Causes of Redundancy (Redundancy – Being out of work)
- The pressures of global competition and international economic recession which force organisations to take cost out of their business. This involves getting rid of some employees.
- Introduction of new technology. This has contributed hugely to the reduction in the number of semi-skilled people in the offices.
- The thrust for producing and added value has led to more use of such indices as added value per shilling/dollar/pound of employment costs to measure businesses performance with regard to utilization of human resources. If there’s no added value realised then organisations are forced to offload some employees.
- Setting of higher performance standards. The pressure for improved performance to meet more intense global competition explains why many organisations are setting higher standards for employees are not retaining those who do not meet those standards. Performance management processes are used to identify underperformers and deal with them.
- Voluntary release. People also leave organisations voluntarily to further their careers or because they feel they want to leave the organisation. They may also take early retirement or even volunteer to leave under pressure or because they are being paid to do so.
When redundancy becomes the only option, the problems normally associated with it will be reduced if there is an established procedure to follow.
The procedure should have three options:
- To treat employees as fairly as possible.
- To reduce hardship as much as possible.
- To protect management’s ability to run the business effectively.
These aims are not always compatible. The management will want to maintain its key effective workers while trade unions may want to adopt the principle of ‘last in first out’ in redundancies.
The objectives of the redundancy procedure should ensure that:
- The trade unions concerned will be informed as soon as possible of the possibility of redundancy.
- Every attempt will be made to:
- Absorb redundancy by the natural attrition of employees.
- Find suitable alternative employment within the company for employees who might be affected and provide training if necessary.
- Give individual’s reasonable warning of pending redundancy in addition to statutory period of notice.
- If alternative employment is not available in the company and more than one individual is affected, the factors to be taken into consideration in deciding who should be made redundant will include:
- Length of service with company
- Value to the company
- Opportunities for alternative employment elsewhere
- The first three of the above factors should be regarded as the most important. Length of service should however be the determining factor.
- The company should make every endeavour to help employees find alternative work if necessary.
The first step is to ensure that the redundancy selection policy has been applied fairly. It is also important to make certain that loyal requirements for consultation have been met. The information to be presented at any consultative meetings will need to cover the reasons for the redundancy and the steps the company has taken to reduce redundancy. The redundancy pay arrangements will also be covered. The basis for selecting people for redundancy as set out in the redundancy policy should be confirmed.
The next step is to reform those affected. It is important to ensure that the interviews held with those to be made redundant are handled sensitively managers should be given guidance training on how to deal with release interviews.
Methods to avoid redundancy
- Calling in outsourced work.
- Withdrawing all subcontracted labour.
- Reducing or eliminating overtime.
- Developing work sharing. Two people doing one job on alternative days or splitting the work between them.
- Reducing the number of part-timers.
- Temporary layoffs.