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Managing redundancy: tactful transition and softening the blow
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Managing redundancy: tactful transition and softening the blow

Key points 

  • Redundancies are at an all time low, but hiring intentions are forecast to change
  • It’s important for HR manager to anticipate and manage emotions of staff tactfully
  • Providing clarity quickly is critical and allows for smooth transitions into new roles

The Australian Bureau of Statistics has confirmed redundancy and retrenchment is at record lows. In the financial year to February just 1.4 per cent of the workforce was made redundant, the lowest annual rate since records began in 1972. However, things may be about to change.

HR research into the hiring intentions of companies suggests one in three public sector employers are planning redundancies in the second half of 2023 — along with one in seven private sector companies.  It’s a reminder of how quickly the labour market can turn even while employment remains strong. This is also a timely reminder to businesses to think carefully about how they word the news of downsizing to an unsuspecting workforce.

Traditionally, rounds of downsizing and redundancies have been heralded by economic gloom but the changes in the market now are quite different. Inflation is high and interest rates are rising, however the share market is steady, house prices are up and unemployment is still at historic lows.

In the years following the global financial crisis, redundancies have become increasingly rare. While 9 to 10 per cent of workers change jobs each year, most do so voluntarily, seeking better conditions, a role change or electing to retire. The strong labour market has also made many employees confident in their ability to find and keep jobs and command strong salaries, regardless of market decisions.

So for employers about to announce redundancies or retrench workers, there is likely to be a sense of shock or anger about losing a job when the cost of living is so high. If a business manages  the communications and strategy poorly, they further risk losing additional talent, detrimentally impacting morale and facing reputational damage.

So how should employers seek to soften the blow and/or help an employee depart with dignity?

Firstly, being able to anticipate and manage the emotion of impacted staff is critical.For some workers, this will be the first time they have ever experienced redundancies after years of relatively strong economic performance. For those, the news could come as a shock and so it needs to be explained in the context of why the change in necessary, and the implications for other business operations.

Furthermore if news of redundancies has leaked to staff, employees will likely have spent hours ruminating on the possibility and what it might mean for them.

Providing clarity quickly for those going and those staying is critical, as employee unhappiness can be exacerbated by the uncertainty.

The second critical consideration is timeliness, making the call quickly can help employees move into other roles before the market changes dramatically. Although the hiring market appears to have come off its peak, there are still many roles unfilled, so enabling employees to step quickly into finding and securing a new role is ideal. Here, there are benefits in providing access not only to Employee Assistance Programs that can offer guidance and advice for concerned personnel but also support for people wanting to leverage their experience to return immediately to work.

The kind of help on offer can range from direct assistance, such as help in identifying and applying for future work or upgrading CVs, but more commonly includes pointing employers to outplacement services.

Making access to support freely available can ease the separation process, while also demonstrating a nature of care to remaining employees. Finally, having an option for now-redundant employees to say goodbye to colleagues can be important in the separation process — but it is also one of the hardest steps to navigate. For some employees, the process of being made redundant will be shocking enough that they might want to sever all ties. Others will feel devastated if they haven’t had a chance to farewell colleagues who they have connected with over time. There’s no single answer, but being conscious of employees and their feeling and looking for ways to support those who stay as much as those who have left can help maintain business morale.

It’s not yet clear what a slowing economy will bring in the second half of 2023, but for businesses foreseeing changes, now is the time to get the strategy right to support a dignified redundancy process.

This content is general commentary only and does not constitute advice. Before making any decision or taking any action in relation to the content, you should consult your professional advisor. To the maximum extent permitted by law, neither Pitcher Partners or its affiliated entities, nor any of our employees will be liable for any loss, damage, liability or claim whatsoever suffered or incurred arising directly or indirectly out of the use or reliance on the material contained in this content. Pitcher Partners is an association of independent firms. Pitcher Partners is a member of the global network of Baker Tilly International Limited, the members of which are separate and independent legal entities. Liability limited by a scheme approved under professional standards legislation.

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