During hard times, like this prolonged pandemic, when businesses are literally squeezed from all fronts, downsizing is one alternative to ensure survival. Management has to make very hard decisions for their human capital, shareholders, clients, and corporate survival. And in any downsizing, the number one casualty is people.
Already, thousands if not millions of workers were laid off and still many are getting retrenched in this continuing pandemic. The goal of downsizing is to save on payroll cost. It is an emotionally charged process.
Atty. Ranulfo P. Payos, the country’s professional human resources management expert in his presentation during the webinar on “Labor Market: Downsizing for the Right Reasons” for the German Chamber of Commerce and Industry, stressed that downsizing is allowed by law, but it is not simple.
“Downsizing is one of the most disconcerting jobs an employer has to do,” said Payos. Downsizing causes anger, disgust, angst, and despair to those laid off. It is also disturbing to management because it disrupts stability, flow of work and internal and external relationships. It could cause labor strikes, especially if a company is unionized.
In a new world order where consumers are empowered, laying off people affects the image of the company. Hence, it must make its case solid if the reason for downsizing is financial.
According to Payos, the law did not specify the amount of financial losses to justify laying off people but it should be substantial enough.
There are available modes of selecting the “sacrificial lambs” in downsizing. The management can choose compulsory or voluntary.
One advantage of compulsory retrenchment is it is a good opportunity to remove deadwoods, the slackers, absentees, tardiness, troublemakers, and many kinds of derelicts. “It is then time for you to strike them to be the first to go,” said Payos.
But Payos also cautioned management to be certain. Management must have a defensible position just in case the laid-off goes to court. The criteria for firing these people must be based on efficiency of performance, productivity, long service and seniority.
There are instances that even if the employee has a string of bad record that the management can say he is dispensable, Payos said that if the laid off is sure of his grounds he can always question his termination. Thus, HR practitioners are advised to always have a good job performance system where employees are regularly given an assessment of his performance.
According to Payos, many companies lost in labor cases because of failure to account the reasonable criteria for the termination.
“If you want to fire the dregs of the company because you are better off without them, be sure you are well grounded,” he added. This means, the employer has ready data to justify the termination.
“While the law allows downsizing there are things to follow and failure to follow creates expensive legal suits,” he said as he pointed out that lawyers from Makati and BGC charge P250 to P400 per minute of their time. “When you call, they have a meter, they charge money for time spent for you so as HR your job is preventive lawyering,” he emphasized.
For voluntary retrenchment or optional retirement, there is not much of a problem. But Payos said the danger of this voluntary mode of laying off people is the possibility of losing good people needed to help steer future growth of the company.
“You might lose high performers, young with very high potential,” he said. High performers would like to avail of voluntary retirement because they can get high separation pay while they get reemployed by others.
This would also mean that the company would be left with “derelicts because they have nowhere else to go.”
In his 31 years as HR executive, Payos said management would normally talk to individuals that the company would like to keep and refuse their application for voluntary retirement, but if the employee insists on leaving there is nothing a company can do to keep him.
The process of downsizing does not end there as the company will have to deal with some issues post downsizing.
The management has to deal with the low morale of the survivors, reallocation of jobs to the survivors, retraining, and pay adjustments.
A good company does not only give out the right separation pay, Payos said it has also the responsibility to help those laid off cope with the post traumatic stress.