What is redundancy? Definition and meaning
Redundancy occurs when employers reduce their workforce because a position is no longer required. It is only redundancy if that particular position disappears. If somebody is dismissed and his or her post is filled by another person, that is not redundancy.
Redundancy, in general English, refers to a situation in which something is unnecessary because it is more than required. For example, if I say “I saw a rich man who had a lot of money,” the phrase ‘a lot of money’ is redundant – I do not need to say it because the word ‘rich’ already gives us that information. Therefore I should not say it, because it is surplus to requirements.
The term is commonly used in business, engineering and other sciences, and linguistics. This article focuses on its meaning when referring to losing one’s job.
According to ACAS (Advisory, Conciliation and Arbitration Service), a UK body that provides free and impartial information and advice to employees and employers on all aspects of employment law and workplace relations:
“Redundancies are a form of dismissal, and can happen when an employee’s job no longer exists. This may be due to an employer needing to reduce their workforce, close the business, or certain work is no longer needed.”
“If an employee is made redundant they may be eligible for certain rights such as time off to look for work, redundancy pay, a notice period and consultation with the employer.”
Redundancy and layoff
The term ‘layoff’ (verb: to lay off) has the same meaning as redundancy in both British and American English. In South Africa it is called ‘retrenchment’. Layoff used to mean only the temporary suspension of employment, but today includes both the temporary and permanent states. Most people these days add the word ‘temporary’ before ‘layoff’ if the situation is not permanent.
The person who is being made redundant should be told clearly why this is happening. There should also be an appeals procedure in place in case he or she disagrees with the decision, or believes the selection was unfair.
Stress is a common problem among those who experience redundancy or face the prospect of losing their jobs. According to some studies, people who are made redundant are 60% more likely to be on prescription antidepressants or painkillers compared to the general population.
Redundancy may be voluntary or forced. When an employer offers voluntary redundancy, it is usually accompanied by incentives, such as extra money in the severance package or extended garden leave. Garden leave means the worker stays away from the workplace during the notice period, but still receives his or her wages.
Companies, government departments and other employers offer voluntary redundancy to prevent them having to choose who to dismiss.
Redundancy: Last In, First Out
Redundancies tend to be controversial, especially if the employer has to choose who to dismiss. A popular technique is LIFO (Last In, First Out). Workers who have been in the company the shortest amount of time are made redundant first
LIFO in itself is controversial, for many reasons. Employers’ accountants, if they are trying to reduce costs, will argue that the longer-serving employees tend to be paid more, so more money would be saved by getting rid of them. Others, however, might argue that in the short term laying off the longer-term employees is more expensive because of the size of their severance arrangements.
Supporters of a system that rewards results say LIFO discriminates against the loyal, hardworking employee. They argue that the less productive employees should go first.
Sometimes news about redundancy is announced unexpectedly, and the employees who are laid off have to cope as best they can.
Notice of redundancy
Fortunately, in most cases, the redundancy announcement is preceded by consultation, in which the employer, employees, trade unions, and other stakeholders negotiate the best way to move forward.
In some countries, employers with more than a certain number of workers are legally required to consult for a certain period. This often depends on how many workers need to be dismissed.
In the United States, the Worker Adjustment and Retraining Notification Act (WARN Act) requires private sector companies to give 60 days’ notice of large-scale redundancies and plant closures. There are some exceptions. Several US states have their own more stringent requirements.
In the United Kingdom, if between 20 and 99 people are to be dismissed, consultation must start at least thirty days before the first dismissal occurs. If at least 100 workers are to be made redundant, consultations must begin at least ninety days before the first dismissal takes effect.
The aim of the consultations are to reach agreement with appropriate representatives on issues, such as ways to avoid dismissals or bring down the number of employees to be laid off to a minimum.
In Britain, if you have been working for your employer for between one month and two years, the law requires that you receive notice of at least one week. This period increases by one week for each year of employment up to a maximum of twelve weeks’ notice. During the notice period, you have the right to take paid time off work to attend job interviews.
Redundancy and outplacement
Outplacement means helping people who have been made redundant find new employment. It is a service that is offered by either dedicated professionals within large corporations or specialized agencies.
The aims of outplacement specialists are to help people improve people’s job seeking techniques, create better resumes (CVs), learn how to behave in job interviews, etc.
They provide the emotional and practical career coaching support that will help the employee who has been made redundant navigate the employment market and move into a new job as quickly as possible.
With the greater rates of downsizing, layoffs & redundancies, and rightsizing since the early 1980s, employers increasingly have found a need for some form of help in reducing the trauma of redundancy for both their ex-employees and those who kept their jobs.
Downsizing and rightsizing often have the same meaning. While downsizing always means reducing the size of the workforce, rightsizing means adjusting the company’s size so that it is better able to make a profit. In theory, rightsizing could mean increasing the workforce, but nearly always refers to making people redundant.
Outplacement has become a common component of severance agreements when workers are made redundant. Even if the employer does not provide the service free of charge, many people pay for it privately.
For those who have been working for the same company for ten, twenty or more years, finding themselves looking for a job again is a very unfamiliar and daunting prospect. Being trained on how to proceed and cope can significantly improve a person’s job prospects.
Video – The redundancy process
In this Clarion video, Employment lawyer Deborah Warren describes everything that an employer needs to consider when looking at making redundancies.