Why you should reconsider redundancies

The current state of the economy has forced businesses to re-evaluate and cut costs. Many are seeing redundancies as the logical step forward.

However, research from Capterra highlighted the other paths that are available and why redundancy should be reconsidered.

It’s no secret that the economy is in a bad way. Experts have pinned the issue on high inflation rates and the war in Ukraine, which have caused a stall in economic growth. With people spending less to survive, small and medium-sized enterprises (SMEs) are being hit hard. Capterra said that in response to this, 37 per cent had made redundancies in the past year.

Of those who were forced to cut jobs, 38 per cent said it was an increase from the previous year. Some industries were hit harder than others. The top five were:

1. Telecommunications (80 per cent)
2. Marketing and communication (73 per cent)
3. IT/Technology (52 per cent)
4. Insurance (45 per cent)
5. Construction (45 per cent)

Unsurprisingly, the main reason for these job cuts was to save money. The top five reasons were:

1. Cost cutting (48 per cent)
2. Decrease in operations (34 per cent)
3. Decrease in funds (22 per cent)
4. Outsourcing (14 per cent)
5. Company mergers (13 per cent)

While redundancy may seem unavoidable to businesses, there are some effective ways around the issue. According to Gartner, the top 10 alternatives to cutting jobs are:

1. Voluntary reduction in hours
2. Internal redeployment
3. Reduce executive compensation
4. Four-day working week
5. Remote work
6. Voluntary leave of absence
7. Organisation-wide pay cuts
8. Hiring freeze
9. Sabbatical
10. Benefit cuts

If the situation is truly unavoidable, care should be taken to make the process as smooth as possible. Communication is an important first step, said Capterra. According to the report, 38 per cent of respondents’ organisations don’t communicate job cuts. A lack of transparency can affect trust and morale and should be a key consideration.

Laura Burgess, content analyst at Capterra Australia, commented: “If an SME needs to downsize, they should consider the costs of lay-offs and rehiring. Companies should evaluate alternatives to redundancies, such as employee upskilling or offering staff a voluntary reduction in hours, first.”

Support is also crucial, as it can be a stressful time for all involved. Showing empathy can further build trust and morale. The top three ways of supporting employees who had been let go were:

1. Providing a reference letter (63 per cent)
2. Redundancy package (48 per cent)
3. Support finding a new job (47 per cent)

Offboarding is important, too. This may get overlooked; however, Capterra said it is important in setting up redundant employees for their future. Shockingly, 40 per cent of respondents said their employer doesn’t provide offboarding.

Ms Burgess continued: “If companies have no choice but to make lay-offs, it’s vital to implement an offboarding strategy, such as holding exit interviews, to show support and compassion to employees, and avoid damaging the company’s reputation.”

To assist in implementation, some of the main factors of the offboarding process are:

• Holding an exit interview
• Organising employee knowledge transfer
• Recovering company assets
• Revoking systems access
• Arranging final payments