Coping with retrenchment
1 April 2005 | 0
Was it really only a year ago that we were basking in record employment levels and fat salaries? It seems so long ago now that you’d be forgiven for wondering whether you had dreamt it.
Back in those halcyon days, the key word on every HR manager’s lips was ‘retention’. Finding employees during a skills shortage was proving difficult and, once you had skilled staff, trying to keep a hold of them was an even greater challenge.
Twelve months later and we find ourselves in the middle of an economic downturn in which companies are cutting back on recruitment and, in many cases, reducing their workforce. While redundancies are regrettable, there’s little that can be done to avoid them if companies are going to survive in the current climate. But just how does a company decide who is to go and how do they ensure that those who survive the cutbacks remain motivated?
If a particular department is experiencing trading difficulties then it’s more likely than others parts of a company to suffer staff cuts, but often companies are forced to make redundancies across the board. Sometimes organisations set up a voluntary redundancy programmes in order to carry this out or they will shed staff on a ‘last in, first out’ basis. However, although the latter approach may seem fair, it doesn’t always make sense to lose the last person in, as they may be employed to look after a critical part of the business.
Before instituting a retrenchment plan, companies should decide what positions are essential for the day to day running of a company, says Deiric McCann, managing director of Profiles Assessment Ireland, a company that offers a range of evaluation instruments to assist companies in recruiting and retaining personnel.
‘There are three traditional strategies employed in an uncertain climate,’ says McCann. ‘These are reducing costs, improving productivity and a savage focus on quality of the bottom line. All HR managers need to think about what this means for their people strategy and to act accordingly, so that they can ride through this situation without getting sliced and diced’.
Choosing who goes and who stays is obviously dependent on what type of business you’re engaged in, but one thing is certain: if you’re forced into making redundancies, you need to work out a plan that will ensure that those who go are treated fairly. This is essential because as well as making it easier on those who leave, it can also help to reassure clients and those who survive the job cuts.
The first step for any company deciding to reduce its workforce is to sort out the legal obligations. If the collective redundancies count for more than ten per cent of the workforce then the company has to notify the Department of Enterprise, Trade and Employment under the Protection of Employment Act, 1977. There then follows a 30 day consultation period in which the department investigates why the redundancies are being made. Companies have to be able to show that it isn’t using the situation to get rid of employees who are seen to be under performing.
Companies then have to work out notice periods and redundancy payments for those who have been with them for two or more years. In cases where it would be disruptive to have staff serving their notice periods in full, some companies may decide to implement an in lieu of notice payment scheme where staff are paid any salaries owed under contract, but are asked not to return to their workplace. This is often the situation among sales personnel, who are unlikely to work as well as they normally would.
After dealing with all the legal requirements, the next step is to implement extra services that make the prospect of unemployment easier to deal with. While some companies are not in the position to be able to afford such an option, it’s become increasingly common to offer extra support for workers who are being made redundant. This support can range from short-term financial counselling to outplacement services.
Normally, outplacement services are outsourced to a third party agency who will assist redundant workers to find new employment. This can include advice on CV preparation, interview techniques and tips on searching for jobs. According to Tom Gavigan, managing director of Gavigan Consultancy, a company that specialises in outplacement services, there are immediate benefits in implementing outplacement services for individuals losing their jobs. ‘We offer both individual and group training for those faced with a change in career and we find it helps to lessen their anxieties and make them think about their future in a more positive way,’ he says.
Colm Cavey, managing director of Professional Career Consultancy, echoes those comments by adding: ‘The service is designed to make the whole process easier for companies who are losing staff and to reassure those who have been affected by redundancy. It’s a good way of showing redundant workers that it isn’t their fault that they’ve lost their job because Individuals initially tend to blame themselves for redundancy.’
Although outplacement is usually outsourced, when General Semiconductor Inc announced that it was to close its facility in Macroom, County Cork with the loss of 670 jobs, the company decided to implement its own outplacement programme. ‘We decided that it was essential for us to be pro-active regarding the outplacement programme, rather than just outsourcing it to an agency,’ says Mike J Collins, General SemiConductor’s training development manager.
‘The programme we implemented included setting up a resource centre on the company’s Intranet for employees giving advice on CV presentation and interview techniques, as well as providing CV Templates, links to FAS and a Jobsearch engine.
‘Another strand of the outplacement programme was to ensure that employees were given access to training. Some staff were already undertaking the ECDL qualification with Unlimited Training. We wanted to ensure that they completed this before we closed down and we also allowed others to take the course as well. We then asked FAS to run a number of courses for us, covering areas such as basic computer skills for those employees that weren’t able to take the ECDL course. Around 450 employees have undergone training so far and we’ve had very positive feedback from our employees who say that the outplacement programme has eased their anxieties regarding the future’.
While recent coverage in the media has tended to focus on those who lose their jobs, there’s also the problem of how to motivate those that survive any staff cuts. Mary O’Hara, senior manager at the Global HR Services Division of PriceWaterhouse Coopers says that when redundancies are being made, it’s important to encourage remaining employees and show that you are aware of the work they are doing.
‘It’s wrongly assumed that those who don’t lose their job are happy to be kept on by a company, but this isn’t always the case,’ says O’Hara. ‘There may be situations for example, where someone’s applied for redundancy under a company’s voluntary redundancy programme and been refused because they’re seen as key personnel. Other survivors meanwhile may continue to be worried about further redundancies and so it’s important that they see that those who lose their jobs have been treated well.’
Companies who make redundancies also tend to forget that existing employees are likely to be called upon to undertake more tasks than before. If a department loses members of its team then the work that that team carried out still has to get done regardless of how many people there are to do it. If these people aren’t encouraged and treated well, then a company may lose them as well as those forced out by redundancy.
Employee motivation is particularly important when circumstances require the imposition of unpaid leave or cuts in wages and salaries. Under the Payment of Wages Act 1991, it is illegal to impose retrospective pay cuts, ie to dock wages accrued before the reduction is announced, or to cut wages without an employee’s prior written consent. In each case where the law is breached, companies may be liable for a fine of up to £1,000. If financial information is too sensitive to be shown to employees before gaining their written consent, the employees may ask a Labour Rights Commissioner to inspect the books.
Retention still important
Deiric McCann says that it’s easy to forget about the staff who haven’t lost their jobs. He says: ‘The mantra that people in HR were shouting a short while ago, was retention, retention, retention. Now that mantra has died down, but ironically, as economic uncertainty continues, retention is as much of an issue as it ever was. People usually leave their job in part because they don’t get the recognition they deserve and so good communication with employees is essential. You need to tell your staff what you’re doing, why you’re doing it and what’s expected of them. You also need to encourage them and show that you care about them.’
When cutbacks are initiated one of the first things to go is training, so it might seem surprising that McCann would stress the importance of it at this time of economic uncertainty. He says: ‘Some companies are horrified when we suggest that they should keep training in a downturn, but it’s essential regardless of the economic climate. The golden rule in retention of employees hasn’t changed because of the downturn. People will consider changing jobs if they don’t feel that they are moving forward, especially in the IT sector where things change so quickly. Investing in training is important because people need to know that they’re progressing and that they’re worth a good price on the external market if the worse happens. If you don’t continue to offer it, you may find that rather than having a reduced workforce, you have none.’