Is redundancy the new performance management?

When should you use redundancy versus performance management?

Too often we hear from an employer or manager when they’ve reached their limit with a poor performer. Our initial advice is often to begin a performance management process, but we’re met with resistance because the problem has gotten out of hand and the employer now feels like they don’t have the time nor wherewithal to begin to manage the employee’s performance. Often, they turn the conversation to whether or not they can use redundancy as an alternative option. Is that a viable option? Let’s explore it.

What’s the difference between performance management versus redundancy?

In between those steps should be periods of review and assessment, during which you should provide your employee with the relevant support to assist sustained improvement. It’s essential that a proper process is followed throughout the performance management process to ensure that all reasonable steps have been taken and documented in accordance with legislation.

Active performance management can help you create a strong culture of excellence for your business. It creates clear expectations and can help attract and retain highly motivated and productive team members.

If you’re trying to leverage redundancy in place of performance management, it could be illegal and have unintended consequences, like a post-redundancy hit to your team’s morale and an impact to their productivity, not to mention unfair dismissal risks.

“A classic mistake that employers often make is that they don’t realise that if they make a role or person redundant, they are claiming that the position is genuinely not required by the business, therefore potentially leaving the business under resourced and open to the risks of an non genuine redundancy process,” notes Businessary HR Manager Lauren McCleery.

“A redundancy means the employer no longer wants or needs to have that position performed by anyone. And if it’s not a genuine redundancy, for example if you then try to recruit to replace the role you’ve made redundant, the employee could claim that it’s an unfair dismissal and make a claim against the company to the Fair Work Ombudsman.

“Generally we would advise clients to focus on leading by example – providing coaching, mentoring and support to their teams, including a well structured performance management program. This will help mitigate the need for a knee jerk reaction of using redundancies to exit an underperforming or unliked employee from the business.

“Your managers and leaders should have the capability and confidence to handle difficult conversations, and if you’re not finding that they are able to, then perhaps it’s at their level that more training and effort should be applied.”

But businesses can and do have the need to make roles redundant at times. Your business could consider making roles redundant for a number of reasons, including new technology that reduces reliance on the role, economic slowdown or business slowdown, closing or relocating an office, or perhaps you’re undergoing a merger or restructure.

If you’re not making a role redundant for genuine business reasons, you could be trying to cut corners. However, if your reasons are valid, making a role or roles redundant could be the answer for your business.

How do I make someone redundant?

Firstly, make sure that you are looking at a ‘genuine redundancy’, which requires you as the employer to meet three requirements, according to Fair Work:

You do not still need the employee’s job to be done by someone (i.e. you’re not hiring someone else to do the same role)
You’ve followed relevant requirements to consult with your employees about the redundancy under an award or registered agreement
You’ve made a reasonable attempts to find suitable alternative roles for the employee within the organisation.
You then have an obligatory consultation process to set out what you as the employer need to do, and this process should be done ASAP after you’ve made the decision to make major changes to the workplace that will result in redundancy.

Your consultation requirements include:

Notifying your employees that may be affected by the changes
Provide them with information about the changes and the anticipated effects
Discuss steps that you’ve taken to avoid or minimise negative impacts on your employees
Consider your employees’ ideas or suggestions about the changes
Discuss any potential suitable alternative roles available.

Making the redundancy process as smooth as possible

Strong and consistent communication is key. You should carefully plan and implement a communication strategy to avoid mixed messages or inaccurate information throughout your obligatory consultation process. “If you’re not sure about your obligations, this is when you need to rely on your HR team or find an HR consultant,” adds McCleery. “This isn’t the time to wing it or leave it to chance.”

Provide dignity, support and respect throughout the process

“If you’re not sure about your obligations, this is when you need to rely on your HR team or find an HR consultant,” adds McCleery. “This isn’t the time to wing it or leave it to chance.”

To summarise

You need to make sure that any redundancies you’re considering meet the criteria set out by Fair Work.
You can make roles redundant when it’s a genuine redundancy, which can be tricky so we encourage you to get expert advice.
Redundancy isn’t a good replacement for performance management – you can’t use it to terminate someone who is underperforming or a ‘bad cultural fit.’
Focus on your performance management process NOW so you don’t run into a scenario of wanting to exit someone from your business without the structure, process, time or energy to do so.

Need to have a difficult conversation with an employee?

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The information provided in this article is only general in nature – before making business decisions you should consider seeking advice specific to your situation.