Redundancy – should you make people work their notice periods?

When you make people redundant, should you get them out of the organisation immediately or make them work out their full notice period?

It is becoming increasingly common in the private sector for people not to work their full notice periods when they are made redundant. Even when people have year-long notice periods, they are often given a large chunk of that as pay in lieu of notice, known in the trade as PILON. There are sound commercial reasons for this, as there often are when private firms adopt a practice. PILON enables the employer to give more cash, which encourages people to accept a deal, and it means they can get the employee out of the office before he or she causes any damage. Often, people will be put on ‘gardening leave’, effectively paying them for staying at home doing nothing but preventing them from working for a competitor.

But PILON and gardening leave are frowned upon in the public sector. No CEO or HR Director wants to be accused of paying public servants to do nothing or of giving them money instead of squeezing everything out of them until the bitter end. Paying redundant staff in lieu of notice is therefore much less common in the public sector. There is nothing in the Civil Service Code which prevents it, it’s just that senior managers and their political bosses are scared the potential adverse publicity. The Daily Mail and others would have a field day with stories about public servants lounging around at home on full pay or walking out with huge payoffs when they could have been made to work until the last day.

Public sector organisations often avoid commercially sensible decisions out of fear of the media. As Esther Harris said earlier this year, public bodies are scared to spend £10k to save £100k or £300k to save £10 million. Regardless of the long-term rationale, it’s the £10k or the £300k that would be trumpeted in the tabloids. The same is true of PILON. It might make commercial sense but few public sector managers dare use it.

Consequently, redundancy in the public sector, rather than being a swift coup de grâce, is often a slow bleeding to death of the sort described so eloquently by the Redundant Public Servant on his blog and in the Guardian. Sometimes it can take months. Interpretations of rules and policies vary between organisations. In some parts of the public sector, stages in the redundancy process which legally could run concurrently are, for any number of reasons, run in series. So people are told they are ‘at risk’, then there is the period of negotiation with the unions, then people go into the redeployment pool and then, finally, they are given notice but still required to work it. In some circumstances, public servants can spend a year at their desks knowing they are being made redundant yet still being expected to turn up for work. The impact this has on staff morale and productivity, even among those who are not being fired, is easy to imagine.

Despite the reputation (not always deserved) that the public sector has for treating its employees more fairly, its redundancy process often borders on the inhumane. Furthermore, while it might look as though it is saving money, the process is almost certainly counterproductive. Private sector firms realised this a long time ago. That’s why they tend to fire people and pay them off on the spot, rather than putting them through the slow morale-sapping process that the Redundant PS and his colleagues are going through now.

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8 Responses to Redundancy – should you make people work their notice periods?

  1. Pingback: Redundancy – should you make people work their notice periods? - Rick - Member Blogs - HR Blogs - HR Space from Personnel Today and Xpert HR

  2. MLW says:

    Excellent piece.

  3. SimonF says:

    Quite agree. Having made people redundant we were very mindful that we didn’t want them moping about poising the atmosphere. When it came to my turn to be made redundant I just wanted out. In all cases the company was better off and in the great scheme of things the financial cost was immaterial.

    However in all these cases the notice period was 3 months or less, which is quite reasonable for professional people. What you highlight is that some people are on 12 months notice, which begs the question, if they were that important then why are they being made redundant? I also have some sympathy with the Daily Mail tendency in these cases (and now I’ll have to lie down) but suspect (hope?) they are very few and far between.

    On that note, I have always argued against anything longer than 3 months and wouldn’t accept any longer myself. If I want to move on I don’t want to be held back by my employer quite rightly insisting that I work my notice period.

  4. Richard J says:

    All of these are very good points, of course, but it’s worth remembering that (specifically non-contractual) PILONs have one very useful advantage for the employee concerned…

  5. Very interesting piece and it is a dilemma for many employers. Most of my clients are private sector so get shown the door PDQ unless they might take all the clients with them, in which case they sit on garden leave for months. From the public sector employees I have dealt with I can agree with your comment about the inhumanity of some treatment and it seems to be a rule of thumb that the more policies an employer has dealing with redundancy, diversity, grievances etc the less attention is actually paid to doing what is right.

    I agree with the last comment above – notice periods should probably be shorter. To answer the question about working the notice period or paying in lieu, I think employers need to take a sober and careful look in each case and assess the potential risk posed by the employee staying in post demotivated and, perhaps, minded to “sabotage” the business.

  6. Dominic says:

    One sentence that I take issue with in the final paragraph of the piece is: “Despite the reputation (not always deserved) that the public sector has for treating its employees more fairly…”

    My experience is that, as a generalisation, that the public sector treats staff appallingly. They try to and do get away with practices that a private sector employer wouldn’t dream of.

    There is a good reason why membership of trades unions are relatively high in organisations such as the NHS and local government. If I worked for any state organisation, I would be a member of a union like a shot.

  7. Rick says:

    Simon, Michael – one-year notice periods are rare in the public sector. It’s not just the notice period but the practice of running stages of the process in series that causes the problem. For example, if you have the 3 months union consultation, followed by 6 months in a redeployment pool, followed by your 3 months notice period, that leaves you with a year between being told you are redundant and walking out of the door.

  8. SimonF says:

    Rick,

    If that is the case then I think it is verging on a cruel and unusual punishment. Whenever I have had to take people through the process I thought it was a sham because we all knew that there was going to be redundancies and who was involved.

    I have only been involved when it professional people and I remember commenting to our HR consultant who was over seeing the process that it was designed for down sizing a factory of 1000 to 500 when everyone had the same virtually the same skills. When it came to high tech business it was very obvious that the sales coordinator wasn’t going to be able to do the radio engineers job, but we still went through the charade of allowing her the opportunity to apply for the job.

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