If, after doing your cashflow forecast, you find that redundancy is a real possibility, you should take professional advice straight away. There is a strict legal process to follow and a relatively long lead time before you can take redundancy action. It is important to be clear, even in a pandemic situation, employment law still applies. If the process is not followed to the letter, you could very well end up having a personal grievence lodged against you.
In good times the vast majority of people behave reasonably but in difficult times people will do what they believe is necessary to feed their families.
A successfully lodged personal grievance based on a poorly followed redundancy process could likely set you back at least $15-20K per person and in many cases much more. In our experience if one person gets a payout, word spreads quickly and you could find a slew of people taking grievances.
Before you talk to your staff, you need to consider the following:
- In a redundancy process, you make a position redundant not a person.
- Work out why you are considering redundancy, what are you trying to achieve?
- If you make a position redundant can you still operate your business effectively?
- Remember if you take the opportunity to get rid of a troublesome employee by making them redundant you cannot replace them within a significant period as you have technically made the position redundant and not the person.
- When looking at your cashflow, you will need to take into account redundancy payments which should be stipulated in the employee’s employment agreement. You will also need to pay out accrued holiday pay and any other monies owed.
If you need to make a position redundant, you are required to consult with the affected employees and act in good faith at all times. So who are affected employees? These are all people whose jobs are potentially under threat. For example if you have a team of 10 welders who have largely the same job description and you need to make 2 positions redundant, you need to consult with all of the welders and let them know that their jobs are at risk and that they are an affected person. We recommend you do this in person first of all with a witness present who can keep a record of the conversation. You will then need to provide the employee with a letter in writing explaining that they are an affected person, the reasons why this is the case i.e. severe loss of income due to the Covid-9 pandemic and a consultation process and timeline.
If your work place has union members, you will need to consult with the relevant unions.
“Good faith” means listening, being open to ideas or possible solutions and not pre-determining an outcome.
Deciding which positions are made redundant and who will lose their job
Before making this decision,you need to have developed a criteria which will stand up to scrutiny down the track if a grievance is lodged. The process must be seen to be fair and robust, not singling out any individual.
The final decision and notifying the employee of the outcome
Once you have have an idea of the positions that are going to be made redundant and identified the staff who will potentially lose their jobs you should invite them to an individual meeting to discuss your intention to make their position redundant and ask them to bring a support person. During the current lockdown you should invite them to a video conference through Zoom or Skype for example and also ensure you have a support person in on the call taking notes. In the meeting you should inform the employee you are considering making their position redundant and explain the reasons why you came to this conclusion. You should also explain that you have not yet made a final decision and that you are open to other ideas or solutions. Finally, before the meeting ends, give the employee a timeframe for when you will let them know of your decision once you have weighed up all of the facts and taken on board any ideas they have.
Once the above process has been completed you can then let the employee know of your decision in writing. You may also want to let them know in person.
On a final note, going through a redundancy process is not pleasant for anybody and can be a very stressful experience. The good news is we are here to help you manage your risk and support you. In such trying times emotions can take over. Let us help you lighten the load and take away some of your stress.