Take Advice before Slimming Down at the Top or Pay the Price; Senior Management Redundancies Are Running at Their Highest Level for over Seven Years as Cash-Strapped Firms Seek to Cut Bills. but, as Specialist Employment Law Solicitor, Stephen Jackson of Harding Evans Explains, If Companies Dismiss Executives without Following the Rules, It Could Cost Them Dear
Byline: Stephen Jackson
ANNOUNCEMENTS of redundancies and predictions of a forthcoming recession continue to hit the headlines.
Some senior "victims" of the downturn have received massive severance deals. For example Adam Applegarth, former chief executive of Northern Rock, walked away with a pounds 380,000 payoff, while Stan O'Neal, former boss ofMerrill Lynch, exited with a package worth more than pounds 50m, despite presiding over the bank's biggest losses ever during 2007.
Few, if anyfirms in Wales could contemplate golden handshakes on such a scale. However they could still end up paying outmuch more than they can afford, if they are careless in their handling of senior management redundancies.
Firstly, it seems that senior executives and managers are now among the most vulnerable when it comes to employers deciding where to reduce overheads.
The 2008 National Management Salary Survey published recently by the Chartered Management Institute revealed that redundancies amongst senior managers have more than doubled in the last 12 months and are at a seven-year peak.
The trend is certainly not limited to blue chip companies or Plcs. The harsh reality is that many smaller businesses are also restructuring themselves.
While departing senior executives in Walesmaynot leavewith the kind of pay-outs reported above it remains the case that, if their dismissals are mishandled, their departures could result in firms having to fork out tens of thousands of pounds in compensation. In addition to any ultimate pay-out, employers will have to deal with the threat of a tribunal or court proceedings hanging over them for many months, often years.
Problems often arise because of the greyareawhichexists between a management post which has genuinely become surplus to requirements, and a manager who is under-performing. It's probably fair to speculate that, in seeking to reduce management numbers, firms will often target their poorer performing executives first.
Senior executives are often brought in to a company on the strength of an excellent record elsewhere, and employers become frustrated when, after having left them to their own devices, they fail to deliver results.
This approach creates difficulties when an employer then wants to achieve a dismissal very quickly. A common problem is that employers fail to communicate properly what is expected ofmore senior employees and also fail to give them any feedback on their performance until they start discussions with them to get them out of the company. …