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Fair Work implications for downsizing workforce

Over recent years businesses have enjoyed high levels of growth and experienced the difficulties of attracting and retaining talent. The impact of the Global economic crisis is that for perhaps the first time in many years organisations are contemplating reducing their workforce. The April 2009 Hudson Report1said that in their survey of more than 7,000 Australian employers late last year, 55% said that they would need to restructure their business. The survey identified the four most important factors as:

  • Clear communication to employees
  • The need to support line managers
  • Treating affected employees with respect; and
  • Minimizing the impact of remaining employees

Have a good strategy in place
Quite apart from the impact on employees, the timing and manner in which retrenchments are conducted can have considerable affect on a business - in terms of cost, productivity, trust and its reputation. It is essential therefore to have a well thought-out strategy for any downsizing of a businesses workforce. This will include the support services offered to affected employees including outplacement services, EAP support but also training for line managers to handle disgruntled staff members and how to conduct discussions with employees who are to be retrenched.

The Fair Work Act
Employer obligations under the new industrial relations legislation changes significantly:

  • From 1 July 2009 the number of people who will be able to accesses relief under the FWA unfair dismissal provisions will increase dramatically. Employers who retrench employees will see an increase in the number of unfair dismissal cases brought against them.
  • From 1 January 2010 the National Employment Standards (NES) will come into operation and will provide severance pay of up to a maximum of 16 weeks pay in addition to notice pay. This will apply to all employees even those not covered by an award or workplace agreement and those who have not previously had any entitlement to severance pay such as senior managers.
  • The NES also includes obligations to consult with employees over decisions to retrench employees. A failure to do so will be grounds for unfair dismissal proceedings.
  • From 1 January 2010 most employees will also be covered by a Modern Award which will also have more specific obligations on employers in relation to retrenchment obligations and severance payments.

Processes and training for line managers
Clear guidelines should be developed outlining the processes involved in terminating employment via redundancy if unfair dismissal claims are to be minimized and staff exiting treated fairly and with dignity. Line managers need to be trained in handling these situations in accordance with established procedures and supported though what is always a difficult and emotionally taxing period.

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