With orders, bookings and profitability down, and less customers or clients (or staff) coming into your business for the foreseeable future as the impact of COVID-19 on our community is being felt, it is a really difficult time for business, the NFP sector and government.
Many of our clients are already preparing and implementing their business continuity plans including scenario-planning to ensure they keep their businesses alive and well during this period of uncertainty.
An important part of those business continuity plans is staff – keeping them healthy, keeping them safe, keeping them working (insofar as possible), keeping them employed (insofar as possible).
For more information on managing your team during this time, read our articles on how to communicate with staff during a health crisis, determining the leave entitlements apply during self-isolation and managing workplaces during COVID-19.
If restructure and redundancy is a scenario in your business continuity plan, read our blog below to learn about some workforce planning strategies you may be able to deploy to avoid having to let go of your valued people.
What is redundancy?
This is where an employer decides that a position within an organisation is no longer required by the organisation, regardless of the employee who occupies that position. Whilst the position may be declared redundant, this does not automatically mean the employee occupying that position receives a retrenchment payment. Other options for that employee can include re-deployment to another position. A requirement of Fair Work Act 2009 (Cth) is that re-deployment options are explored.
With COVID-19 we expect thousands of Australian businesses will have to restructure due to economic circumstances. Whether it be the catering or event management company, restaurant, café or travel agency, current staffing levels are likely to be excess of operating requirements both during, and immediately after, the COVID-19 period.
To meet legal requirements, the employer must be able to demonstrate that the position/s declared redundant no longer exists and will not be filled by another employee/s. If entire stores or departments are being closed down (e.g. the entire travel agency, or the project is ‘pulled’ for 2020, meaning the project management team now have no project/duties to work on). Further, as was common during the GFC, position/s can be abolished but part (or all) of those duties are absorbed / shared between other existing employees (meaning those who ‘survive’ the process will be a whole lot busier!).
Alternatives to redundancy
Before you make the hard (and sometimes costly) decision to make some of your valued team members redundant, take some time to carefully consider alternatives to redundancy that may be available.
This might include implementing some of the following flexible workforce arrangements:
- reducing casual staff numbers;
- reducing overtime – Can you more assertively manage your month end, or rotating roster, such that overtime is stripped out, and that elevated cost is instead allocated to keeping some of your workers employed permanently?
- altering rosters and opening hours (by agreement with your employees) – it may be your business is not open or operating;
- possible job sharing arrangements (by agreement with the employees) – Would employees agree to work 3 days per week instead of five, or enter into a job-share with a buddy on an equivalent level, working together, say, on Wednesdays, but job-sharing the other work days? Could you have workers looking to transition to retirement and this crisis might be a valuable opportunity to ‘float’ this idea and attempt a mutually beneficial solution?
- possible decrease in working hours for a determined period of time (by agreement of the employees) – Could your workers drop back to 4 day weeks for two months, on a trial basis, to see if they can ‘share the pain’ and all take a ‘haircut’ in take home pay, as an alternative to some of their team being made redundant?
- re–deployment of the employee – If you are carrying excess staff in a certain area but ‘crying out’ for staff in another area, can you re-deploy some of the now-surplus staff across into this other department/office?
- any other method that may mitigate against an employee being terminated from employment / made redundant (and, in the current significant global economic downturn, unlikely to find equivalent employment for likely a long time).
You and your employee may also agree that the employee will take leave (either paid (in full or at half pay), unpaid or a mixture of both) for the next couple of months and see where things are then.
It is important to note that employees must agree to any of the above changes. They have rights and entitlements protected by their employment contract (such as the right to be paid for 38 hours per week if employed full-time). Therefore, regardless of whether the company considers the change the best course of action, if the employee does not consent then the employer cannot impose these reductions/modifications on the worker. These will be treated as unilateral changes to an employment contract and likely breaches of contract which would be actionable by the worker.
Unpaid stand down as a second-to-last resort
The final workforce planning strategy you can deploy prior to having to restructure is declaring a ‘stand down’. The Fair Work Act 2009 (Cth) (s524) allows an employer to ‘stand down’ an employee without pay when the employee cannot “usefully be employed” because of, among other reasons, a stoppage of work for any cause for which the employer “cannot reasonably be held responsible”. An example where this was successfully applied was the Esso Longford gas explosion in 1998 which meant Victorian businesses were without gas for many weeks, could not trade and had to ‘stand down’ staff as a result.
Standing down your workforce (or certain offices/divisions/teams) should only be considered:
- as a final approach before enacting more-dramatic (and permanent) restructuring resulting in redundancies,
- but after attempts at getting modifications/reductions in labour/costs by consent (e.g. employees agreeing to go on annual leave) have failed or were not successful enough to ‘stem the bleeding’.
We strongly encourage you to get specific advice from us before ‘rolling out’ a stand down of some (or all) of your workforce.
As business owners ourselves, we know downturns are scary in the moment, particularly when the world around you is panicking. There are a number of key areas you need to be focusing on to keep your business alive during this period of uncertainty.
It is helpful to remain calm and consider your business continuity plan methodically. Lean in on your advisors and engage in some scenario-planning to help reassure you and galvanise your business.
Sadly, our Australian laws are restrictive and you may feel like there is only an ‘all or nothing’ approach. However, with open communication and some creativity, you may be able to find the flexibility (and cost-saving) measures you need to weather this health crisis.
We are here to help with any questions, documents and communications you need.
Managing Director / Principal Consultant
Mark is passionate about helping Australian businesses efficiently resolve their industrial relations issues. Mark has demonstrated proficiency advising managers, executives and boards of small to medium-sized enterprises, as well as some of Australia’s best-known companies, on both litigious and non-litigious matters.