Many businesses in Australia, both large and small, have struggled in recent years in tough economic conditions. One of the common reactions to that situation has been to reduce staff levels through significant redundancy programs or even by withdrawing from the market completely like car manufacturers in Australia. But downsizing that is driven purely by cyclical business conditions is, potentially, at odds with the long-term health of an organisation.

It’s in this sense that the tension being played out at the moment is the need to meet two competing objectives:

  • reducing labour costs to contribute to overall unit cost reductions; and
  • retaining skills and talent in the workforce (often skills that have been gained at significant historic cost to the organisation).

In the long term, most businesses will want to ensure that the have access to highly skilled and qualified personnel – shedding staff during cyclical downturns might mean:

  • it becomes much more difficult to make the most of things when economic conditions improve; and
  • those ‘remaining behind’ lose motivation.

Are there alternatives?

With that in mind, some organisations are looking to alternatives to redundancy which balance the need to control labour costs against retaining skilled and qualified team members – as well as balancing the need to convey to the market that the business is prepared to take the necessary steps to ensure business survival against incentivising employees.

In our series, we will present 5 ways in 5 days in which Australian businesses can look to control costs without shedding staff, as well as some of the key practical issues that arise.

What legal issues usually arise in implementing alternatives?

As measures to control labour costs have impacts on employees, there are a range of legal issues that may arise:

  • the change may require a variation in terms and conditions of employment in the employee’s contract (such changes usually require the consent of each individual employee);
  • the employer may be required to notify and consult with employees and unions about the change under the terms of an enterprise agreement or modern award that applies to their employment;
  • the employer may need to go through certain processes specified in an enterprise agreement in order to implement the change (for example, giving a certain period of notice or being required to reach agreement with employees);
  • the employer might be prevented from implementing some changes under the terms of an enterprise agreement or modern award; and
  • the employer will need to ensure that the implementation of the change doesn’t fall foul of discrimination laws or the general protections provisions in the Fair Work Act 2009.

There are, of course, practical issues to think about. Employers will need to carefully consider the impact that changes (or, indeed, the process for change) will have on staff morale and on the culture in the organisation, as well as on the organisation’s public profile. The reaction and perceptions of customers, suppliers and potential employees are factors which are all too often overlooked. It goes without saying that employers will need to consider the way in which the changes are communicated to both staff and other stakeholders alike.