All about staff reduction


Staff reduction is the reduction of the workforce on a larger scale, i.e. the termination of several employees. As a point of orientation, one can use the legal formulation for mass layoffs, e.g. at least 10 employees within 30 days.

In this case, an appropriate procedure (consultation procedure) and an obligation to draw up a social plan are also prescribed.

A layoff always means stress or an additional emotional burden for those involved.

Reasons for a staff reduction

Staff reduction is basically a measure to restore or maintain the competitiveness of a company. It aims at reducing costs, increasing liquidity and adapting to a “new” (market) situation.

1. Financial problems and rationalization measures

A poor turnover and profit situation is one of the main reasons for adjusting the operational cost structure. In this cost structure, personnel costs are in most cases a major starting point for downsizing. Outsourcing is one possible approach.

2. Strategy change

This term is comprehensive and can affect all areas of a company, such as finance, production, marketing and sales. Due to the change in strategy, the current competencies of the employees are no longer needed and a reduction or restructuring of the workforce occurs. Often one of the following strategies is the reason.

3. Merger and acquisition of companies

In this situation, there often is a duplication of positions due to parallel organizational structures of the merged organizations. It is precisely from the cost reduction through job cuts that a synergy effect is to be achieved.

4. Reorganization and restructuring

Increasing efficiency is a constant topic in organizations where a drastic change is brought about by reorganization, automation or digitalization of processes. For the employees affected, there often is no further employment.

5. Closure of sites/outsourcing

Especially for cost reduction, the closure of sites with the relocation of production to lower-cost locations or due to the increase in efficiency through higher production numbers at a single site is a frequently chosen strategy. Outsourcing to third-party suppliers with a focus on higher-value process steps also leads to site closures.

Possible measures to reduce personnel costs

Within this framework, there are various measures that can be taken to reduce headcount or personnel costs without initiating job cuts with layoffs. These approaches are generally more socially acceptable than staff redundancies and can be implemented in the short to medium term.

1. Making use of natural fluctuation

In every organization, employees leave the employer for a wide variety of reasons, because they

  • change their career
  • retire
  • relocate geographically
  • become self-employed
  • etc.

When these positions are not filled due to a hiring freeze, a natural reduction in the work force occurs.

2. Fixed-term contracts/free-lance employees

The same procedure applies to fixed-term employment contracts and work on demand. If these contracts are not renewed or freelancers are no longer used, personnel costs are also reduced accordingly.

3. Voluntary departure programs

Natural fluctuation can be accelerated through financial incentives. These voluntary programs are aimed at employees who would like to leave the company but do not yet feel financially able to do so. The incentives are therefore mainly of a financial nature, such as severance payments or support for early retirement.

4. Transfer and HR development (redeployment)

In parallel to natural fluctuation, internal redeployment (newplacement) also helps in areas where positions are open or employees are needed. Here, retraining can help in the short term or HR development in the medium term as part of career management. Such measures are particularly suitable in the context of a change in strategy.

5. Reduction of working hours/part-time work

A reduction can be imposed in the short term by reducing overtime or taking vacation. Also in the short to medium term, a reduction in personnel costs can be achieved by reducing workloads (part-time). This can either be offered voluntarily or imposed. Then a change notice is necessary on this behalf.

6. Furlough

The introduction of furlough is intended to compensate for temporary employment slumps and to preserve jobs. Here, unemployment insurance steps in to relieve the employer. It is thus an alternative for the employer to threatening layoffs.

The employer thus saves the costs of staff turnover (training costs, loss of operational know-how, etc.) and retains short-term availability over the workforce.

The advantages for the employees are: avoidance of unemployment, preservation of comprehensive social protection within an employment relationship and avoidance of contribution gaps in occupational pension plans.

How to communicate with employees in the event of a layoff

If all the above options have been exhausted and job cuts are still necessary, they must be carefully planned and initiated.

In addition to legal clarification, the most important element here is communication with the employees. For communication to be successful, it must be well planned, consistently targeted at the employees and communicated in clear statements.

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Communicate early and clearly

Communicating job cuts is painful. That is why it is important to prepare well and draw up a plan for dealing with the target groups (management, entire workforce, opinion leaders). The consultation procedure within the framework of the legal provisions must be observed (see below). This is to ensure that the employer informs the employees at an early stage so that they can propose alternative solutions. If the company has an employee representative body, this is the point of contact. Otherwise, it is all employees. In any case, employees should be informed before external partners or stakeholders.

Basically, it is important for the employer to inform first, before rumors start and the working climate is strained.

It is important to inform on: who is affected, in what time frame and for what reasons. It is also important that the information comes from the top management and different communication channels (written and oral) should be chosen. It is also advantageous to present the entire situation openly so that the procedure can be understood and the measures are perceived as appropriate. Statements must be made in a language that is appropriate to the target group and understandable. Understanding employees’ concerns and addressing them before they formulate them themselves creates trust and security.

Do not underestimate the emotional component

A termination is a highly emotionally charged situation. This is true even if the termination was foreseeable. A dismissal can completely turn upside down the life of the person affected. Powerlessness, fear of loss and the insecurity can be felt dramatically and lead to existential fears and loss of identity, and ultimately also put a strain on private relationships.

It is therefore very important to rapidly give a new perspective and restore some security by offering adequate measures (e.g. outplacement) promptly after the announcement of the layoffs. In this way, the dismissal is not seen as the end of the line, but rather as a new beginning, which, thanks to professional coaching, can even open up new career opportunities!

Provide support and opportunities

The question of a social plan and employer support in the separation situation becomes crucial for those affected. These pressing questions should be anticipated and answered in advance as early as possible. Important in this context is information on the following aspects:

  • Who is affected?
  • Timetable/dates
  • Possibilities for internal job changes (internal job market)
  • Job offers from partner companies
  • Volunteer programs
  • Support for professional reorientation (outplacement/newplacement)
  • Contact persons

Do not forget the survivors

The termination is also a burden for the people who are not affected by the termination (survivors) and causes an emotionally charged working atmosphere. Therefore, it is also important to include them in the communication. Key performers should be addressed directly for this purpose and to secure their commitment. Supervisors should always have an open ear and an open door here.

Dealing with the remaining employees (“survivors”) is often neglected, but it is just as important for the future success of the company. They feel sorry for those affected, with whom they sometimes have long-standing working relationships or even friendships. On the other hand, they are happy to keep their jobs and must be loyal to the company. In addition, there is often the feeling that they have to work for those who have been laid off. Therefore, the mood usually is not very positive. They should be won for the company’s new project by using measures like team-building and career management, so the project is implemented with the appropriate energy

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7 tips for the internal communication of a job reduction

  1. clarify the legal side of the planned job reduction.
  2. draw up a detailed project timetable at an early stage.
  3. create a clear core message that serves as a storyline.
  4. Explain the reasons for the planned job cuts.
  5. Answer employees’ questions before they ask any.
  6. stay in close contact with your employees.
  7. expect the unexpected and be flexible.

Planning and process of a layoff

Downsizing is the result of an analysis of the organization to the current and target state in the context of a company’s vision and goals. These analyses are usually conducted by a project team and the shape of the future organization is determined. The management approves the new organization and the necessary measures to achieve it. This includes possible job reductions.

Step by Step Guide:
The procedure for a job reduction essentially involves 3 steps:

Step 1: Mandatory social plan (since 2014)

The social plan obligation and the prescribed procedure are regulated in Art. 335d to 335g OR. Violations of the regulations can lead to considerable costs. The reasons for mass redundancies are manifold in a globally oriented economic system, but often comprehensible to outsiders. For employers, the obligation arises in mass dismissals in the following cases (OR 335ff):

Mass dismissals are dismissals that the employer announces within 30 days in a company for reasons that are not related to the person of the employee and that affect:

  • more than 20 and less than 100 employees and at least 10 terminations,
  • 100 to 300 employees and at least 10% of the workforce,
  • more than 300 employees and at least 30 terminations.

Subject matter of a social plan

The exact content of a social plan is not prescribed. Its purpose is to define measures to avoid redundancies, limit their number and mitigate their consequences. However, it is not only a question of financial benefits. Usually, the following contents are encountered:

  • Hiring freezes
  • Financing of outplacements
  • severance payments
  • Early retirements
  • Changes in notice periods

Early retirements should be announced with caution, since the cost side should not be ignored and also older employees do not want to belong to the old iron (they would rather continue to work).

Staff reductions should be transparent and take into account production planning as well as the needs of those affected, with longer notice periods or early release. Financial measures, such as severance pay or a hardship fund, can be attractive. More sustainable, however, are measures that provide professional support for the job search or improve opportunities on the job market.

These include job centers, outplacement (also for groups), paid retraining and continuing education, and a job reference that is issued favorably and mentions the termination for operational reasons.

Advantages for the employer

While the benefits are obvious for those affected, our experience shows that employers also benefit when social plans are fairly negotiated. This is particularly the case when, thanks to professional support, all the challenges of this complex process can be implemented in a positive manner. The most obvious aspects are the external impact, in particular to preserve the company image and to maintain the employer brand. However, a well-balanced support also has a calming effect on the entire workforce, enables a faster implementation of redundancies and is a proven means of preventing staff churn as well as ensuring the retention of top performers. Productivity is maintained until the last working day, without the employer having to pay vast sums for retention bonuses. In addition, measures that reduce the number of redundancies, such as early retirement, workload reduction or unpaid leave, become an explicit part of the social plan and can thus be accounted for as an additional benefit.

Thus, as a first step, the employer must assess its legal situation and formulate its offer for a social plan as required.

Step 2: The consultation process

The consultation process (OR 335f) stipulates that before the employer decides on a mass dismissal (or also a mass change termination), he must inform the employees of the impending step and give them the opportunity to submit proposals on how the dismissals could be avoided:

1 If the employer intends to carry out a mass dismissal, he shall consult the employee representation or, if there is no such representation, the employees.

2 He shall at least give them the opportunity to submit proposals as to how the dismissals may be avoided or their number limited and their consequences mitigated.

3 He shall provide the employees’ representative body or, if there is no such body, the employees, with all relevant information and, in any event, inform them in writing of

  • the reasons for the collective redundancy
  • the number of employees to be dismissed
  • the number of employees who are normally employed
  • the period during which the notices of termination are to be given.

4 It shall provide the cantonal employment office with a copy of the notification in accordance with paragraph 3.

It begins with the information of the employees on the planned steps. At the same time, the employees or the employee representatives are requested to consider what measures could be taken to prevent the threatened dismissals. The employer sets a deadline for this. How long this deadline must be is not regulated by law. It is recommended to give two to three weeks. After that, however, another period of time must be planned in which the management seriously examines the submitted proposals.

Often, a lot of thought is put into how the legal consultation process can be avoided by staggering the process of termination. In the medium-term this is a mistake that may cost the company dearly later on. Instead, the investment should be made in a well-founded planning of the process.

The consultation period is therefore only the time within which the employee side can submit proposals. The duration of the entire consultation process is longer, since the review period by management must also be included.Timing is therefore important from a legal point of view.

Communication planning during this period is equally important. After all, if you consider how long the management has already been dealing with the potential mass-layoff, it is clear that this cannot be communicated in a quarter of an hour’s employee information.

At the end of the consultation period, the employer decides whether and which of the proposed measures will be included in its restructuring process. These results, together with the decision on the social plan, form the basis for informing the employees.

Step 3 : Implementing the job cuts

What many people do not sufficiently consider is that management must achieve at least two other goals in addition to the job cuts. First, they must achieve an increase in productivity with the remaining employees while maintaining the same level of quality, and second, they must manage the reduction in such a way that, despite the crisis, there is no permanent break in the loyalty and motivation of the remaining employees. Therefore, in addition to the organizational change, motivating and leading the employees is a major challenge for the management. 

For everyone involved, implementing the job cuts on schedule is an additional burden on top of the daily work routine. The superiors have to lead the termination interviews positively and accompany the separation phase. The HR department must accompany the dates of the separation with the superiors, handle the additional administrative work (resignation, certificate, PF, etc.) and remain the contact for those affected. The management, as described above, has to implement the job cuts on the one hand and at the same time implement the new projects in a positive way.

There are also some special cases to consider that require special handling:

  • What happens to employees who are absent during the consultation process?
  • Do foreign employees working in Switzerland or employees working abroad have to be taken into account?
  • What happens to employees on maternity leave or employees who are on sick leave during the consultation?
  • What is the procedure if, on the date of closure of the company or branch, certain employees who are unable to work are still protected against dismissal?
  • What happens to severance payments that have already been transferred to an employee who is subsequently employed by a subsidiary or offered another position?
  • Can apprentices be included in a mass layoff?

Who bears which responsibility?

The following functions play a central role in communication:

Executive management:
It bears the ultimate responsibility in all areas and therefore especially for such important projects as restructuring and job cuts. It is also the organization’s top communicator both for internal communications to all employees and for important external partners (customers, suppliers, banks, etc.). It also decides on process planning and implementation. Therefore, it is fundamentally responsible for communication. For individual aspects, communication can also be partially delegated.

Restructuring project team (internal/external consulting):
It is charged with the planning and implementation of the project (analysis of actual and target status, process planning, scheduling, etc.) and accordingly has the most detailed knowledge. It provides information and arguments for communication.

Human Resources:
HR is responsible for all personnel issues and is therefore an important operational partner in the planning and implementation of job cuts. At the same time, HR is also the contact for those affected, after the information has been announced and during the implementation phase.

Direct superior:
This group of people is responsible for the implementation of the decided measures and thus for the communication with the employees (affected persons and survivors). They play a key role in the termination process, which they often perform together with HR. Because they may also be affected by the layoffs themselves, this role can be doubly difficult. Support through training (termination) and coaching (dealing with difficult situations) can be valuable here.


How is communication done and by whom?

A transformation process with a mass layoff basically requires two types of information:

General information to all employees

This process-accompanying information is important in order to ensure a positive development and to prevent negative rumors. At the moment of the consultation process, this is also required by law. This information is the responsibility of the management. Basically, there should be a “storyboard” here so that the statements are communicated consistently. The language must be simple and understandable. In principle, several forms should also be chosen, e.g. verbal (information event) and written (letter to employees, info on the intranet, company newspaper, etc.).

Specific information for specific target groups

A transformation process is often implemented “top-down” and “bottom-up”. In this process, information and assignments are given by management to the various departments and teams, and the results are then fed back by the teams. This usually takes place in a cascade of meetings in which the relevant information is communicated by supervisors to specific audiences. In addition, this information can also be distributed directly to these target groups in writing.

Support through external outplacement & coaching

Outplacement supports employees who lose their jobs in finding a new professional solution (job, self-employment, etc.). This service is paid for by the employer and carried out by external specialists who coach the employees concerned in a personal relationship of trust.

Outplacement with external specialists is valuable because it increases the chances of success and accelerates the process due to the specific expertise and market knowledge of the coaches.

Professional outplacement offers companies and those affected by the restructuring process the following advantages:

Advantages for the employer

  • Facilitate internal organizational change processes (downsizing/restructuring) as part of the transformation strategy.
  • Assume social responsibility for employee engagement.
  • Strengthen motivation and productivity of remaining employees.
  • Avoid damage to image as an employer and with customers and suppliers.
  • Design termination meetings in a spirit of partnership.
  • Reduce costs for legal disputes
  • Keeping the duration and costs of the separation situation under control.
  • Clarification of special cases.

Advantages for those affected:

  • Master difficult emotional and professional situation in a positive way.
  • Recognize own potential and work out the next career step.
  • Define own goals and priorities (career perspectives).
  • Acquire important competencies for professional development.
  • Increase chances of success and shorten search period.
  • Better positioning in the personal job market.

Outplacement or severance pay?

Even though some of those affected would probably spontaneously opt for a financial settlement, professional outplacement is clearly more sustainable, both financially and professionally. Financially, it is more sustainable because outplacement results in a new job with a regular income. The money from the severance package usually lasts until it is spent (often only one month) and no new income is generated. Professionally it is more sustainable, because outplacement means planning the professional future.

Together with the coach, energy is put into an active and positive future, and life goals and career plans are redefined by means of a career balance.

As the process continues, job seekers improve their self-marketing, discover alternative jobs and industries, and benefit from the coach’s network. And it is not uncommon for career transitions to take a happy ending thanks to outplacement support, namely when the employee is able to get a better job than he or she had ever dreamed of. 

Outplacement or training?

An alternative to severance pay is to pay for professional training. Continuing education is very important, especially in our time with many changes in the world of work. In the job search situation, however, this is a question of time perspective. Since job profiles and professional requirements change dynamically, it is important to first clarify where my skills profile is in demand in the job market. This is a fundamental element of outplacement consulting. Only when I know where my professional future lies can I decide on the right training. There is a risk that training will not bring the decisive advantage and will delay my job search. Therefore, first an outplacement and then, if necessary, a training.

Other important services provided by an HR specialist in the event of a job loss

In addition to outplacement, there are various services that an external specialist can provide to support your transformation process and which represent added value in the context of restructuring:

Training of the termination meeting

A termination meeting is a stressful experience for all parties involved. Therefore, it is important that a termination meeting is well structured and clear statements are made about the situation, the procedure and the social plan. Good preparation through training can reduce the emotional stress and improve the quality of the interview. Training

Coaching of superiors

The transformation process involving difficult situations with employees often puts a strain on managers. The support of an external coach is a valuable assistance to prepare and reflect difficult situations and to avoid burnout. Coaching

Career management

Career management is an instrument of employee retention and supports the transformation process by having the remaining employees reflect on their role in the future organization. Through this reflection of the new role and its requirements, transformation takes place, both at the individual and organizational level. Career Management

Team Building

This helps the remaining employees in a possible new constellation to reflect together on the goals, roles and tasks of the team and to reorganize them. Team Building

Assessment during redeployment

In the context of reorganization, it is important to select the most suitable person for a new task. Here, in addition to internal references and performance records, an external assessment helps to evaluate the relevant competencies for a specific job profile. Assessment

TIPS for a staff reduction

Finally, some experiences from our many years of work in restructuring and downsizing projects.

Clarify the legal situation

Better clarify the legal situation (also for specific individual questions) once more. A mistake can be costly as well as delay the whole process.

Communicate

You almost can’t communicate too much. Inform openly, fairly and sustainably. Explain why the project is necessary and how it will be successful. This will help you gain the trust of employees and facilitate the change.

Involve HR/outplacement specialists

For outplacement and other valuable services (see above) it is important to choose a qualified service provider. Compare different offers and choose the one that fits your culture and offers the best quality (e.g. a member of ACF Switzerland).

Accompany the process well

After the conception, it is important to implement the details well. In addition to the project managers, the management and the HR department are important partners in the transformation process.

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