If job cuts have to be made, why not simply ask for volunteers? Surely that has to be easier for an employer than putting the workforce through the pain of compulsory redundancies? Not necessarily, and here’s why.
As an employer:
1. Do you really want to pay your top talent a shed-load of money to go and work for your competitors? Your best and brightest employees – those with the best job prospects elsewhere – may be among the first to apply for voluntary redundancy.
2. Do you want to demoralise your star performers by dangling the prospect of big pay-offs but then turning down their requests, on the basis that you reserve the right to refuse voluntary redundancy to key individuals? Hence turning enthusiastic and able employees into resentful opponents?
3. Do you want to give away large cash lump sums as a leaving present to employees who were planning to leave anyway? At any given time there will be a proportion of your workforce who are actively looking for jobs elsewhere. Why not stuff bundles of extra cash into the pockets of your leavers as they head for the exit?
4. Do you want to make more people redundant than is necessary? If voluntary redundancy is offered to employees in unaffected posts to create opportunities for redeployment, what happens if employees in affected posts refuse to be redeployed into the newly vacant posts and opt for redundancy instead? You could be in for additional redundancy dismissals, lengthening the process and possibly tipping the balance in terms of your consultation obligations (subscription required).
5. Do you want to spend significantly more on redundancies than is necessary? Among the first to volunteer will be those with many years of service, and hence the highest payouts.
6. Do you want to prolong the whole redundancy process as long as possible? If so, calling for volunteers across the board is a great way to drag things out, especially where there are not enough volunteers to cover all the redundancies and you have to commit all the management effort necessary to go through the whole compulsory redundancy cycle after already having been through the voluntary one.
7. Do you want to create a situation where all your employees feel forced to think very hard about whether they should stay or go, including those who were very happy in their jobs and had no intention of leaving before? Once the “we’ll pay you bucketsful of money to leave, whoever you are and whatever job you’re doing” genie is out of the bottle, it can be very hard to get it back in.
8. Do you want to reduce the amount of money available to invest in recognition and reward for those who will continue to work for you – and on whom you depend for achieving your organisation’s objectives during these difficult times? If so, a voluntary redundancy scheme can be a great way to do so.
9. Do you want to annoy and demoralise your line managers? Offering voluntary redundancy to their team members when their teams are not directly affected by the need for redundancies, and then parachuting in as redeployed replacements people made redundant elsewhere in the organisation, without giving your mangers the ability to select the best person for the job, is a sure-fire way to alienate managers and wreak havoc in their teams.
10. Above all, do you want to give up your responsibility as an employer to manage the resourcing of your organisation to deliver its objectives, so that your workforce has the right balance of skills, experience, competence, aptitude and attitude to create sustainable competitive advantage? Or would you prefer to just cut by 5% or 10% and you don’t really care who stays or who goes? So what if you will be losing some of your most talented and seasoned employees and keeping the mediocre? It may be the most difficult business environment for generations, but hey, you’ve cut your headcount without compulsory redundancies and you’ll muddle through somehow.
My argument in these 10 reasons is that, from the point of view of the employer, a widely drawn voluntary redundancy scheme carries many disadvantages. But that is not to say that voluntary redundancy per se has no advantages for employers if job cuts have to be made, especially if used in a discerning and focused way.
If you have a group of employees, for example, all of whom are doing identical jobs, and only a proportion of those posts are redundant, then it is certainly good practice to consider calling for volunteers within the affected pool.
Also of course, employers will bear in mind that compulsory redundancies, just like voluntary redundancies, cannot be made without cost to their organisations. So deciding on the balance between voluntary and compulsory redundancies will normally be a case of deciding between least-worst options.
Moreover, there are ways to mitigate some of the ill effects described above. Take point 2, for example. By communicating the criteria for voluntary redundancy very clearly from the beginning, it may be possible to manage expectations and limit the extent to which employees who don’t meet the criteria feel disappointed when they are refused.
And it could be argued in relation to point 5 that some employers will actively want employees with long service (and hence generally higher salaries) to leave. The one-off redundancy cost may be higher, but the ongoing paybill saving will be greater.
Finally, trade unions always prefer voluntary to compulsory redundancies and many collective agreements, especially in the public sector, specify that the voluntary route must be tried first. Wanting good relations with the unions and being bound by collective agreements will weigh in the balance for those employers affected.
Difficult times: is redundancy the answer?, Sue Nickson, XpertHR (subscription required)