Termination of Employees for Economic

Termination of Employees for Economic Reasons

Despite being an unpleasant task, there may be a number of reasons when termination of employees becomes a necessity. Current trends involving mergers and acquisitions have made a number of staff redundant and some employees may have to be terminated for economic reasons. Business downsizing has become a necessity for companies to maintain their competitiveness in the market. The cheap labor available in Third World countries has made this situation even more difficult. Companies often have to make the hard choice between not automating their processes and thus going out of business or automating their systems and terminating the employees whom the process of automation has made redundant. ("Employee Dismissal: Facts about employee dismissal for employers," n. d.); ("Labour, Employment and Human Rights Law," 2009)

Most countries like France, Norway, The Netherlands, Sweden, UK, U.S. And Australia view termination of employees on economic grounds to be fair and legal. (Leat, 2007) However, employee termination is always a difficult job and the manner in which it is done can impact business productivity and the workforce. It can also have important implications in the political, social and economic domains. Therefore, an employer must not only keep legalities in mind but also make it a point to act in an unbiased and professional manner using tactful language and maintaining the dignity of the employee before his/her colleagues. ("Employee Dismissal: Facts about employee dismissal for employers," n. d.); (Njoya, 2007)

Employers must fulfill certain basic obligations when dismissing employees for economic reasons. Firstly, employers must justify the legitimate cause for which dismissal is taking place. Legislations in various countries like UK, U.S. And France recognize that there should be a balancing of interests of employees and employers, but when it comes to the business necessity of maintaining the competitiveness of the company, such dismissals are considered legitimate. Even the ILO or International Labor Organization has conceded that termination of employees is justified in case of "operational requirements" of the company despite ILO's stress on job security and statements that maintain that employees should take recourse to terminations only in the absence of alternatives. Companies must prove that their survival is at stake or that their viability is at risk. It is not enough to give the argument that the terminations will improve company profitability. (American Bar Association; Committee on Negotiated Acquisitions, 2006); (Njoya, 2007)

Most of the times termination of employees for economic reasons results in collective layoffs when a significant fraction of the workforce is laid off. Secondly, employers must take care that the criteria on which employees are chosen for dismissal are objective. For instance, employers should take into account various aspects like seniority, family situation, etc. while dismissing employees. Thirdly, there must be efforts to redeploy those employees whose designations have been abolished. This must include identifying suitable positions where the employees can be assigned to after retraining. (American Bar Association; Committee on Negotiated Acquisitions, 2006); (Njoya, 2007)

Many countries require employers to provide an advanced (one month or more) written notification to the employee(s) citing the correct reason for termination. The employer may have to face legal action and pay financial compensation if this notice period is not strictly observed. (Berkowitz; Muller-Bonanni; American Bar Association; Section of International Law, 2007) Employers must ensure that payments and other benefits that are due are given to the dismissed employees. In countries like France, these payments and benefits may include severance indemnities which differ according to the positions and seniority of the employee, and any paid vacation that is due to the employee but has not been availed of. Some payments may also have to be made in cases of "contractual non-competition clauses." The total payment amount depends upon the individual job contract and the relevant collective agreement, the minimum being set by appropriate legislation. (American Bar Association; Committee on Negotiated Acquisitions, 2006)