Fairness in workforce reductions: How Australian businesses can give staff a fair go

Thursday, 30 April 2020

Clare Payne photo
Clare Payne
EY Fellow for Trust and Ethics and Honorary Fellow of the University of Melbourne

    The impact of COVID-19 has seen changes to employment arrangements that were otherwise unimaginable. So how can leaders ensure that their workforce reductions are fair?

    The move to ‘stand down’ employees en masse, rather than terminate their employment contracts, aligns with the Australian Prime Minister’s desire for businesses to ‘hibernate’. However, soon enough, those who have been stood down will be seeking some type of certainty as to what the future holds. Should they look for alternative employment? Will they be taken back or let go later? Will they be offered less hours at less pay?

    Even otherwise profitable businesses, including those which are benefitting from the pandemic, are assessing how best to manage their workforces and implementing measures such as reduced hours and adjusted pay.

    How business leaders manage this next phase will distinguish the good leaders from the ordinary and will stand as a public demonstration of just how much they value their people.

    Fairness as a guiding principle

    Fairness is a principle all leaders should use to guide their decisions during this time. After all, a ‘fair go’ is part of Australia’s national identity. Focussing on fairness will also take us some way towards addressing the inequity that exists in our society.

    Blanket reductions applied across a workforce might appear fair, however the impact is not always equal, therefore in many cases the action is not fair at all.

    So, what factors might leaders consider to ensure that their workforce reductions are fair? Here are some ideas:

    • Contribution: Recognising contribution beyond financial and short-term delivery
      For example, are there key staff who have a positive influence on staff morale and culture? Do some staff live the purpose and values more than others?
    • Loyalty: Rewarding loyalty to the firm and leadership beyond the traditional measure of years of service
      For example, have some staff taken hardship postings or moved their family to take a role?
    • Needs: Acknowledging the different needs of individuals that will impact their ability to cope with a change to their employment
      For example, giving special consideration to staff with mental health issues, people with disabilities or those who find themselves vulnerable to COVID-19.
    • Financial Impact: Acknowledging that individuals have varying abilities to cope with changes to their income
      For example, some staff may have student loans, distressed mortgages or responsibilities as a sole income earner.
    • Adaption: Recognising that individuals have different abilities to adapt to the changes ahead
      Some people may be better equipped to transition across to the new business models that may eventuate. Consideration needs to be given to those who are less able.

    A lot more to lose than just people

    Poor practices in workforce reductions have the potential to emotionally scar the Australian workforce, widen existing inequity and jeopardise our future success as a nation. Those who remain, the ‘survivors’, are often the ultimate judge of whether an organisation and its leaders did the right thing, not just by them but their former colleagues as well.

    There are other risks to an organisation when reductions are perceived as unfair. There’s reputational damage if an organisation is seen to have taken advantage of a crisis or failed to uphold a broader public interest obligation to society.

    When a terminated employee gains employment with a client and steers work away from their former employer the loss of market share can be felt directly. There is also the possibility of legal ramifications. Individuals who believe they were treated unfairly are more likely to bring legal action and may be tempted to take their case public, engaging the media.

    Finally, widespread redundancies that are considered unfair can reflect badly on management indicating a lack of reserves and in some cases a flawed business model.

    Having an open mind to alternatives - trusting staff to be part of the process

    A method that is underutilised when leaders seek to reduce their workforces is the involvement of their people in the decisions. Many teams will have the ability to self-organise to achieve desired reductions. For example, given the chance some individuals may elect to take a break – ‘going off the books’ for a time to pursue further education or spend time with their family, others might agree to job-share rather than striking out a role completely. Teams (particularly those who know each other well) may be the most well placed to determine reductions in pay, getting closer to a model that reflects individual needs and therefore fairness.

    Leadership in full view

    Analysts, investors and the public are watching and assessing how leaders are managing their workforces through the crisis that COVID-19 presents. In the UK, a live Google-doc tracks the public responses of individual businesses. What is clear is that the spotlight is on business leaders. Those who manage their people well using ethical practices and the guiding principle of fairness, will be remembered for more than just the jobs they saved.


    Clare Payne is a former employment lawyer. She is the EY Fellow for Trust and Ethics and Honorary Fellow of the University of Melbourne. Clare is the co-author of A Matter of Trust – The Practice of Ethics in Finance.

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