What Is Redundancy at Work? Definition and Reasons

By Indeed Editorial Team

Published 14 April 2022

The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.

Organisations may lay off employees for various reasons. When a corporation faces financial difficulties or no longer requires a certain role, redundancy may occur. Learning about what redundancy entails can help you to strategise effectively when the company lays off staff. In this article, we define redundancy at work, explore the distinction between redundancy, layoff and downsizing and provide measures you can take to assess and manage possibly redundant roles in your organisation.

Related: How to Continue Moving Your Career Forward After Being Laid Off

What is redundancy at work?

Redundancy is the process through which companies let go of one or more workers owing to factors unrelated to job performance or behaviour. It's not the same as getting dismissed because of poor performance or workplace flaws. The employee has little influence over the circumstances that led to their redundancy. The employees typically have entitlement to appropriate compensation because losing a job can cause financial and mental hardship. Here are some instances of scenarios in which companies could be under pressure to let go of their employees due to redundancy:

  • Economic recession: If external forces such as an economic recession begin to have an impact on the firm, sometimes you may let people go, even if they make valuable contributions to the company.

  • Termination of job title: If the company no longer requires a certain job title, it may result in redundancy. For instance, if your organisation transitions to an electronic phone system, the function of a receptionist may become obsolete.

  • Firm closure: Another reason for redundancy might be that the company decides to end the business to pursue another enterprise, retire or move on to a new career.

  • Significant decrease in income: When a company's income drastically plunges, it may be necessary to make some employees redundant.

  • Business relocation: If you decide to transfer the company to a different location or country, it may result in redundancy since it may not be economically feasible and practical to relocate every employee. The firm may also shrink its size to establish itself in a new location.

  • Changes in a company's operations: Organisations evolve in terms of operations and usefulness. This may imply that some sections of the firm are no longer essential as other ones take their place.

  • Inadequate financial resources: If the company has limited or no funds for a project, this might lead to redundancies. Keeping employees when there's no work for them may result in a loss of earnings.

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What is the distinction between layoffs, redundancy and downsizing?

Before you can consider redundancy in your business, it's critical that you first understand how it differs from layoffs and downsizing. Here's how to tell the difference between the two:

What's the distinction between redundancy and layoffs?

Layoffs often occur when a business is unable to supply adequate work for its employees. Depending on the health of the organisation, layoffs might be permanent or temporary. Similarly, redundancies can arise as a consequence of a lack of employment, but they can also occur as a result of other situational circumstances such as firm closure or migration.

Related: What Is Termination? Definition, Examples and Process

What is the distinction between redundancy and downsizing?

Downsizing is the process through which a firm decreases its size. This might be because they're planning for a merger or because they're attempting to increase their market share. Downsizing is comparable to redundancy in this regard, although with downsizing, firms may give employees the option of transferring to another corporate site.

Related: 10 Steps to Cope With Retrenchment

How to assess possibly redundant positions

Evaluating duplicate positions inside your organisation may assist you in improving a company's economic outlook. Here's a list of steps to help you:

1. Identify critical responsibilities within your organisation

To assist you in distinguishing a collection of occupations that may or may not be critical for the firm, you can first define important functions. You may designate vital employees as corporate officials and department heads or managers since they assist in the day-to-day operations of the organisation. Department heads might also assist in taking on extra administrative duties within their department if necessary.

Related: Common Responsibilities and Expectations of Managers

2. Evaluate important personnel and their capacity to take on extra responsibilities inside your organisation

Examine each key person and their position in your organisation. They may have prior expertise in another position that qualifies them to take on more duties. If the leader of the accounting department, for example, has a background in financial planning and is also a certified public accountant (CPA), they may take on greater responsibilities if one or more accountants are on leave.

3. Think about the positions or divisions that provide few benefits

Although this process may be challenging, you may consider the company's financial viability. Examine your organisation's structure to see which functions offer the least potential advantage to the firm in the future. This can assist you in determining which responsibilities are redundant. For instance, if the marketing department has eight digital marketing experts executing work that three individuals might do, your organisation may have five marketing specialist jobs that are redundant.

4. Examine each employee's job history in those roles

You can examine each employee in the duplicate jobs once you've restricted the scope of your search. Examine their work performance, professional credentials and overall contributions to the firm. If one person consistently outperforms the others, they may be a better choice to stay with the organisation. For instance, if you determine that five digital marketing specialist jobs are redundant, go over their job applications and performance information. If one of those marketing experts has a strong work ethic and innovative ideas, they might be a tremendous asset to the organisation.

It's important for the decision on who the company would make redundant and the reason for it to be open and without bias. It's important that there are appeal processes in place if employees disagree with the result or believe they were unfairly chosen. Other explanations are as follows:

  • attendance log

  • disciplinary history

  • knowledge or experience

  • work performance standard

  • workplace successes or failures

Related: How to Conduct Performance Evaluations (With Definition)

5. Identify prospective places inside the firm to transfer those people

If your goal is to enhance efficiency rather than prevent a loss of profit, you might establish new positions or relocate staff to different tasks to benefit your organisation. For instance, if you discover numerous redundant marketing professionals but still want to retain them on board, you may offer them roles in customer service, sales or other marketing role that requires assistance.

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Best strategies for dealing with redundancy

Here are some pointers to assist you to deal with redundancy at work:

  • consult with other corporate representatives

  • call a business meeting to tackle the problem

  • meet with each redundancy candidate one-on-one

  • make no productivity assessments for anyone who is on medical leave

Does the employee have entitlement to redundancy pay?

When businesses make people redundant, they have an obligation to them. Many individuals have financial responsibilities and finding another job might take time. A redundancy payout aims to provide financial assistance to redundant employees while they look for new employment.

If the employee has worked consistently for the company for at least two years and is facing lay off due to redundancy, they most likely have the right to redundancy pay. They may also be eligible if they have a two-year or longer fixed-term contract that ends and the company does not renew due to redundancy. Outlined below are some conditions where the company may not be liable to grant redundancy payout:

Transfer of a business

When another company buys over the company, its employees may no longer be of service. There may be a new agreement between the seller and the buyer on the employment of the staff. If the buyer doesn't want to keep the employees, the seller is normally liable for their redundancy compensation. The selling price of a business usually factors in the employee agreement because sellers can save money on redundancy if the buyer keeps the staff.

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Instead of making a person redundant, an employer might give them another chance inside their company on comparable terms. The employee has the option to accept or reject the offer based on its appropriateness. If the employee accepts, the employer doesn't fire them and they don't receive redundancy compensation.

Related: Learn How to Explain Gaps in Employment on Your Resume

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