A couple of years ago, the Covid pandemic impacted on redundancies, with an increase faster than during the 2008 to 2009 economic crisis. Redundancies reached record highs between May to July 2020 with a redundancy rate of 5.6 per 1,000 employees. Some of the
biggest companies that announced layoffs since March 2020 were Easyjet, Royal Mail and Rolls Royce.
This unprecedented situation created a large pool of candidates representing both opportunity and risk. While being laid-off can leave an employee with many questions and complex emotions to process, it is also not an easy decision for businesses to make.
However, sometimes circumstances change and companies may need to begin rehiring sooner than expected. While the idea of downsizing and letting go of employees may seem counterintuitive at first, it can have a positive impact too.
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What is Redundancy?
Redundancy happens when employees get dismissed from their jobs and companies need to reduce their workforce. In the UK, an employee is considered redundant if one of the following conditions is met:
- The employer has ceased, or intends to cease, operating the business.
- The need for employees to perform a specific type of work, or to carry it out at their current location, has ceased, diminished, or is expected to do so.
Companies must follow the right procedures and provide redundancy payments and notice periods. As such, employers are advised to take all reasonable steps to avoid redundancies from occurring and handle them in a way that minimises the potential adverse impact on
those who lose their jobs and the remaining employees.
Can Companies Rehire After Redundancy?
There is no set timeframe that a company must wait after redundancies before rehiring. Once employment has been terminated due to redundancy, there are no legal restrictions on employers hiring for the same role again within a specific timeframe.
To minimise the risk of facing an unfair dismissal claim from the redundant employee, companies must be able to demonstrate valid reasons for redundancies such as business closure, relocation, or the need to lower financial costs.
There should be a significant change in the financial prospects of the business that now necessitates the recruitment of new workers. Employers must be able to show that their financial situation has improved or transformed to the extent that new hires are required.
It is crucial to be able to establish that the reason for rehiring is directly linked to a change in the organisation's financial circumstances.
How Redundancy Affects Organisations
Restructuring is often carried out to address financial challenges and reduce costs with the objective of lowering expenses. This cost reduction can have an initial impact on the organisation’s financial health, but redundancy also has a wider reach than that, affecting
employees’ morale and reducing productivity and profitability too.
Company Culture and Brand
The process of redundancy can impact an organisation's culture and branding. How organisations handle this and support affected employees can shape their reputation as a successful business. Providing employees assistance with job transitions, and maintaining
open communications can help preserve a positive brand as an employer,and enhance the organisation's attractiveness to potential employees in the future.
Skills and Knowledge Loss
Redundancy may result in the loss of valuable skills, knowledge, and experience within the company. Employees who are made redundant might have specialised expertise or knowledge that is not easily replaceable.
This loss can potentially impact the organisation's ability to execute certain tasks, maintain quality standards, or adapt to future challenges. Effective knowledge transfer and succession planning are crucial to mitigate these risks.
Employee Morale and Job Satisfaction
Redundancy can significantly impact employee morale and the overall organisational culture. The fear and uncertainty surrounding job security can create a sense of anxiety and lower motivation among both the employees who are being made redundant and the remaining
workforce.
Organisations need to manage the process with sensitivity and support to mitigate the negative impact on morale and maintain a positive work environment.
Opportunities when Eliminating Redundancy
When eliminating redundancy, organisations can seize several opportunities that arise from the process.
Increased Profitability and Financial Stability
Reducing redundancy can lead to cost optimization and improved financial performance. By eliminating unnecessary positions, organisations can reduce expenses related to salaries, benefits, and overheads. These cost savings can be reinvested in areas such as innovation, technology upgrades, employee development, or strategic initiatives, enhancing the organisation's long-term sustainability.
Improved Organisational Efficiency and Productivity
The elimination of redundancy provides organisations with an opportunity to restructure their teams or departments, creating more effective and agile structures that align with their strategic goals. Companies can redefine job roles, establish clearer reporting lines, and
optimise team composition to better meet the evolving needs of the business.
Boost Employee Satisfaction and Retention
While redundancies can decrease employee morale and job satisfaction due to a sense of uncertainty, they can also represent an opportunity to assess the skill sets and capabilities of the remaining workforce.
Redundancy allows companies to reallocate talented employees to more strategic or high-priority roles, maximising their potential and contributing to overall organisational success. This talent reallocation can result in increased employee engagement, improved retention rates, and a stronger, more capable workforce.
Managing Redundancy Well
In today's business landscape, employers are currently facing workforce challenges and shortages that require innovative and legally sound solutions. If your organisation finds itself in a situation where they may need to hire for a role that was previously made redundant, at Morgan Philips Executive Search we provide headhunting services focused on employees’ career evolution and job search strategy.
Contact our expert team today to find your perfect candidate, or use our job search function to find your next executive role.