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Redundancy considerations for SME firms looking ahead

Jerome Doraisamy
07 May 2020 2 minute readShare

In the age of coronavirus, many firms are having to consider reduction in staffing numbers and accordingly must consider the prospect of redundancies.

In conversation with MyBusiness sister title Lawyers Weekly, McDonald Murholme principal Andrew Jewell said that smaller firms “need to familiarise themselves” with the pandemic-inspired redundancy requirements, and be aware that if an employee is dismissed to reduce employment number this is generally considered a redundancy and there may be additional entitlements.

“If the firm does not have a redundancy policy, then redundancy entitlements are contained in the Legal Services Award 2010 (for non-lawyers) or the Fair Work Act for lawyers. In each case, redundancy pay is only required for employers with 15 employees or over, so boutique firms should be aware of the rules around counting employees and their own employee numbers as this will affect redundancy entitlements,” he explained.

“Finally, excepting employers who qualify for JobKeeper or where there is a stoppage of work, there is no inherent right for an employer to reduce an employee’s hours to stand them down. Accordingly, if a boutique firm wishes to implement a reduced-hours regime (as many larger firms have) it is likely they will need to offer redundancy as an alternative to reduced hours.”

While law firms across the board are having to navigate WFH arrangements – as well as the complications that come with such arrangements – this may be more difficult, Mr Jewell espoused, for boutique firms which may not have the existing WFH infrastructure in place and which may not have dedicated WHS professionals.

“While all law firms have had to consider work from home, larger firms are more likely to have the IT systems in place and access to the hardware required to move their workforce home with little impact to their business, while boutique firms may have experienced disruptions as they set up the systems required to continue to service clients remotely,” he mused.

“Further, WFH throws up some new safety concerns, such the physical workspace and mental health impact, and if a boutique firm doesn’t have a health and safety professional employed the senior managers/owners will be needing to ensure the workplace remains safe.

“Finally, boutique firms won’t have the same resources as larger firms to deal with any drop in revenue and may feel forced to make decisions regarding staffing.”

As a result, smaller firms must consider what their business will look like in a post-pandemic world, once restrictions are lifted, Mr Jewell advised.

“It would be a short-term view to implement redundancies (and incur the costs involved) only to have to recruit more staff in the near future with the associated costs and risk that new employees don’t work out,” he said.

“Accordingly, firms should consider avoiding redundancies and extending employment of existing employees, which could be assisted by the JobKeeper regime or by employees agreeing to take leave or work reduced hours.”

Moreover, such firms should view such challenges as an opportunity moving forward, Mr Jewell argued.

“First, firms will be considering how they want to look after COVID restrictions are lifted, and boutique firms have increased flexibility when it comes to staffing. Accordingly, boutique firms can be quicker to implement arrangements and can come out of the other side sooner than larger firms who will need more time to implement new arrangements,” he suggested.

“Second, it is a reality that some larger firms will be shedding staff or will be unable to recruit as they normally would, meaning there will be talented lawyers looking for employment and boutique firms busy with work may have access to more talented candidates than normal.”

Ultimately, such SME firms must have a clear view of what is emerging on the horizon, Mr Jewell concluded.

“The main comment is to reaffirm that COVID restrictions are not forever, and all firms, especially boutique firms, should be preparing for the ‘other side’ and accordingly should be reluctant to reduce their workforce only to be recruiting again in the near future.”

Redundancy considerations for SME firms looking ahead
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Jerome Doraisamy

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