when you look at the net worth of unachieved revenue targets, cost in salary and training.
  6. Build the capacity of your employees.  It is critical to build the culture of continuous development within an organization. A competent workforce will always deliver the required business results including financial requirements. This ultimately guards businesses from losing their key staff.
  7. Contract based employment. This helps employers make better decisions at the end of an employment contract including redundancy.  A good employment contract will specify exactly the terms and conditions that can result into the end of the contract. This helps both parties to be prepared enough for what is forthcoming.

How is a redundancy program handled?

  1. Redundancy Program. It is important that HR designs a redundancy program that will be followed. This should be simple and clear to all stakeholders. The program or plan should indicate the criteria to be used when selecting the roles that will be affected.
  2. Reason for redundancy. Businesses should first identify and be clear with the reasons that have contributed to a position or role being considered redundant. This will make it easy for the line manager and HR to explain to the affected employees.
  3. Identify the roles that will be affected by the redundancy. Using the criteria developed by HR, line managers will select the roles that will be affected. Common factors used when selecting roles include: Last in first out, number of documented disciplinary cases on file and employee performance.
  4. Hold consultative meetings. It is advisable that line managers hold meetings to discuss the affected roles, validity of reasons for rendering the respective positions redundant, how they will break the news to the affected staff, any appreciation packages, notice period, leave days accrued, and any other entitlements as stated in the employment contract, employment laws and HR policy. Due process requires that you hold at least one or two meetings with the affected staff before handing them the notice to terminate letters.

The consultative meetings also include discussions with the employees likely to be affected so that they are involved in the discussions leading to the redundancy. In these discussions, the affected employees are asked about what they think about the decision and whether they have any alternative suggestions. The objective for the consultative meetings is to – find avenues to avoid redundancy, delay the process, or find best strategy for executing the process.

  1. Consider alternatives. Most employment laws require that redundancy or termination of an employee contract should be the last resort having fully exhausted all other employment alternatives. Employment alternatives include: retaining the affected employees at reduced pay, taking on other roles within the company, part time work or even volunteer opportunities. Before a decision is reached to terminate employees, inviting them to share their opinions and alternatives is a great initiative that you could propose to the employees during one or several of the consultative meetings that you have with them. You might be surprised with some of the ideas that they could have.
  1. Dismissal/termination of contract. Having met and discussed with the affected employees, letters of termination can now go out. The affected employees at this point already know what is happening and they are mentally prepared to handle what comes their way. At this meeting you can recap the reasons for the redundancy, commitment of the employer to rehiring the affected employees once the situation gets better, and any benefits they stand to gain from redundancy and their contribution toward the company.
  1. Due process requires that an employee whose employment contract is being terminated has to be reminded of their right to appeal to management.
  1. Applicable laws. Managers handling the redundancy process should follow the applicable employment laws and regulations. Consulting an expert would be advisable to avoid any unnecessary penalties.
  1. Notice period. Notice period/payment in lieu is based on what the employment law for a given country provide(s) and varies depending on the time period that an employee has spent with the company. Where an employer is not willing to wait for the notice period, they have the alternative of paying in lieu.
  1. Accrued leave days. Where an employee has outstanding leave days, the employer is expected to either pay for them or ask the respective employee to take those leave days before their last working day. Other employers sometimes ask employees to take such days of leave simultaneously with the notice period. Other days like public holidays worked also fall in this category.
  1. Payment of redundancy benefits. Before ending the process, the employer should ensure that all employee entitlements as stated in the employment act, company policies and employment contract are all fulfilled. These may include;
  • Payment of Pension dues as defined under the Pension Scheme Rules.
  • Payment of ex-gratia payment at a rate agreed on by management and stakeholders.
  1. Collective termination. Where you are faced with a need to terminate a group of employees at the same time, it is important to double check with the provisions on collective termination in the employment act/labor laws for the respective country. Some employment laws like in the case of Uganda require that a labor officer is notified if a group of employees not less than 10 are to be terminated from employment. This notice should go out at least one month before the 1st employee is terminated.