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Reduction in force best practices during COVID-19

     
September 30, 2020

If we’ve learned anything from the COVID-19 pandemic, it’s that organizations and employees are capable of adapting to change quicker than we ever expected. Businesses and their employees are adapting to new norms while addressing new and unforeseen workforce challenges.

Unfortunately, with coronavirus, many organizations are seeing negative impacts on their bottom line. This is forcing HR professionals to make difficult decisions about workforce reductions, whether through employee furloughs, layoffs, or a large-scale reduction in force (RIF).

Preparation is the key to minimizing the harm this type of action can have on your business, your brand, your culture, your employees, and – last but not least – the individuals who are departing. It all starts with a good RIF strategy.

Outlining your RIF strategy

A RIF strategy starts with understanding why the layoffs are necessary and worth carrying out, and it goes on to include other factors such as risk mitigation, setting up voluntary and involuntary leave programs, and being open and communicative with your employees.

To put together a RIF strategy, you will need to answer to the following questions:

  • What is the primary purpose of the mass layoffs?
  • What business needs are causing the workforce reduction?
  • What is the scope of the workforce reduction? How many employees (number of individuals) will be impacted?
  • What types of severance or exit options/packages/benefits will be offered, and to whom?
  • How will you communicate to the employees at large – those being affected both directly and indirectly?

Once you have clearly outlined the business purpose and overall scope of your RIF strategy, you can shift focus to mitigating risk, determining voluntary and involuntary program specifics, communications planning, and ensuring that yours is a socially responsible RIF.

Mitigating risk

Each and every decision that your team makes regarding the layoff introduces additional risks, both legal and internal. Naturally, all of these will have to be addressed to ensure that risk is mitigated as much as possible.

Mitigating legal risks

An important first step in your RIF strategy is to cover all the important legal implications involved to ensure you minimize the risk of potential legal action against your organization such as for wrongful termination, age discrimination, employment discrimination, and so on.

Many of the legal risks are related to how you select the employees, so you should thoroughly document your decisions and selection process and tie them back to the prevailing business purpose as much as possible.

To avoid legal issues, consider the following:

  • Know the demographics. Obtain demographic data and location data of selected employees. This will help you to see a much bigger picture of what could introduce potential legal risks. If, for example, your demographic data shows that everyone being let go is female, or that the majority of the employees are 60+ years old, then you might be opening yourself up to future legal action unless you can show that the decisions were based on justifiable factors.
  • Assess WARN Act implications. The Worker Adjustment and Retraining Notification (WARN) Act is a federal law that protects workers from the impact of unexpected unemployment and requires you to give advance notice to your employees. However, there are certain exceptions that would not trigger WARN; an employer should always act in good faith and remain true to their employment brand.
  • Assess ADEA and OWBPA. Both the Age Discrimination in Employment Act (ADEA) and the Older Workers Benefit Protection Act (OWBPA) are employment laws designed to protect workers from being discriminated against for age-related reasons. Even if your selection decisions are completely on the up-and-up and not at all related to age or other factors, you could still be at risk if those decisions aren’t properly documented. For example, if the segment of departing employees includes individuals 40+ years old, make sure to read up on the OWBPA amendment within the ADEA to minimize your risk as much as possible.
  • Form a decisional unit. When making selection decisions, form a dedicated unit of employees that help with the process. This can be a collection of departmental directors or managers who have insights on large segments of employees. A reduction in force best practice is to create the decisional unit from the same group of people that the termination program is targeting – whether that’s individuals within the same facility, department, or job function.

Mitigating internal risks

Mitigating internal risks is all about addressing and minimizing the negative impact that the RIF might have on your employee retention, engagement, and overall morale – all which can ultimately affect your brand and company reputation in the market at-large. How you handle a RIF can and will have a lasting impact on both the remaining and department employees’ experience.

To help minimize internal risks, you should always:

  • Be transparent. Communicate often about the state of the business and the challenges faced. This can help people to better understand and trust the decisions that are being made by your leadership team. You might also consider providing details on what the laid off employees received or will receive as part of their exit.
  • Listen to your employees. Throughout the RIF process, make sure to listen to what your employees are saying both to you and amongst themselves. Doing this can provide valuable insights on how things are going, perceptions amongst the workforce, and even ideas on how to address any negative feelings with your RIF process. Various types of employee surveys can help.
  • Don’t ignore the remaining employees. Plan to talk with all remaining employees to discuss how the transition is going, always remaining visible, communicative, and helpful.

Voluntary program considerations

Your RIF strategy doesn’t have to be a 100% involuntary initiative. That means you can consider alternatives to termination, such as early retirement. Before officially finalizing your list of targeted employees, you should offer an incentive for employees to voluntarily participate or self-select. Such programs can help to reduce the number of people laid off involuntarily by the workforce reduction.

To do this, determine the program eligibility requirements and any potential interplay with those requirements and pre-existing retirement programs. A best practice here would be using age plus service as the eligibility criteria.

Also, it’s worth noting that employers can reserve discretion in accepting or rejecting voluntary participants, but be sure you understand the potential risks involved.

Involuntary program considerations

As previously mentioned, it’s important to thoroughly document the reasons and criteria for employee selection within an involuntary program. Therefore, you must carefully review the selection criteria and, if possible, the individual selections for legitimacy and consistency.

Severance considerations

A robust and detailed severance policy will come in handy during a reduction in force initiative. If you’re lacking an appropriate severance policy, gain insight through published reports or engage a consultant who specializes in severance plan design.

Even if you do already have a policy, you may have to make some adjustments to specific employee severance packages if the policy isn’t comprehensive enough to encompass a large-scale workforce reduction scenario.

With that said, here are some key severance considerations:

  • Is there a current severance policy/practice/handbook for your organization?
  • Is there an applicable severance plan? Possibly from previous layoffs?
  • Do any of the targeted employees have a custom/individual employment contract or offer letter? What about severance provision or severance agreements? Notice provisions? Or any other provisions specific to termination?

Affected employees of any involuntary severance program are likely to have a lot of questions, and many of those will be related to severance and their payout. To be prepared, HR professionals should calculate what is already owed to the employees to understand what each employee is actually entitled to. This needs to be very clearly laid out prior to communicating with affected employees. Download Mercer’s Reduction in Force Checklist for more information on this vital process.

Special circumstances and potential concerns to consider in regards to severance include:

  • Employees on leave – It’s not illegal to lay someone off while they are on leave, but it is illegal to lay someone off because they are on leave. Have a plan in place to communicate with these employees so that they get the message directly from your HR department to help reduce risk and potential legal complications.
  • Employees with documented complaints – Review workplace complaints from the targeted segment to make sure that any manager, supervisor, or director decisions regarding specific individuals are based on the predetermined reduction in force selection criteria, and not related to previous history or an uneasy relationship.
  • Potentially contentious separations – People are going to be upset when layoffs happen – unfortunately, there is no way around that. You can, however, try to identify who might take the news the wrong way and/or which employees might be most likely to retaliate in some way after the fact. Each of these situations will be unique and, as a result, will have to be addressed differently (and thoughtfully).

Workforce reduction transparency

Maintaining transparency throughout the layoff process is another RIF best practice. Consider pre-decision communications and state-of-the-business updates to prepare the workforce for the reality of the situation. Be open and honest while using budgetary reasoning as much as possible, as this is a challenge that many people are likely to relate to.

You should also start the decision-making communications prior to introducing any voluntary options, which could help increase acceptance and participation in those programs.

Layoff communications

Even though transparency is vital, communicating layoffs might be one of the more anxiety-inducing parts of the process. But with proper planning ahead of time, you can reduce some of that stress.

Start by notifying the entire workforce of the layoffs, not just the affected employees. Then, when communicating with the affected employees, make sure to:

  • Provide training for the employees delivering the message in termination meetings. This could include a review of carefully crafted scripts with standard messaging, as well as some responses to potential or expected questions.
  • Be as clear and detailed as possible. Explain that it has nothing to do with explicit workforce performance and continue to stress the underlying budgetary reasons behind the decision.
  • Stay mindful of legal implications. Have your legal counsel review the messaging that you intend to deliver to the workforce.
  • Detail outplacement and severance packages. This demonstrates that the business cares about the people affected and that you’re trying to help them with the transition by providing resources.

Outplacement

Outplacement programs have proven very beneficial and effective at helping transitioning employees land in a new position elsewhere. While these outplacement programs might vary in practice, they all provide employees with the resources to more easily transition into a new position. In addition, they’re also beneficial to employers in a variety of ways, such as reinforcing their organizational value proposition and brand image.

Outplacement resources can come in the form of resume development, job search assistance, interview practice, and coaching, among other things. Regardless of the form, any good outplacement program also benefits your business by protecting your social brand and reputation amongst your past, present, and future employees, and minimizes the risk of lawsuit and/or unemployment compensation funding.

As with many services in today’s environment (medical, advisory services, etc.) outplacement can now be provided through a virtual platform. With Mercer’s on-demand approach to outplacement transitioning employees can use an on-demand platform with all of the tools and resources required to find their next right job, including experienced coaching from any device seven days a week. This high quality, virtual model reduces costs associated with brick and mortar services without compromising service. In this model, cost savings are passed on to employers making it one-half to one-third the cost of traditional providers. This enables employers, who have historically offered these costly services to only senior levels in the organization, the option to provide services to all levels of transitioning employees.

In times when you must say goodbye to employees, consider services that will both help transitioning employees and preserve employment brand and engagement. For more information, visit the Mercer Workforce Transition page or reach out to us at 1-855-286-5302.