First Class Coach

Q: The family firm I work for has never made anyone redundant in its 30-year history, but now we're having to, and it's me who has to do it. How should I go about it?

by Miranda Kennett
Last Updated: 31 Aug 2010

A: My sympathies: redundancies are always painful, since they involve prioritising the economic survival needs of the enterprise over those of the individual. You are right to be cautious. How you handle the process will make a difference to both those who go and those who stay, and to the future prosperity of the business.

A key issue for you is the selection of appropriate candidates to depart. With a family firm, the question of loyalty is bound to arise. Should you get rid of someone who has worked steadily for the company for years, or apply the 'last in, first out' rule? Presumably, the younger, cheaper people you hired recently brought in vital skills, though the old-timers know the business well and, because of their experience, may be more effective. They're also likely to find it tougher to get another job. On the other hand, their salaries are bigger, they may not be as energetic as the newer recruits and may lack critical expertise in new areas of technology and emergent markets.

It's a tough judgment call, and you'll have to balance the short and longer-term needs of the company. Ask yourself and your fellow managers: who will the business need if it is eventually to climb back to success?

Whoever you make redundant, expect repercussions. Usually, it's the least valuable people who go first, and because the employer feels guilty, pay-offs are often quite generous. This causes resentment among colleagues, who see an ineffective member of staff walking away with what seems like a sizable reward for incompetence. As time goes on and another swathe of redundancies is required, the company is less willing, and less able, to be generous - it's now a question of survival - so more bad feeling is generated among both leavers and survivors over the perceived unfairness of redundancy payoffs.

Whatever you decide, communicate early and often with all your people: the rumour mill can suck a great deal of time and energy out of the company that would be better put to increasing productivity. As Macbeth said: 'If it were done when 'tis done, then 'twere well it were done quickly' - but not so fast that redundancies cost more than they save, or the wrong people leave.

You'll need to follow a clear three-stage legal process if you're to avoid being sued for unfair dismissal. The process takes about three weeks, but expect to pay more if it needs to be speedier.

Start by establishing the case for redundancies and documenting it, communicating with the affected employees and setting up fair and objective criteria for who goes and who stays. These criteria might include salary level, significant customer relationships and disciplinary records. Interestingly, length of service may now be age-discriminatory, so should be avoided. If you use poor performance or attitude as criteria but have not so far mentioned these issues - in an appraisal, for example - you could run into problems: the employee will want to know what criteria you've used and may argue with your judgment.

Next, invite individuals to a meeting to discuss their situation. They are entitled to bring another employee or a union representative. When you meet, explain why they've been selected and that they still have the right to be considered for any alternatives there may be - for example, going part-time or taking on extra responsibilities. You'll need to let them know the severance package you're proposing, some of which will be statutory and tax-free, and the time-frame. Finally, provide formal, written confirmation of the termination of their employment and details of the redundancy package. Make sure that what you offer takes account of the provisions in their contract of employment, and other elements of employment law such as maternity leave.

Remember, there are alternatives to redundancy. A small research company I know has just put the entire company on a three-day week. This allows the business to tick over, retaining its talent pool and avoiding severance payments. Staff continue to receive a regular (if reduced) income, and avoid the trauma of redundancy. When business picks up, its experienced people are ready to come back full-time and, meantime, individuals can take on other work, provided it's not for a direct competitor. And being employed, they're in a better position to find another job, if that's what they'd prefer to do.

- Miranda Kennett is an independent coach. If you have a problem you'd like her to tackle, e-mail: miranda@firstclasscoach.co.uk

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