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Redundancy – how businesses can soften the blow

Redundancy – how businesses can soften the blow

As the likelihood of redundancies rises, businesses should consider how to mitigate the impact internally and externally.

Key findings: 

  • There has been a sharp increase in redundancy planning, with thousands of jobs lost across various sectors 
  • Employers need to think carefully about how they communicate changes in resourcing to avoid losing talent, damaging employee morale, and causing reputational damage  
  • Provide support to employees during the separation process, including access to Employee Assistance Programs, outplacement services, and professional networks 

What a difference a year can make in job security.  

When we started 2023, redundancy and retrenchment in Australia had hit record — and possibly unsustainable — lows, with just 1.4 per cent of the workforce made redundant in the financial year to February, the lowest annual rate since records began in 1972. 

Since then, a barrage of bad economic news and tightening spending has resulted in a sharp increase in redundancy planning.  

There have been thousands of jobs lost across technology, finance and banking, and more still across governments. 

In fact, the latest HR research into the hiring intentions of companies suggested considerable momentum is building in retrenchments. Six in ten public sector employers planned redundancies in the second half of 2023 — along with one in four private sector companies.  

And as the year came to a close, redundancy plans became reality. Data from the Australian Bureau of Statistics showed more than 65,000 jobs were lost in December, with more than 100,000 fewer full time jobs existing in the month as compared to November. 

In the first few weeks of 2024, redundancies started to flow through WA’s resources sector, as Alcoa announced plans to shut its Kwinana refinery and First Quantum Minerals slashed jobs at its Ravensthorpe nickel and cobalt mine. 

Mass redundancies were also announced in the A-League, with the operator of Australia’s top flight football competition confirming up to half of its staff had been made redundant. 

It’s an indication of how quickly the labour market can turn even while employment and hiring intentions remain strong.  

But it is also a good reminder for business owners to think carefully about how they word the news of downsizing their workforce.  

Traditionally, rounds of downsizing and redundancies have been surrounded by widespread economic gloom.  

Previous downturns have been accompanied by falling share markets, contracting house prices, rising unemployment and a constant stream of bad news. 

In contrast, the share market remains steady, house prices continue to rise to new records and unemployment remains at historic lows. 

A near decade-long labour shortage has left many employees bullish about their ability to find and keep jobs and command strong salaries, regardless of economic conditions.  

So for employers about to announce redundancies or retrench workers, there is likely to be a sense of shock — even anger — about losing a job in a tightening market. 

There is also an entire generation of workers who have only ever changed jobs voluntarily, seeking better conditions or change of pace.  

It means that employers need to think carefully about how they communicate a change in resourcing, whether that is a salary freeze, a halt on new hiring or the difficult decision to downsize.  

If they fail to communicate well, they risk losing other talent they might have hoped to retain, which in turn can affect employee morale and result in reputational damage. 

So how should employers seek to soften the blow — or at least help the employee depart with dignity?  

The first piece of advice is to anticipate and manage the emotion.  

For some workers, this will be the first time they have ever experienced redundancies after years of relatively strong economic performance.  

For those employees, the news could come as a shock so it needs to be explained in the context of why a certain role or roles are not currently needed, and what the impacts will be for other business operations. 

A round of redundancies doesn’t signal a collapse, even if newspaper headline writers would have you believe otherwise, so business leaders need to be as clear as possible about their future intentions.  

On the other hand, if news of a round of downsizing has leaked, employees will likely have spent hours thinking about the possibility and what it might mean for them.  

It is critical to provide clarity early for those going and those staying, as unhappy employees   in an uncertain environment can quickly create a toxic workplace culture.  

The second thing is to consider how making the call quickly can help employees move into other roles before the market really turns.  

Although the hiring market has come off its peak, there are still many roles left unfilled. 

Enabling employees to step quickly from your organisation into a round of applications for the next is also appropriate.  

Here, there are benefits in providing access not only to Employee Assistance Programs that can offer guidance and advice for concerned employees, but also support for people wanting to leverage their experience to head straight back into 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.  

Facilitating connections throughout professional networks can also be invaluable for departing employees – in 2024, more than ever, it is not always what you know, but who you are connected to that makes the difference when looking for a job.  

Making access to support freely available can make the process of separation a little easier, while also demonstrating to remaining employees that you care.  

Finally, having an option for now-redundant employees to say goodbye to colleagues can also be important in the separation process — but it is also one of the hardest issues to navigate.  

For some employees, the process of being made redundant will be shocking enough that they might want to cut all ties. Others will feel devastated if they haven’t had a chance to say goodbye to colleagues who have become an important part of their lives.  

There’s no single answer here, but being conscious of how employees feel, consulting with them on what they want in the workplace, and looking for ways to support those who stay as much as those who have left can help keep morale strong.  

It’s not yet clear what a slowing economy will bring in 2024 and with luck, we might see redundancies deferred in preference for a slowdown in hiring. 

But for business leaders who know bad news is on the horizon, now is the time to get the strategy right to support a dignified separation.  

This article was first published in HR Daily.
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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