Measures That Can Be Taken by Organization to Avoid Compulsory Redundancy - Essay Example

Measures That Can Be Taken By Organization to Avoid Compulsory Redundancy Introduction In the terms of downturn in economic sphere more and more employers encounter necessity to reduce workforce. The process is accompanied with various issues that make the matter complicated. Reducing the staff may face the company with liability issues. Numerous complaints by laid-off workers have a risk to turn into lawsuits, and this may even lead to litigation. Laid-off employees who suppose that they were discharged unfairly may bring suit against company based on various acts of discrimination - race, gender, age, disability, nationality, religion and many other statues that are protected by the law. Employers thinking over the methods of compulsory reduction may avoid or decrease the risk of liability by various means, for instance, purchase employment liability insurance, or any other methods depending upon the situation, although it is impossible to avoid all the risks that may come from the process of workforce reduction. (Francis, 2001) At first, it is necessary to prepare a plan, reflecting strategy of carrying out redundancy, and the reasons for this measure. This plan is to be detailed and accurate and it should provide unity of managers' actions. Redundancy should not be selective or optional; it should be based on many objective factors, like skills or experience. Clear and objective criteria of selection demonstrate that the process is clear and all the employees have equal rights and position. (Burr, 1991) It is necessary to remember that such factor as past productivity of each employee is not objective. It may be regarded as beneficial for the company, but the result will be based upon appraisal of past performance that might have been carried out incorrectly throughout the company. (Ogden, 2004) It is known that the case of redundancy is one of the most painful events that may be experienced by the worker. Redundancy announcement inevitably affects his moral condition, work-related behavior, productivity and individual motivation. Popular methods applied to avoid redundancy It is known that compulsory redundancy is one of possible measures taken in case business faces various problems. Of course, the company should observe and consider all measures that could resolve these problems, that could change business concept and that all causes of competitiveness loss were examined. "Failing to address workforce issues and driving the company into bankruptcy thus losing all jobs does not make sense". (Benyon, p. 14) There are some strategies that are regarded as the alternatives to compulsory redundancy. The specialists provide for the following list of these strategies: Natural wastage is non-hiring new workers in case old employees retire or leave the company, thus, reducing the number of employees. It can be effective where reductions are required across the entire workforce and over a prolonged period. Drawbacks include, the most able leave, attracting new talent causes resentment and turnover continues after achieving the desired workforce level. Stopping overtime - can be effective if it has become part of normal working practice. Drawbacks include, the differing impact on workforce groups and the subsequent difficulty in getting exceptional work requirements met. Early retirement measures - offer early retirement to volunteers. Drawbacks include the loss of some of the most experienced staff. Terminating temporary contracts - can be relatively quick to implement . Drawbacks can include insecurity for some workers, loss of supplier confidence and contractual penalties. Retraining or redeployment - this should always be explored in depth. It is more cost effective than compensation, recruitment and induction costs." Internal recruitment Recruitment freeze (Edwards, p. 50) Internal recruitment Internal recruitment is described as the situation "when a business recruits one of their current employees for another job within the business. For example, a person working on the cash desk of a shop might successfully apply to become the manager of the shop." (Bertola et al, p. 46 )It has both advantages and disadvantages. Advantages of internal recruitment are as follows: 1. Employee already has some ideas of the work to be done. 2. Managers are aware of person's skills and experience 3. This is cheap way of recruiting. 4. Existing workers have greater possibilities for career promotion 5. This measure helps to retain those workers who intended to leave otherwise 6. The period of training is shorter compared to period needed for training of external workers 7. The skills and abilities of candidates are studies carefully, so the risk of choosing a wrong person reduces. (Evans-Klock et al.) Disadvantages of internal recruitment are as follows: 1. External workers may be more experienced and have more skills 2. External workers may have fresh ideas that internal employees do not. 3. the number of potential candidates reduces 4. such measure will result in appearance of one more vacancy that is needed to be filled 5. Existing workers may start to suppose that they are promoted automatically. 6. Company may be resistant to innovations; the workers from the outside often bring new strategies and ideas. (Geary) While making decision as regards to internal recruitment, the company should decide if there are right people wit appropriate skills already working in organization, and if training and development of these people were effective. Internal recruitment is done by means of advertising of new positions within the company, for instance, intranet, notice boards, newsletters, staff magazines, consultations, meetings etc. Redeployment The company that faced the necessity of compulsory redundancy is liable for finding new jobs for appropriate skill level and experience of the workers. Of course, it is not demanded to create new workplaces, but organizations are liable for finding "offer a job of lesser status and/or pay and any jobs at other sites or with associated companies". (Pettinger, p. 154) In case employee considers new job to be not suitable for him for definite reasons, he may apply to the Tribunal. Then the Tribunal observes each individual case and judges basing upon individual family or health conditions of this or that employee, the nature of new work and its terms. The companies usually offer alternative employment to their workers in case the contract terminates. In case a new work is similar to the previous one, and in case it demands the same skills, experience and capabilities, it has the same working conditions, then this new job is regarded as suitable employment. In this case there is no compulsory redundancy, and this worker won't have breaks in his employment. (Pettinger) Employee and employer usually agree about trial period of few weeks, up to four from the termination of the previous contract. "If they are dismissed in this period it is deemed as redundancy from the previous contract but if the employee unreasonably ends the new contract they may lose the right to redundancy payment because they have deemed to have refused an offer of suitable alternative work." (Pettinger, p. 77) In case new work is different from the previous one, employee has a right to have a trial period which lasts up to 4 weeks from the date of termination of the previous contract. "If the trial period is successful then there is no break in service and continuity of employment is maintained. If the employee is dismissed or resigns in this period they are entitled to redundancy pay". (Pettinger, p. 81) So-called "bumping" is regarded by the experts one of the most specific aspects of compulsory redundancy problem. As the practitioners in HR sphere describe it, in case the company faces the situation when some of the employees are to be dismissed on the grounds of compulsory redundancy, it is demanded to look for opportunities to reduce all negative effects of the process by means of providing these workers with alternative work places. Such strategy sometimes comprises terminating the contract of another worker who otherwise wouldn't be affected by compulsory redundancy. (Reubens) Such measure leads to appearance of a new vacancy, which will be then provided to employee who is to be dismissed on the grounds of compulsory redundancy. "Usually this occurs where the "bumped" employee has indicated their willingness to take voluntary redundancy and/or early retirement." (Reubens, p. 42) The question is the accepted limits of using "bumping" concept in case of compulsory redundancy and bad effects that can be produced. This problem was examined by the Employment Appeal Tribunal. This was the case of Lionel North, who was chosen as the most appropriate person for dismissal when the company he was currently working in faced the necessity of compulsory redundancy. But the managers failed to provide a secure redeployment conditions for this worker "through making another, more junior employee redundant, either voluntarily or compulsorily". (Sisson, p. 113) They were not aware of North's attitude to such situation, assuming that he would not like to have a junior post, but Employment Appeal Tribunal stated that he was not obliged to offer such alternative to his employer. This case makes evident that all alternative ways to reduce the effects of compulsory redundancy are to be observed and examined by the managers responsible for it. As the specialists add, "all potential options are actively considered and that assumptions about the employee's intentions are not made in the absence of any particular suggestions or indications from them." (Paige, p. 35) A decision concerning redeployment should derive from a variety of factors, for instance, similarities and differences in payment, working conditions, kind of work, location, and of course individual circumstances of each employee. Companies usually undertake liability to provide the worker chosen for compulsory redundancy with an alternative work place. This new employment is usually offered as soon as the previous employment is terminated or during the period of termination. In case the skills are experience demanded by new position are the same, in case the working conditions are not worse, and in case alternative position is provided in the limits of period of 4 weeks, a new position is regarded as suitable redeployment. (Edwards) A positive issue provided by such alternative is that the employment continuity has not breaks in it. "There may be an agreement between the employer and employee of a trial period of up to four weeks from the end of the previous contract. If they are dismissed in this period it is deemed as redundancy from the previous contract but if the employee unreasonably ends the new contract they may lose the right to redundancy payment because they have deemed to have refused an offer of suitable alternative work." (Edwards, p. 33) When an employee is provided by a new workplace he has a right for a four-week trial period, that starts after the termination of the previous employment. "If the trial period is successful then there is no break in service and continuity of employment is maintained. If the employee is dismissed or resigns in this period they are entitled to redundancy pay". (Heery, p. 37) Voluntary redundancy Voluntary redundancy is one of the methods that can be implemented in case the company desires to avoid compulsory redundancy. This method is regarded as the expensive one, because it may result in attracting of employees who have a long period of work to higher settlements of redundancy. That is why it is not frequently used, because very few employers suggest higher payments related to redundancy to encourage their workers leave the company. But it is necessary to mention that this strategy often results in inequality of the remaining skills and experience and produce negative influence on the company's performance. As the commentators report, "many redundancy agreements approve the employers' right to decide on who should be allowed voluntary redundancy and who should not. So if an employee applies for voluntary redundancy it is not certain that it will be allowed". (Ogden, p. 117) Of course, under such circumstances workers should carefully consider possible effects that their failed application may cause on their future prospects in career. In comparison to this method of avoiding compulsory redundancy, early retirement is less expensive. The method of voluntary redundancy has its specific features and issues connected to it, which are to be observed. The authors advise top managers in organization not to call for volunteers for voluntary redundancy unless it is dictated by the company's policy and accepted redundancy procedure. As the specialists state, this is not the best way of avoiding compulsory redundancy. It is possible that those workers whose skills and experience are important for the organization will agree to voluntary redundancy. The invitation for voluntary redundancy should be properly worded to attract workers for voluntary redundancy. (Morin) Here is the example provided by one of the specialists: "If you turn down volunteers in a department and then go on to select other employees in that department, they can argue that the selection process is inherently unfair since you were never going to select the volunteers because you previously rejected their applications for voluntary redundancy. In addition, it delays the whole process. In redundancy situations delay is dangerous." (Morin, p. 88) In case the employees are not well-informed during the process of selection, even those who were not regarded as the candidates for voluntary redundancy, will seek for alternative workplaces. Terminating the contracts of temporary employees Terminating the contracts of non-permanent employees is another strategy used in case the company desires to avoid compulsory redundancy. It is customary to point out several types of non-permanent employment, which depend upon market terms. These types are as follows: Temporary work. Contract for a temporary employment may be signed in case there is a necessity to replace a permanent worker for definite reasons, or in case organization has temporary working peaks, or if the company wishes to facilitate the working process for permanent employees in case of a particular job. This kind of employment is determined by specific conditions an terms as regards to mandatory procedure, and the period of temporary work. Casual work. This is another type of non-permanent employment, and it has its specific conditions that determine this type of work. Besides, it provides for a set of special issues. These influence touch upon "the contract of causal employment, the contract between the employment agency and the user, and the user's obligations vis--vis the casual worker". (Root, p. 77) Fixed-term employment. This type of temporary employment requires reaching agreement between the parties. This agreement includes the issues of the working period, or a necessary volume of job performance to be carried out (the nature and duration are defined in this case). These issues are included into the contract in case the date of contract termination is not clearly defined. (Root) Recruitment Freeze Redundancy is most frequently accompanied with large-scale organizational restructuring, and organization should provide security of working environment for its employees within the whole period of restructure. Recruitment freeze is one of the measures called for providing such security. Recruitment freeze is used to "curtail permanent appointments to jobs that are similar to those that will be impacted". (Francis, p. 27) This measure allows those employees that consider themselves to be involved into the process of compulsory redundancy, seek for new suitable working positions. Here is the passage from the document of the company's policy related to recruitment freeze in case of compulsory redundancy: "During any major re-structure a list of jobs that will be affected by the recruitment freeze will be produced. The recruitment freeze will continuously be reviewed throughout the restructuring process and may be lifted should business circumstances dictate a need for change e.g. if there becomes a surplus of jobs not being filled." (Heery, p. 44) Early retirement A method of early retirement is reported by the specialists as the popular alternative of compulsory redundancy, due to the benefits that it provides for the workers. Some of the authors state they the initiatives of early retirement are useful and profitable only under definite circumstances, but these are not usual or widespread circumstances. It is not profitable for the company to offer expensive alternatives for the employees. As the authors state, "it is doubtful that benefits outweigh the cost, and the cost is considerable". (Burr, p. 46) It is pointed out that a significant part of the workers who agree to early retirement would have anyway retired at the nearest future or even the same year. "Early retirement does not create employee attrition, it borrows it from the near future". (Burr, p. 50)This method of avoiding compulsory redundancy may be effective and not expensive in case organization faces a one-time necessity of restructuring or cutting back. Accordingly, repeated usage of this alternative to compulsory redundancy is not effective and profitable for the organization. There are some arguments against early retirement initiatives implemented by the company. The issue is that this process may often be unfair because similar groups of workers are treated differently. This argument is to be considered by managers responsible for implementing this method. But, at the same time, "broad early retirement incentives are inequitable because they grant higher benefits to employees who retire during a particular time at the expense of employers and employees who must finance these incentives in the future". (Benyon, p. 36) One more important issue related to this method is that future employees often have to support early retirement programs financially, but they will not obligatory participate in these programs at future. That is why it is recommended that "future early retirement incentives should be targeted so that the benefits to public employers will be high in relation to costs."( Benyon, p. 37) Of course, none of those strategies may be regarded as the method that allows avoiding compulsory redundancy. None of them should be regarded as universal as well. Organization that faces the necessity of compulsory redundancy should carefully observe circumstances and conditions to find out the best method to be applied in each individual case. It sometimes may be effective to consult the employees or at least take into account their needs while forging out effective strategy in case of the company desires to avoid compulsory redundancy. Contents Introduction..1 Popular methods applied to avoid redundancy.2 Internal recruitment...3 Voluntary redundancy...7 Terminating the contracts of temporary employees......8 Recruitment Freeze....9 Early retirement....10 Abstract In the terms of downturn in economic sphere more and more employers encounter necessity to reduce workforce. The process is accompanied with various issues that make the matter complicated. Reducing the staff may face the company with liability issues. Numerous complaints by laid-off workers have a risk to turn into lawsuits, and this may even lead to litigation. Here are the most popular ways that allow companies partially avoid compulsory redundancy or reduce its negative effects: Natural wastage. Stopping overtime. Early retirement measures. Terminating temporary contracts. Retraining or redeployment. Internal recruitment. Recruitment freeze. Organization that faces the necessity of compulsory redundancy should carefully observe circumstances and conditions to find out the best method to be applied in each individual case. Works Cited Benyon, H., Grimshaw, D., Rubery, J., Ward, K. (2002) Managing Employment Change: The New Realities of Work. Oxford University Press Bertola, Giuseppe; Boeri, Tito; Gazes, Sandrine. 2000. "Employment protection in industrialized countries: The case for new indicators", in International Labour Review (Geneva), Vol. 139, No. 1, pp. 57-72. Burr, R., Harris, J. (1991) Guide to Redundancy and Retirement. Rosters Ltd Edwards, P. (2002) Industrial Relations: Theory and Practice (Industrial Relations in Context S.). Blackwell Publishers Evans-Klock, Ch.; Kelly, P., Richards, P., Vargha, C.. (1999). Worker retrenchment: Preventive and remedial measures. International Labour Review (Geneva), Vol. 138, No. 1, pp. 47-66. Francis, J. (2001). Avoid layoff litigation rather than fight it. Austin Business Journal - August 10 Geary, J. (2005) Enterprise : Coach Your Way out of Redundancy. The Birmingham Post, April, 27. Heery, E., Salmon, J. (2000) The Insecure Workforce. London and New York. Morin, M. L., Vicens, Ch. (2001) Redundancy, Business Flexibility and Workers' Security: Findings of a Comparative European Survey. International Labour Review, Vol. 140 Ogden, D. (2004) Coping With Redundancy. David A Ogden Paige. S. (1997). At Risk Of Redundancy. Insight on the News, Vol. 13, December 29 Pettinger, R. (1999) Effective Employee Relations: A Practical Guide to Policy and Practice. Kogan Page Reubens, G. (1970) The Hard-to-Employ: European Programs. Columbia University Press. New York and London. Root, L. (1987) Britain's redundancy payments for displaced workers. Monthly Labor Review, Vol. 110. Sisson, K., Storey, J. (2000) Realities of Human Resource Management: Managing the Employment Relationship (Managing Work & Organizations S.). Open University Press Read More