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Redundancy procedure

By The Drum, Administrator

May 31, 2007 | 9 min read

Business can be a heartless beast when it comes to saving a company which is losing money, and, in order to offset losses, more often than not it is the workforce that has to be pruned. By cutting loose a number of its staff, a company will look to take stock and stabilise the business.

It’s a process that is spread across all forms of business, and marketing is no different. In fact, the fickle world of marketing is often most guilty of this act, with agencies continually ‘taking stock’, with tough decisions to be made when accounts are lost. ‘Consolidation’ is often inevitable if there is no business waiting in the wings to cover the financial impact of such a blow.

“At first I thought the consultation process was baloney,” says Mark Gorman, marketing consultant and former managing director of ad agencies IAS Smarts and 1576.

“But the more I’ve had to go through it, the more I’ve seen the merits of it.”

The procedure of making redundancies within a company can be a fairly long-winded affair, taking several weeks while the management assess and then identifies prime candidates that the business can do without.

“It’s horrific. Everyone knows, it’s never a secret and it’s the worst thing that can happen in an agency,” says Gorman of the process.

Despite his feelings towards the process, Gorman admits that the legislation does make sense in ensuring that both the company and the staff involved are treated fairly, “It does allow you to have a more considered approach to the whole procedure and it disciplines the way you go through the process. It takes the emotionally charged situation that you’re in and it takes a little bit of the emotion out of it, which can relax everyone involved in a strange sort of way. It’s really difficult making people redundant from both sides of the fence.

“People want certainty and facts. They want to know what the next stage is, where they stand and what opportunity there is for any decisions to be reversed. There was one occasion where we went through the process and we completely reversed the decision due to consultation with those involved.”

Ian McAteer, managing director of The Union agrees that the process does create ‘a black cloud’ over the company. “Whilst that’s happening, it inevitably creates uncertainty because you’ve got a wider group of workers and someone will be selected to leave and that is unpleasant, but the law says that is what you have to do.”

McAteer continues by highlighting that, while the stress on the staff is understandable, those making the selections are also under intense pressure. “If you’re not careful what you say, you can land yourself into trouble. If you tell someone ‘you’re really good’ then the person can come back and say, ‘I shouldn’t have been selected as I was told I was really good’.”

Another point that McAteer makes is that, as with all difficult situations, there can be a ‘silver lining’. If the firm manoeuvres through the process correctly and treats its staff with the respect they deserve, it can find that those who are left have a fresh impetus and a drive to see the company get back on its feet.

“It can also create a Dunkirk spirit, which, for the people who are left, is ‘we’re going to get through this, we’re going to fight our way out’. That’s very much what happened to us. We got a resolve from the people who remained. People understood why it was happening – they knew we’d lost a big account and they understood it. Those that left understood and those that remained understood why others were leaving. Once it’s all over and it’s done, the people who are left do get back into pursuing things. Unquestionably though, it can be a challenge for management to maintain morale.”

Chris Scott, director of recruitment consultancy, Eden Scott believes that the employer has a moral responsibility to help any staff being ‘let go’ to find alternative employment if possible, but admits that there is no requirement for them to do so.

“Certainly today, with internet recruitment there is clearly a whole new world out there and it is a relatively easy task to find jobs in your sector if there is demand for your skillset. You can actually find out within minutes what the general market is like in your area of expertise,” says Scott.

So while the ordeal of redundancy may be gruelling, both the company and the individuals who ultimately leave may find a new lease of life. While the business survives and moves on, those members of staff are given an opportunity to look to develop and steer their careers in a new direction. It may not be a development that they expected or would have invited, but in the Scottish marketing industry, if a person is good at what they do, there always seems to be an agency somewhere willing to take on an experienced and skilled professional.

The View of the recruitment specialist

Chris Scott, director, Eden Scott

“Don’t panic and take stock. Obviously most people’s main concern is about their financial position, so try and get that in shape as much as possible, have a look at your timescales and try and budget accordingly.

“Try and estimate how long it might take you to find another role in order to get cash coming in. It will obviously also depend on the package that was received from the previous employer. Assuming that the finances are in a reasonable shape and there’s a little bit of time to play with, then the best thing to do is to sit down and think ‘What should I do? Did I love my job and everything about it? I lost it under really unlucky circumstances, but do I want to continue to do the same?’ It can be a watershed moment. Take some time to think about it, rather than taking the first thing that comes along. One of the things we have seen in the past is where people have felt panicked into taking the first job that has come along after taking redundancy. Sometimes it works out, but quite often it doesn’t and they are back on the job market fairly quickly. It really is up to the person to decide what they want to do next, but it’s always worth taking the idea of a change into consideration but be aware that it’s not an easy move to take. Generally employers are looking for people with expertise in their sectors and disciplines, so if a person wants to change career then that can be a fairly long term commitment to achieve that.”

The View of the legal Specialist

David Hossack, Employment

Partner at Morton Fraser LLP

Modern business is such that from time to time it becomes necessary to look at the way you operate: because of trading conditions or new technology you may be faced with the possibility of reduction in staff and the accompanying legal minefield. Whilst a genuine redundancy can be a fair reason to dismiss, there are steps which an employer must follow to ensure that the possibility of a tribunal claim is reduced.

It will come as no surprise that a key element in a well run process is communication. You should consult with your employees (and not just those at risk) not only about the business decision you are facing but also the way in which you might implement it. This should cover matters such as the nature of criteria where there is to be selection from a group of employees and ways of avoiding redundancies including voluntary redundancies. Where there may be more than 20 redundancies in 90 days you must formally consult with employee representatives and notify the DTI.

Having determined that redundancies will proceed you must follow a procedure which is fair, objective and non-discriminatory as well as considering other opportunities which may involve retraining staff or displacing another member of staff at a different level to save employment.

Recently things have become more complicated given the impact of statutory dismissal procedures on redundancy. Unless strict procedural rules are followed the dismissal will be automatically unfair even where everything else has been done in a fair way. This procedure entails sending the employee a written statement outlining the circumstances which could lead to dismissal and inviting the employee to attend a meeting at which representation by a co worker or trade union official is permitted.

A meeting must be held between the employer and employee at a reasonable time and place to discuss these issues. If the decision is then taken to dismiss, the employer must advise the employee of the decision in writing together with details of a right of appeal. An appeal hearing before a more senior member of staff must be fixed in the event that the employee wishes to appeal.

Having overcome all of these hurdles it is important to remember that the employee is entitled to either work or be paid for their period of notice and, if there is more than 2 years of service, entitled to receive a statutory redundancy payment.

As ever, with potentially complex issues such as redundancy, it is always best to get specialist legal advice before acting.

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