Businesses should avoid using redundancy payments as a default method of termination unless they want to see employees take advantage of generous payouts, a legal expert warns.
Harmer’s Workplace Lawyers managing partner Joydeep Hor says more businesses are attempting to use “strategic redundancies” to get around messy termination conversations and potential unfair dismissal actions. He says that in some cases these redundancy deals are even negotiated with the employee.
“A lot of employees now know about their companies having generous redundancy packages, so having your position made redundant isn’t necessarily the worst thing that could happen. On the employer side, they are using that to their advantage in order to provide a win/win situation.
“I think this is an issue because employees are really not challenging the deal being given, because they’re getting a payout. But employers are really avoiding problems by just offering redundancy.”
Hor says a common situation is where an employer knows of an employee they want to get rid of, but are unwilling to complete the massive amounts of paperwork needed or address performance issues.
Instead, they opt to make that person redundant, even if the payout creates a short-term loss, so they can avoid messy conversations and time-consuming red tape.
“Employers have obligations to dismiss employees for valid reasons, and they need to be genuinely linked to the person being removed. If they are underperforming, businesses need to deal with these issues.”
Additionally, Hor says businesses can often choose to make someone redundant and shift responsibilities onto another worker, thereby saving money over the long-term.
“This might be used as a way for employers to get more bang for the buck, so to speak. But they need to be engaging in proper processes and a lot of employees aren’t being held to account.”
Additionally, Hor says the constant use of redundancy payouts could lead to staff actually expecting a generous payment at the end of their employment, even though it wouldn’t be necessary or appropriate under the terms of their contract.
“You really do run the risk of making this a cultural expectation in the workplace, and that’s something you want to avoid because it could cause some arguments when people are asked to leave. You fix an immediate problem and avoid an argument, but it creates cultural precedence.”
“The other problem is that you really run the risk of some legal action. If an employee does challenge you, even with a significant payout, that employer could be seriously embarrassed. That employee might not have been told about some performance issues.”
Hor warns businesses to avoid making someone redundant unless the role truly is superfluous.
“You have to ask yourself, who is going to do that person’s job? If it’s not going to be done by anyone, then you’re saving salary, but that very rarely that happens. What’s happening is you’re pushing responsibilities onto someone else because of making someone redundant when they actually aren’t, and that has a whole range of effects, including on productivity.”
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
