Redundancies and restructures are taking place across every sector at the moment. In April 2024, research from Massey University found that New Zealander’s who perceived their jobs are under threat increased from 22% to over 48%. Those in the high job insecurity group are nearly 15 times more likely to be in the burnout risk group, highlighting the impact of job insecurity on wellbeing. This research reflects the changing economic environment in New Zealand, and the pressure the workforce is under due to fear of job losses.
As a business owner, having to let an employee go is challenging, especially for businesses that don’t have redundancies often. The uncertainty of a restructure can impact all staff, not just those made redundant, including employees successful in retaining their jobs, employees made redundant and rehired, and the managers who implement the redundancy. While you may not be able to alleviate all the negative impacts of a redundancy, there are some ways you can address the social and emotional implications of redundancy and enhance psychologically safe practice.
Psychological safety
Central to the implementation of redundancy is psychological safety. Psychological safety exists when employees feel included, safe to learn, contribute, and challenge the status quo without fear of being embarrassed, marginalised or punished. Redundancy has a significant impact on psychological safety and impacts an individual’s basic physiological needs. Being at risk of redundancy alone, has a negative psychological impact on individuals. Timothy Clark proposed Four Stages of Psychological Safety:
- Inclusion Safety – members feel safe to belong to the team. They are comfortable being present, do not feel excluded, and feel like they are wanted and appreciated.
- Learner Safety – members are able to learn through asking questions. Team members here may be able to experiment, make (and admit) small mistakes, and ask for help.
- Contributor Safety – members feel safe to contribute their own ideas, without fear of embarrassment or ridicule. This is a more challenging state, because volunteering your own ideas can increase the psychosocial vulnerability of team members.
- Challenger Safety – members can question others’ (including those in authority) ideas or suggest significant changes to ideas, plans, or ways of working.
The psychological contract
Closely connected to psychological safety is the psychological contract. The psychological contract is an unwritten set of expectations between the employer and employees. Workplace culture is often reflected in the psychological contract which is based on more than what is outlined in the job description. Research suggests that people perceive redundancy a breach of their psychological contract which can lead employees to feel less obligated or loyal to their employer.
Individuals made redundant
A study from Seek asked employees who have been made redundant what they wanted from their employer. These include an additional payment on top of the legally required amount (41%); an internal job offer (38%); counselling and health support services (30%); free career advice session with a career consultant (25%); and links to an external job opportunity (21%). These findings highlight the value of providing guidance (career planning, financial or mental health) following a redundancy. If you are in the position to provide guidance to employee’s made redundant it is important to do so.
According to Richter et al. (2018) employees felt they had been treated well by their employers during the redundancy process when they experienced respectful treatment (shown through the interpersonal behaviour displayed by person delivering the message), were provided an adequate explanation, and were given the message by an authority figure they respected. These findings demonstrate the importance of transparent and considered communication.
The psychological and emotional impact of the redundancy process is also important to consider. Madeleine Stevens of John Moore University outlined the psychological stages of a redundancy process. They include:
- Denial: employees struggle to accept job loss, rationalise it, convincing themselves it applies to others, not them.
- Shock: employees grapple with humiliation, shame and betrayal, questioning the situation’s fairness and impact.
- Anger: employees’ direct resentment at management, feeling betrayal. The psychological contract has been breached, leading to resentment, retribution and lack of commitment, affecting work behaviours.
- Negotiation: employees seek personal benefit, explore alternatives, appeals and negotiate for enhanced terms, considering various options.
- Depression: employees grapple with loss, self-blame, financial concerns, job insecurity and emotional withdrawal, affecting productivity and loyalty.
- Acceptance: employees acknowledge job loss, seek alternative employment, explore income avenues and view redundancy as an entrepreneurial opportunity. They shift focus, demonstrating future-oriented actions.
- Relief: employees establish new personal boundaries in future employment, displaying caution and reduced commitment and loyalty after securing a new role or income source.
Remaining employees
Redundancy impacts existing employees and can be destabilising for those who stay in the business or organisation. Individuals react to change in different ways, and it is important to consider the potential impacts the redundancy may have on the team. For example, team performance, morale, mental health and perceived job security.
What can I do?
- Open communication: Transparent, clear and timely communication is critical. Being honest and empathetic with staff throughout the redundancy process creates trust and builds psychological safety. Begin communicating early, provide reasons for the redundancy, allow for questions, be compassionate and communicate continuously.
- Fair and respectful treatment: Looking beyond legal compliance, it is important to preserve the psychological contract. Treat your employee with dignity to ensure the process if fair and respectful.
- Support staff: Prior to making redundancies, be proactive and ensure support is available for existing staff throughout the process. When a business or organisation goes through a period of redundancies and change, employees require a multifaceted approach to support. This includes:
- Mental health support. As redundancies impact the entire workplace, it is important timely and personalised is provided to all employees (e.g., EAP counselling services). Ensure support is ongoing post-redundancy as existing staff may feel a sense of guilt, loss, or struggle to adapt to change in the period after the redundancy.
- Recruitment support or career mentoring. Many people who discover they are losing their jobs will need to look for work immediately. Discussing future career aspirations with professionals can support employees and provide a sense of direction.
- Financial and budgeting services. Loss of income can create significant financial strain. Financial professionals can support employees through this transition.
Stacey Dukes / Psychologist
I am an intuitive and compassionate Registered Psychologist who provides a safe space. I value creating a strong therapeutic relationship with my clients, which I believe is supported through my warm and authentic approach. I provide a therapy style that is relaxed, client lead and based on a shared understanding of reaching the goals that client’s find most meaningful. I understand that there is not a ‘one-size-fits-all’ approach and modify my approach according to the individual needs of the client. I work with young people (16 years or older) and adults. I am also a registered provider for ACC Sensitive Claims treatment.
Contact Stacey
[email protected]
https://mindgarage.co.nz/our-team/stacey-dukes/