Downsizing the Workforce (Cambridge (CIE) O Level Business Studies)

Dismissal & 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)
    

Diagram with the reasons for downsizing

• 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

• Integration with other businesses through mergers or takeovers could mean that some workers' roles are duplicated

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

• Automation involves more machinery being used in the business

  • Workers' jobs are replaced, with remaining workers focused on operating machinery

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

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