Making people redundant

There are times when every organisation needs to look at its business operations and corporate services and decide if it has the right workforce for the job that needs doing. And it's not just a periodic review - on occasion the market that the company operates in is disrupted by technology or receives a major commercial shock; either way, revenue often plummets, necessitating action.

Commercial challenges

Sometimes a company has not kept itself relevant by moving with the market, consumer trends or technical advances, so it has to make big decisions on the capabilities it needs.

It may be that transactional or repetitive activities that form the basis of a department's duties can be automated, and staff made redundant. Don't be tempted to outsource a business process that can be automated.

Sometimes an external service can provide a better link in the value chain than staff. It's not just the skill and experience of the company's people that needs considering, it's the location and the salary too. Sometimes salary arbitrage makes it very attractive to base a certain capability in a city or country where salaries and benefits are lower.

All of these challenges can prompt a review of the workforce and its continuing suitability in its current form.

Respecting your staff

Whatever the reason for change, outsourcing or redundancy is never an easy decision for the Exec team to make. When a decision is made in principle then the laws of the UK and EU require that staff are treated fairly, and the company must follow a certain process, in order to consult with those affected and to explore reasonable alternative solutions.

Those affected could be vulnerable, traumatised or marginalised if spoken with individually, so Employee Forums or Works Councils usually act as spokesperson or negotiator for the group of people affected. Most of us will treat others as we would like to be treated ourselves, so this approach is easily accepted.

Note that laws change, and different organisations take different approaches within applicable laws, so the general order of events set out in this post should not be relied upon without consulting your company's Legal Counsel, and working hand-in-hand with your Human Resources Business Partner.

Company Proposal

Once the possibility of outsourcing or redundancy is considered, then before matters progress too much further, a high-level proposal must be drawn up, agreed by the Execs and then shared, in confidence, with the relevant staff representatives, often a standing Works Council. At this point, it is only the possibility of change that is being considered, and normally, this possibility is not shared beyond those first informed.

There then follows a more detailed investigation into current working practices and a number of options are prepared which outline possible responses to the commercial challenges. Depending on the availability of relevant information - and bear in mind that this investigation is not public knowledge at present - certain works may need to be performed in order to acquire a sound basis on which to make and defend any decision necessary.

For example, if a complete process map exists, which may be decomposed to activity level, then the Proposal team have a good basis with which to estimate the magnitude of the work, and who might be affected. If it doesn't exist, and this is often the case, then it may need to be discretely created.

Similarly, it is essential to know exactly who works in the department of the business unit affected, including detail such as each person's job role, salary, age, years of service, and any special conditions arising from previous M&A.

The Proposal team will need to make a value judgement as to which activities stay where they are, move offshore or to another company, or stay but are performed by another department. In effect, the organisational neighbourhood is also redesigned, in many cases beyond the department that is immediately affected.

Any proposals to reallocate work elsewhere must be modelled to ensure that the hours needed to perform the reallocated activities are possible, including cyclical peaks and any time differences.

Significant outputs must be checked to ensure that verification or approval tasks are separated, and that activities relating to contact with clients or business partners are staffed appropriately. Reallocating the responsibility for customer contact a degree of separation further away from the customer is a common mistake that always backfires.

A new organisational structure is created for each of three different groups - (i) representing the reduction of roles in the department affected (which may be all of the roles), (ii) additional roles created in the organisational neighbourhood, and (iii) new roles to be created, possibly in a new location.

In parallel, the cost-benefit analysis which stands behind this proposal is updated.

A concise presentation is created which summarises the changes to be made. This also gives an indicative timescale for consultation with the staff and for the proposal to be implemented, through to staff exit.

Colleagues deserve the best possible treatment, so the proposal should have great clarity in terms of the challenge faced, the intended operational changes and the treatment of staff affected. The latter includes taking their views into account, the timescale of the consultation and the financial package available if the proposal is accepted.

Proposal Announcement

This is the point at which the most angst will be felt by everyone impacted by the proposal, and by colleagues who may work in adjacent areas.

The announcement should be meticulously planned, and would normally be made by the Exec accountable for this work. It is good practice to prepare a script and possible talking points so that the Exec delivers an appropriate and concise message. The Exec must be told to stay on script, as typically, in the formal announcement, key words and phrases need to be covered and it’s not the time to ad-lib and say things that are well meant but quite possibly should not be said, however well intentioned.

It is usual to inform any extant employee forum of the proposal immediately before it is announced, and it is good practice to do the same with the affected group's managers - they will need to deal with most of the fallout once the Exec has delivered the message and left the building.

It is also good practice to hold the Announcement meeting early in the working day, and only invite staff a matter of 15 minutes before it is held, taking care to note who is absent for any reason, so that they may be contacted afterward.

The Announcement meeting should follow the pattern of the scripted Exec announcement and then the summary presentation of the proposal by the Department Head. Questions are not encouraged - at this stage emotions run high.

At the end, those affected are asked to return after 30 minutes (to allow them time to comprehend what they have heard) when they will break out into smaller groups, headed by their team leaders, accompanied by an HR rep, to discuss what they have heard and to better understand their particular circumstance.

Other groups in the organisational neighbourhood who are not directly affected by the announcement are briefed by their managers, so that they are aware of the proposal and can empathise with their colleagues. Similarly, there may be an existing team who may be the 'beneficiary' of this announcement, in that the work will transfer to them; they are also given a high-level overview and advised to keep their heads down for a few days.

It's good practice to end the announcement day by emailing around the agreed announcement text that the accountable Exec delivered, so that it is there for the record and for reference.

Collective Consultation

A period of consultation with affected staff now starts. This consultation is with the whole cohort at risk. The length of consultation and the necessary activities during the consultation period depend on how many people are affected.

In the UK, the statutory redundancy law consultation periods are at least 30 days before issuing notice of redundancy where between 20 and 99 redundancies will occur, and 45 days when the employer is proposing to dismiss 100 or more employees. There are no set rules to follow if there are fewer than 20 redundancies planned, but it's good practice to fully consult employees and their representatives.

We'd add that being seen to push through a company proposal builds resentment and poor reviews on sites such as glassdoor.com, so taking enough time to explore genuine options and for people to come to terms with the proposal better leads to acceptance.

Unless there is already and established representation forum, the first step of consultation is usually for the affected staff to elect their representatives, and for the representatives to be trained by HR in their responsibility in this role. This is usually completed within a week.

The new representatives then attend at least three Employee Forums, each spaced 2 to 3 weeks apart:

• First Employee Forum
  Go through the proposal and explain the counter proposal process
• Second Employee Forum
  Discuss counter proposals submitted, in more detail
• Third Employee Forum
  Outcome to counter proposals.

Each meeting also has time for raising questions. These are formally answered outside of the meeting and published, so that all affected staff may see the response.

In our experience, each formal Employee Forum is followed by at least 1 further follow up meeting, facilitated by HR, to discuss a particular matter arising.

Individuals may feel as though they have a personal claim on HR, but they should funnel their questions via their representative. In certain circumstances, such as personal/sensitive matters, HR may make a case-by-case exception. Once the Consultation period is over then interaction becomes freer.

Counter Proposals

The workforce, through the Employee Forum, are invited to make different suggestions as to how the company's overriding challenge may be met. Normally this is approached on the basis that those affected want to avoid redundancy or outsourcing altogether.

However, in many situations completely changing the proposal is not realistic. More likely is a suggestion that certain business outcomes are achieved in a different, more effective way. Sometimes, this does result in some people saving their jobs. Even if the overall outcome is much the same, an amendment is often a better way of proceeding, and it gives wide satisfaction to those affected to be asked, and for the recommendation to be accepted.

Listening to the wisdom of those actually doing the job is good practice, and should arguably have been done well before the company found itself in this situation.

The company has an obligation to listen to and discuss any reasonable counter proposals raised, but does not have an obligation to accept any.

Redundancy and TUPE

Sometimes a company may be obliged to cut costs and determines that the easiest way of doing this is to make a percentage of the workforce redundant. It may be that work that those made redundant do will no longer be performed or it may be that those left will take it on.

Similarly, it may be that the work is transferred to a team in another location or continent, and that team may be part of the same global company, or the new workers could be provided by a service organisation. Whichever new resources take on the work, there is no longer a role for the original worker to fill. It is the role they are made redundant from.

If the whole department's work is taken over by a new company (a new legal entity), then it is possible that they will also take on the same workforce who currently do the job. We've seen this before when services such as IT End User Computing groups, Facilities Maintenance teams or Accounts Payable move as one to a new company.

For many, the only difference at the start of their 'new' job is the name of their employer on their paycheck. But, over time, changes kicks in as the purchaser seeks to retrieve the value they saw in agreeing to take-on that workforce. If workers are transferred along with the roles attached to their activities, then their accrued rights are protected and passed on to the new employer. In the UK, this mechanism is called TUPE, which stands for Transfer of Undertakings Protection of Employment.

TUPE is the UK's implementation of the European Union Business Transfers Directive. It is an important part of UK labour law, protecting employees whose business is being transferred to another business. No company is able to decide to opt out of this legislation. The only people who can decide whether they wish to transfer under TUPE, or not, are the employees affected.

Sometimes, the same work will be done in a different location, and that location may be inconvenient for the workers who currently hold that role. It may be that a new office location is proposed that now requires a daily train journey, which is deemed unacceptable by the role holder.

It's quite likely that the new office location is in the home city of the new service organisation, perhaps in an office where each floor hosts multiple teams, each providing off-shored services to major companies in several different timezones. In this case, although, TUPE will take effect, the new organisation has no intention of taking on any of the current staff, and will immediately make those who TUPE-over redundant.

If this outcome is likely, then it makes sense for the redundancy to take effect at the end of service with the current employer.

It will be interesting to see how the recent significant move to remote working affects the response of people who are asked to move office locations, especially if they can still do their work, whilst many new colleagues are based in a different continent. We have seen Call Centres set up in remote but sunny and attractive locations, and several of the existing role holders have decided to take a pay cut in pursuit of an unexpected lifestyle change.

Role Descriptions

When a redundancy outcome is possible, it's essential that the management of the current workforce have accurate and up to date Role Descriptions in place for every role. This means before any announcement is made.

We naturally talk about people having a 'job', but the reality is that every well run organisation has an 'Establishment Headcount' when each position within that headcount is a role that performs activities within the internal value chain. That role exists whether or not someone actually occupies it, and the role will continue to exist and be budgeted for until organisational redesign removes it. When an individual is appointed to perform the activities associated with that role, then they naturally refer to it as their job.

It is the Role Description which must exist, and given that the role is part of the Establishment Headcount, the salary and benefits must be known.

It is essential to check that the Role Description really does reflect the current role performed by the incumbent, who is soon to be 'at risk'. It is very easy for the description to be brought out when a new person needs recruiting, but the job they actually do can be a little or a lot different. For example, a team leader may habitually compensate for one of their team who perhaps struggles with one aspect of the role, but excels at other parts. This selflessness may extend further if another team member is on long-term sick and no-replacement is found. It could also be that a certain portion of a job stopped on the day that a minor business capability was sold to a third-party, thereby not-requiring a downstream activity anymore. No apparent harm in any of these scenarios, but the Role Description rarely gets updated.

The Proposal Team must make sure that any future roles performed by a group other than the current incumbents (whether part of the company or outsourced to a third party service provider), have accurate Role Descriptions in place for the new organisational structure. This is often more time-consuming than it sounds because this type of change provides a perfect opportunity to realign roles and responsibilities within the overall service envelope. The current structure is the result of several years of operational expediency, so a revised structure can often bring efficiency benefits. It may be the case that a third-party organisation has an existing role structure for this type of work, and contractually insists that it is followed.

This further informs leaving enough time to ensure that all current and proposed roles have clear responsibilities and agreed role descriptions before the Announcement is made. Why? We will explore Mapping and Pooling later.

Redundancy and Retention payments

In the UK staff made redundant will normally be entitled to statutory redundancy pay if they are an employee and have been working for 2 years or more.

The statutory minimum is not much - half a week's pay for each full year completed under the age of under 22, one week's pay for each full year they were 22 or older, but under 41, and one and half week's pay for each full year completed over the age of 41.

Length of service is capped at 20 years, qualifying weekly pay is capped at £700 and the maximum statutory redundancy pay is £21,000.

Check the current UK amounts here.

Staff may also be entitled to contractual redundancy pay - extra money in their employment contract that is in addition to the statutory amount. This entitlement will be part of HR policy designed to attract or retain staff in particular industries or with particular skill sets.

Many employers want a smooth handover to new operations - either in-house or an external service, so offer a retention payment to encourage staff to stay in post until the employer judges that it is safe to let them go. Typically retention payments encourage an aligned behaviour that might not otherwise be evident. Objectives to be met to qualify for payment may include:

1. Cooperation with the person taking over the role, respecting that they may find it awkward to learn your activities and training them to a minimum acceptable standard.
2. Creation of Standard Operating Procedures (SOP) in association with the person taking over the role, and verifying that the SOP is a true reflection of the role and that the new person is capable of following it.
3. Minimal disruption to BAU, with no material deviation in meeting service levels, no material increase in operational backlog and a positive interaction with customers.
4. Continue working through to 'go live' of the activities in the new location and for a period of stabilisation beyond that.
5. If requested, agree to travel to the new location at the company's expense.

In addition, managers and supervisors are expected to:

1. Manage their teams to ensure they meet deadlines and no additional/new backlogs are created
2. Respond to staffing changes and ensure timely recruitment of replacement short-term contingent labour
3. Continue to hold regular team and 1-on-1 meetings with employees
4. Continue to review the performance of team members and to ensure that quality work is delivered
5. Continue to interact positively with both internal and external customers.

No tax is payable on redundancy pay, but if the total exceeds £30,000, then tax is payable. Any optional retention payment, holiday pay, pay in lieu of notice, wages owing and bonus payments are treated in the same way as wages, so, tax and National Insurance contributions will be deducted as usual from these payments before you get them.

Mapping and Pooling

When the new job descriptions and teams are shared there is naturally speculation as to who could save themselves from redundancy by being placed in a new role. The initiative leader will work with HR to determine if any of those 'at risk' can be confirmed into a new post as soon as possible.

This is where it becomes essential that the role description of those at risk exist and are up to date. They will be matched to one or more of the new role descriptions.

Mapping

For the new roles available, employees will map into them if they currently perform >75% of the activities in the new role. If multiple similar roles will exist, mapping will be by region or business area. Therefore, if an employee currently undertakes 75% or more of the ‘activities’ in a role then the company would no longer consider that individual at risk of redundancy.

However, if more than one employee undertakes 75% or more of the ‘activities’ in a particular role then all of those individuals will be pooled, and one will be selected for the position.

If no one employee undertakes 75%, but one or more employees completes a significant percentage of the ‘activities’ in a role, then those individuals will be pooled and one will be selected for the position.

Pooling

Pooling Groups are defined by the initiative leadership and HR which group individuals at risk with similar skills sets and/or seniority.

Anyone with the appropriate experience within a Pooling Group will be in that group.

Employees within a Pooling Group will be rated against a set of standard selection criteria. Those who show well against the selection criteria will be invited to a second stage which will be a competency based interview.

Once pooled, management will apply selection criteria with those at risk not present. These criteria may include:

1. Percentage of activities currently undertaken
2. Professional qualifications relevant to the role
3. The absence record
4. The existence of a current performance improvement plan
5. Any documented warnings on unacceptable behaviour
6. The current appraisal / performance review score

A competency-based interview is an appropriate second stage, with questions asked along these lines:

Situation – describe the situation they are talking about
Task – explain what it is they had to achieve
Action – say what they did to achieve the objective
Results – describe the outcome of their actions and evaluate their actions

At the end of the Mapping and Pooling process there will a clear indication of who has been placed in the roles that will remain in the original location and/or within that organisational neighbourhood.

Individual Consultation

The remainder of people at risk are now confirmed as being made redundant and the process of consulting with each, individually starts.

There are normally two individual consultation meetings:

1st Individual Consultation

• Formal confirmation that they will be made redundant, and the process to be followed from now on.
• Advice of internal vacancies elsewhere in the organisation that they may wish to apply for.
• Advice of the likely statutory, contractual, adjustment and retention payments to be made, and on what date.
• This meeting can be very upsetting for some people, so it is acceptable for them to nominate a friend or their manager to accompany them to the meeting, although that third person should remain silent.

2nd Individual Consultation

• Formal answers to questions arising from the first consultation.
• Provision of a Settlement Agreement, which contains confirmation of payments to be made, outplacement activities available to prepare the staff member for life beyond this company, and confirmation of the exit date. It also makes clear that accepting the payments are in full and final settlement of any obligation due to the employee by the employer, and requires that the terms are not disclosed.
• Staff are told that they are not entitled to statutory redundancy pay if the employer offers to keep them on in a new role or offers suitable alternative work which is refused without good reason. Being dismissed for misconduct does not count as redundancy, so no redundancy payment is due if this happened.
• This meeting can seem a bit brutal because it makes clear that the end is nigh. The company normally pay for the employee to get advice from an independent solicitor before signing the settlement agreement.

Outplacement & Exit

With the Settlement Agreement signed, it is now a matter of time before the employee leaves the organisation. The actual timing of their exit may depend on the progress their replacement has made, the operational backlog or the time it takes to shred years of desk and cupboard clutter. They may leave very quickly if there is no role created in another location.

At this point, with all of the unpleasantness over, and a certainty of moving on with money in their pocket, this is often a very positive period.

It is made more positive by arranging Outplacement Workshops run by external experts in this field. Topics often include:

• CV Writing and Interview Skills
• Networking and using LinkedIn
• Individual Face to Face Coaching.

Attendance is optional, but feedback is usually very high, with the opportunity to be prepared for the outside world much appreciated.

Their exit day may be the same as other colleagues, or they may be the only person to leave that week. Either way, tears are shed and farewells said, and a new chapter begins in the life of each individual.

A reflection on the positives of redundancy

Every company must size its workforce to its market and income. Although some individuals are affected, the body corporate will remain, in better shape to provide an income to many others.

When the announcement is made that their roles may disappear, many people are understandably upset and frustrated. Some can be very vocal. A percentage will leave immediately, not wishing to go through an unsettling consultation process or perhaps knowing that it is time to move on anyway. For those who stay until they depart in line with the company's wishes, this period can, paradoxically, turn out to be one of the most fulfilling of their careers.

If the situation is one where the company can no longer afford to keep on its workforce, the time to exiting can be short and made even shorter by PILON (Payment in lieu of notice). But even so, if handled competently, it can be a mercifully short period of uncertainty, and many will treat it positively - as paid time-off - to recharge and look for their next challenge.

This situation can, against expectation, prove to be a time when the at-risk department actually gets the leadership attention that it might have lacked to date.

In training replacement staff, initial resentment turns to a realisation that each person has competently undertaken a series of important tasks over the years, coupled with a pride that they have understood it well enough to teach someone else. If the new location of their tasks is overseas, then there is company-funded travel, often to a different cultural city, and beyond that time to clear a backlog of work that had always niggled. Individuals can acquire a newfound perspective on where they are in their career and use it to move on to the next chapter of their journey in a very positive frame of mind.

Next:

If the scenario is one where the company wishes to carry on the activities currently performed by those affected, either in another department or global location within the same company, or outsourced to a specialist service provider, then there follows a deeper period of transition, which can start after Collective Consultation has finished, and which I discuss in Operational Transition Considerations.

Operational Transition Considerations

Every company will regularly reassess how its operations are performed, and by whom. The business world is always changing but Covid-19 has forced a response. Once you’ve evaluated what’s needed, you may want to transition key activities to a new division or location. We set out how to do it.

Leadership AdvisoryDavid Seacombe