Reducing the workforce: should you stand down staff?

By Gavin Cator | 15 Apr 2020 View comments


Is it time to further reduce the workforce and stand down staff? What are the alternatives?

These are unprecedented times for businesses and owners – including franchisors – have hard decisions to make around how to reduce their workforce temporarily, while bearing in mind a longer-term strategy.

There are several options: reducing hours worked, standing down employees or making them redundant. Decisions taken will depend on the business but there are commonalities to bear in mind.

Redundancy or stand down staff – what is the difference?

Redundancy is where the role will not be needed in the future. Employment ceases and employers will need to pay redundancy, within the relevant industrial agreement, the employment contract, award or enterprise agreement. This is a significant step to take and you may like to consider alternatives, such as part-time employment or leave without pay.

Stand-down is needed where employees cannot be usefully engaged because of a business stoppage beyond the control of the employer. This is clearly relevant in the current climate, where the government is asking businesses to close and if suppliers shutting down prevents a business from functioning.

Employees on stand-down are still employed, accruing leave entitlements. The stand-down period counts as service, even if they are not paid for work. Business owners need to be careful of incorrect stand-down processes – the Fair Work Ombudsman has warned of the risk of business owners misinterpreting the rules.

What factors should you consider?

I would suggest working closely with your accountant or financial advisor to undertake a business projection modelling process for various time frames, to help determine the hours and employees needed to keep the business operational. Also consider if there are any initiatives which could keep the business operating, even if it means re-train or redeploying their staff, or diversifying the business.

Once a new business model has been determined, communication with staff is critical to let them know the situation is and talk to them about their circumstances. You may receive valuable input from employees about how they are prepared to work and contribute to the survival of the business.

Bear the future in mind

Business survival is top priority but shrewd business owners will bear the future in mind too, considering wellbeing strategies for impacted employees and a transition from the flexibility model to the new business as usual model. 

This pandemic may offer opportunities to innovate and take advantages of changes you have implemented. But you should take advice to ensure you comply with all necessary regulations while changing your business model.

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