Downsizing the Workforce (Cambridge International IGCSE Business)

Dismissal & Redundancy

Spec point — 2.3.3 · "• Difference between dismissal and redundancy with examples • Understand situations in which downsizing the workforce might be necessary, e.g. automation or reduced demand for products • Recommend and justify which employees to make redundant in given circumstances"

Dismissal and redundancy

• Dismissal (firing or sacking) is the termination of employment by an employer against the will of the employee

  • Employees are usually terminated due to their misconduct(e.g. violating company policy) or poor performance
  • The employer may choose to dismiss them immediately (without notice or compensation) or provide a notice period which they can work out
  • In some countries, an employee can take the business to court if they feel they were unfairly dismissed

• Redundancy is where a job role is no longer needed by a business and a worker is dismissed, usually with compensation

  • The legal process for selecting workers for redundancy must be very clear and fair

The factors used to determine who is made redundant

• Some workers are happy to be made redundant

  • This may be because they have another job they can go to, they want to retire early or they want to start their own business
  • Some businesses offer a good redundancy 'pay out' which is attractive to workers

Downsizing the Workforce

• Workforce planning is the process of determining the human resource needs for the foreseeable future, in terms of the number and skills of employees required

  • When expanding, a business often requires more employees
  • However, on some occasions they need to downsize the workforce (reduce the number of employees)

Reasons for downsizing

Reducing business size can be caused by a range of factors including business relocation, falling demand and automation through the introduction of technology

1. Lower demand

• Is likely to reduce the volume of output a business needs to produce
• Fewer workers are required to produce a reduced level of output

1. Integration with other businesses

• Through mergers or takeovers could mean that some workers' roles are duplicated

1. Business closure

• Will mean that only a few workers will be required to legally dissolve the organisation

1. Automation

• involves more machinery being used in the business
• Workers' jobs are replaced, with remaining workers focused on operating machinery

1. Retrenchment

• Is likely to mean that fewer resources of all types are required, including employees

1. Business relocation

• may allow a business to reorganise its operations, requiring fewer employees