Take the guesswork out of redundancy. Get redundancy right, a short guide.
Whether it’s a drop in demand, like the bursting of the housing bubble, relocation, a company restructuring, merger or insolvency, there are many reasons why businesses in the real estate, property, development & Construction sector turn to redundancies to navigate change.
Though they impact employees’ lives, redundancies are necessary so companies can survive and keep up with the competition. For instance, demand is especially unpredictable in a period of rising interest and inflation rates, like today’s environment, and without redundancies, many companies would go bankrupt if they couldn’t reduce their costs accordingly.
Carry on reading to find out top tips and advice on how to handle redundancies in your business, as well as information on good practice and risks to watch out for.
Tailored approach
The mishandling of redundancies can have wide-ranging consequences. Redundancies are governed by strict regulations in Australia, Hong Kong and Singapore, and a badly handled retrenchment exercise can result in a fine and negatively impact your business’ reputation.
To mitigate these risks, tailor your approach to each market as these jurisdictions follow different laws, regulations and requirements. For instance, these rules cover what constitutes a genuine redundancy, and the required notice and compensation vary, too. Also, seek expert local advice from the likes of specialist recruitment consultants and lawyers, who can help ensure the process is completed fairly and responsibly.
Right reasons
Though the criteria that constitute a redundancy differ slightly across markets, the common principle is that a redundancy must be genuine i.e. not based on performance. Strict adherence to this approach reduces the risks of claims for unfair dismissal or discrimination. Examples of reasons for genuine redundancies include:
- Implementation of new tech
As the proliferation of 3D printing, automation, machine learning and the Internet of Things accelerates—a process dubbed the Fourth Industrial Revolution—many of today’s jobs will become obsolete in the not-too-distant future, resulting in redundancies, even if many employees are retrained internally.
- To avoid insolvency
When demand, and subsequently revenue, decline, business survival partly depends on cutting costs, often in the form of redundancies. Such declines can be rapid and deep. For instance, Centerline Property forecasts that sales in the property market in Hong Kong will nosedive to a 27-year low this year.
- Eliminate duplicate roles following a merger
Redundancies frequently follow a merger or acquisition. They’re usually rolled out to cut redundant functions and operations, and to improve efficiency.
Best option?
Most jurisdictions, advise or require businesses to evaluate alternatives to redundancy, including natural attrition, cutting working hours, reducing overtime, rolling out flexible work arrangements, redeployment and retraining.
Compulsory or voluntary?
Compulsory redundancies comprise a legal selection process for the roles to be let go, otherwise, staff are free to choose redundancy. Voluntary redundancy packages are often more attractive than those for compulsory redundancies.
Due process
The selection process is mandated by rules and norms that centre on fairness. For instance, discrimination on the grounds of age, race, gender, religion, disability or marital status is discouraged.
Once the selection criterias are picked, work out the correct redundancy pay, and inform the employees, including providing the statutory notice period, at the minimum.
Another part of the process is reporting the redundancies to the appropriate third parties, for example, pension scheme provider;, a union, immigration department or tax department.
Good practice
Consultation
Though not always required by law, consulting employees about redundancies is good practice because it leads to better outcomes. The aim of the consultation process is to reach an agreement with employees’ representatives on the redundancies. Consultation can take place on a group level or individual-basis, according to circumstances.
Support
Many firms provide support services to assist departing employees. Help typically involves job advice, time off to look for a new role, the provision of information on where to access external support, and outplacement consultants, which work with redundant staff to find a new role.
Communication
Employees should be informed of redundancies before the news is made public, at the very least. Clear communications reduce misunderstandings and quash rumours, which can dent morale more broadly.
Appeal process
To ensure a fair approach, employees should be given the opportunity to challenge the redundancy decision. This may take the form of a more senior manager reviewing the case.
Departing procedures
The last step in the process is off-boarding the employees smoothly. As the risk of a disgruntled employee damaging the company’s interests is elevated when it comes to redundancies, and the process can be stress-inducing, reviewing departure procedures, including those around IT security, is advisable.
Though redundancy is a difficult topic, and elicits different responses on the part of employees, following the advice above will alleviate some of the stress involved, and make what is a challenging undertaking that much smoother.
To gain insights from consultants in the real estate, property, development and construction sectors, contact Gough Recruitment today.