Best practices for mass staff layoffs

Shortly after Christmas last year, around 100 employees from a restaurant chain in Melbourne were let go from their jobs by email, according to a report from News.com.au.

Calia, the Japanese restaurant and retail chain, informed staff on December 28 that two of its stores in Melbourne were going to close. The stores were closed that same day, with staff told not to go into work.

It came after Calia went into voluntary administration in 2023 but had kept trading while it sorted out its financial situation, the report said.

Management said it had “no other option but to close our stores” amid “economic challenges, Covid-related debt incurred and rising costs”, according to News.com.au.

With other Australian-based companies such as Star Entertainment Group and global firms such as Accenture also announcing staff layoffs in the past year, how should employers best approach these situations?

Best practices for mass layoffs

Emily Shoemark, director at Snedden, Hall and Gallop Lawyers, told HRD Australia the first step employers need to take when approaching mass layoffs is to look at the applicable modern award or enterprise agreement for the organisation. This should identify any consultation process that needs to happen.

“All awards include this consultation clause and enterprise agreements are the same,” she said. “There would be in there a requirement for any major workplace change that a consultation process take place before final decisions are made.”

In terms of redundancy – for example if a restaurant was closing down and its staff positions were being abolished – what is considered reasonable in terms of consultation will depend on the specific circumstances, Shoemark said.

“Generally, the idea is to give people as much time as possible and a heads-up and a chance to ask any questions during the process,” she said. “Because if it isn't a shutting-up-shop situation and it's a restructure, staff can sometimes have valuable input into that as well.”

Notice periods with layoffs

If positions are being abolished, the next step is to determine the entitlements staff should have, Shoemark said.

“There will be, in the award, specific entitlements that staff have in terms of redundancy pay, if there's more than 15 staff, and notice periods,” she said. “If the notice period can't be given, they still need to be paid in lieu of that notice period.”

While the awards determine the appropriate notice period, the National Employment Standards can apply whether there is an award applicable or not.

“[The National Employment Standards] will have the fallback notice periods but in general, it's a minimum of one week,” Shoemark said, adding that if an employee has been with a company for more than five years, the notice period is four weeks.

HR’s role in redundancies

Shoemark recommended that employers have a clear process when it comes to laying off staff.

“Even if you've got a short timeframe and something's happened that means that the decisions are being made very fast, there needs to be a clear process, ideally documented, of the steps that need to be taken,” she said. “Because it supports the decision makers, HR and any management having to have these conversations with staff to make sure all the right steps are being taken.”

This means putting aside time to check the awards, to check what needs to be done and to document a step-by-step process of what's going to happen, “because it is an emotional time for the organisation as well as the staff”, Shoemark said.

Another key element for employers is preparation.

“[It’s about] making sure you've prepared the relevant letters, emails, providing the information for staff that they need but also estimates of their final entitlements, which staff will want to know,” she said. “Having those documents prepared will make that process easier.”

There are usually two formal letters that need to be sent to staff. The first explains what could be happening to the business – such as its potential closure – and letting staff know you’ll keep them updated and to reach out if they have any questions, Shoemark explained. The other is sent when the final decision is made, where you let staff know whether there is no other option but to let them go, and where you discuss relevant entitlements.

The final important factor is transparency.

“With any workforce change or any change in general, communication is so important,” she said. “While employees don't need to know the ins and outs of the accounts and the basis of the decision, it can really help the process to make sure communication is really consistent and clear.”