Rightsizing in Companies does not have to be a Legal Quagmire!
Background:
A European Company involved in oil and gas service sector was facing financial troubles. Their Indian operations were also suffering because of downturn in oil and gas sector over the past few years. The Indian subsidiary had to reduce costs and decided to go in for rightsizing of workforce.
Challenges:
There were a variety of factors to consider especially when dealing with the reduction of workforce that had been providing services for a considerable amount of time. A major challenge was to identify whether the employees fell under the definition of ‘workman’ under the Industrial Disputes Act,1948 and then ascertaining the legal compliance required. Once this was ascertained, it was important to consider other aspects such as justifying why one employee has been chosen for rightsizing and not his immediate colleague, the adequate compensation payable to the workers being let go and the appropriate strategy to negate the chances of litigation and ensure a smooth transition for all parties involved.
Approach and Strategy:
-It was necessary to understand the job profile, tasks performed by the employee in the context of company’s service portfolio, his qualifications, decision making capacity, application of independent judgment and the ability to bind the Company to classify the employees as ‘workman’ or not.
-Extensive research showed that there was severe downturn in the oil and gas industry, which had directed impact on the business of companies providing services to oil and gas sector. As such, Companies across the globe were opting for rightsizing in order to keep cost in control and to stay afloat.
-Employees for rightsizing were identified based on work that was available currently and the prospective assignments in the respective departments. Additionally, past records of the employee as well as their degree of expertise was also considered.
-Severance/Compensation package was designed based on the Company's financial abilities, the employees' expectation and the industry norms.
Impact:
The process of rightsizing was conducted in a smooth and efficient manner. Employees had understood the situation and tendered their resignation. The Company was able to reduce their head count by almost 30% as well as avoid litigations in this respect.