Picture the scene. There are 20 of you in the funds team. You go to the annual conference and spend the morning in a series of presentations. After lunch, you are split into 2 groups and are told to go to separate rooms for further sessions. The first group is told that times are hard. They are then told that they are to be made redundant and are informed that there are taxis are waiting outside to take them home. ‘Thank you very much for your services, now off you go.’ No redundancy payment. No bonus. No benefits. The second group is told that the first group is being made redundant but that their jobs are okay, for now.

If you were in either of those groups, how would you feel? If you were in the first group, words like ‘outraged’ or ‘devastated’ might leap to mind. Surely the business could have said something? Surely you could have been given some warning? How are you going to cope? You’ve got a mortgage, responsibilities.

Even if you were one of the ‘lucky’ ones who were in the second group, would you be feeling lucky? What would be at the back of your mind when you went back to work? Maybe, if things don’t improve, next time it will be you out of a job without any warning. If that’s how the business goes about dealing with redundancies, why should they treat you any differently?

There’s nothing nice about redundancies but the scenario above (which is loosely based on a case which happened in the UK) shows how a badly handled redundancy can devastate lives and wreck workplace morale.

We’re living in difficult, some say unprecedented, times. Businesses are struggling to cope with the global financial crisis.

In almost every business the wages bill is likely to be one of the biggest expenses. However, any business which decides to cut its wages bill in the manner described above is likely to face several consequences.

The first consequence is in relation to those in the first group. In Guernsey most employees with over a year’s service have statutory protection from being unfairly dismissed, although this service requirement is waived in certain circumstances e.g. where the dismissal involves sex discrimination. If an employee is dismissed (whether by reason of redundancy or for any other reason), a claim can be brought against the employer in the Employment and Discrimination Tribunal (the ‘Tribunal’). If an employee succeeds in an unfair dismissal claim, the maximum award is 6 months of salary and cash benefits.

In deciding whether a dismissal on the grounds of redundancy was fair or unfair, the Tribunal will ask itself 2 things: first, was this a genuine redundancy; and secondly was a fair redundancy procedure followed? So, what is a genuine redundancy situation? This can arise where the demand for work of a certain type has reduced or where a whole department or office is closing down. The Tribunal will not look kindly on dismissals which are ‘dressed up’ as redundancies. (We’ve been wanting to get rid of So and So for ages because he’s not up to scratch, so let’s say that we can’t keep him any more because the credit crunch has hit sales badly.)

In reality, the second part of the test is the more difficult part to satisfy: a fair redundancy procedure. The best source of information on fair redundancy procedures is the website for Commerce and Employment’s Industrial Relations section. This has a Code of Practice on Handling Redundancies (the ‘Code’), which is free to download. The Code sets out the steps which an employer should take when facing a redundancy situation. If you are an employer and you have a contractual redundancy policy, you may wish to check that the requirements of the Code are addressed in your Policy.

The common thread which runs through the Code is consultation. If you think back to the scenario above, both groups would have felt very differently had the business simply sat down with the employees at the outset and explained that times were difficult, that the business was going to have to take measures to reduce costs and if real dialogue taken place over alternatives and outcomes.

Let’s not stop there. Think how differently the employees in group 1 would have felt if they had known that a fair and objective system had been used to select people for redundancy, such as a scoring system which took into account their performance, skills and experience, absence record etc. Refine the procedure still further by adding in a round of consultations at which the employee had a chance to comment on the scoring system and a chance to suggest alternative to redundancies such as reduced overtime, redeployment in another part of the business, part-time working or voluntary early retirement. Implementing a fair redundancy procedure which incorporates these elements will help take employees past the initial, shock reaction and help lead them to an acceptance of the need for redundancies. Critical in this is giving the employees a voice, instead of presenting the employees with a fait accompli. Apart from anything else, even if no alternatives can be found to redundancies, affected employees have at least had the chance to mentally prepare themselves for the possibility of losing their job.

Implementing a fair procedure is also important from the perspective of the employees who are left behind. Think how differently the employees in group 2 would feel towards the business if it had gone about the redundancy procedure in accordance with the Code.

‘Survivor syndrome’ is a recognised emotional reaction to redundancies experienced by those who remain in the business after a round of job cuts. Don’t make the mistake of thinking that a redundancy exercise only impacts on the employees who lose their jobs. A redundancy exercise has a traumatic impact on everyone associated with it. Frequently, employees who survive a redundancy programme will have experienced a period when their future is uncertain. They will have seen colleagues (who are often friends) lose their jobs. This in itself puts a strain on the survivors. It can become especially difficult for them if the situation between their colleagues and the business becomes contentious, so that the employee feels torn between conflicting loyalties.

Survivors may also feel concerned if they think the business didn’t conduct a fair redundancy procedure. If the survivor employees think that the redundant colleagues were not treated with respect, or that the process was somehow unfair or motivated by personal animosity, they will often be demotivated as a result. From the employer’s perspective, this could mean the loss of the survivors’ skills and experience as the survivors decide to leave rather than risk being next in line for the same treatment. This risk of defection may increase where the survivors are also facing an increased workload or organisational changes in the short-term as a result of the redundancies.

Even if the survivors stay on board, research has shown that survivors often perform much less effectively at work following a redundancy than in the past. Survivor syndrome is connected with various negative changes including lower morale and commitment, reduced loyalty to the business, reduced motivation, increased stress levels and poorer customer focus. In this way the survivors’ attitudes towards the business will be driven by their perceptions of their employer’s conduct during the redundancy process.

The good news is that survivor syndrome is largely avoidable if employers ensure that redundancies are managed with humanity, fairness and objectivity. In practical terms, this means developing:

  • a communications strategy so that all staff get regular updates on the redundancy procedure;
  • setting out clear criteria which will be applied in selecting staff for redundancy;
  • carrying out sincere (note the emphasis) consultation in which the employer is genuinely committed to listening to the employees’ suggestions as to how redundancies might be avoided;
  • making sure that, in the aftermath of a redundancy programme, meetings are held with the survivors to discuss the impact of the redundancies on the business and the employees and consider how those issues can best be addressed;
  • taking practical steps to help survivors cope e.g. with stress resulting from the additional workload or with training to help redeploy the survivors elsewhere within the workplace.

If we were to boil it down into one phrase, it would be that the employer has to treat the employees with respect.

Employers can gauge the success of their treatment of survivor syndrome by measuring statistics such as trends in absence levels, resignation rates, customer feedback, achievement levels in performance reviews etc.

Few organisations can hope to escape the credit crunch unscathed, so if you do have to carry out a redundancy exercise, bear these points in mind. Doing so could mean the difference between costly Tribunal claims and coming through the recession with a stronger workforce, which is loyal and enthusiastic about you as an employer.

And when the tide turns and you’re looking to recruit staff, you may well find that your employer branding, as demonstrated in your positive attitude towards employee relations, has the new recruits knocking on your door…

This article originally appeared in the January 2009 edition of Business Brief.