Disputes are an inevitable part of doing business. Whether contractual, customer or employee related, more often than not, they are disagreements between parties that can be resolved quickly and amicably.
What is clear, however, is the number of these disputes tends to rise in times of uncertainty and, in the last 12 months, we’ve seen a lot of uncertainty.
Businesses across the country have navigated unprecedented challenges, propped up with more than $100 billion in pandemic relief. While the economic recovery has been strong in some parts of the economy, many still find themselves on the brink of insolvency.
With the three key pillars of business support — JobKeeper, JobSeeker and insolvent trading relief laws — coming to an end, it’s time for many businesses to make decisions about the future of their business and their employees.
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In desperate times, people get desperate
350,000 businesses were removed from the last stage of JobKeeper support, with insolvency experts predicting an increase in business failures in the coming months. For small businesses, the focus should be on avoiding what many consider to be the inevitable rise in employee/employer disputes that occurs when businesses restructure, go under or make changes.
Just as we saw post-GFC, the Fair Work Commission recorded a 40% jump in unfair dismissal applications (the Commission’s highest case type) during the period of May to June 2020.
Whether cutting costs, reducing staff or negotiating reduced wages, business owners need to consider their options and make strategic choices that balance taking a long-term perspective about what is in the best interest of their business and their immediate survival and solvency.
A hasty move can affect the long-term viability of the business or result in legal action. Likewise, inaction can also result in negative outcomes.
What matters more is how you go about making changes. Whether it’s cutting a deal or getting in early to come to a mutually beneficial compromise, the goal should be to attempt to find a solution that all parties can live with (noting that they don’t need to love it) to lower your cost base and avoid hostility.
Reduce costs without panic
Employee numbers are often the first to be reduced in times of uncertainty. In fact, up to 150,000 Australians are predicted to lose their jobs in the three months following the end of JobKeeper. In reality, reducing staff numbers can be a reactive and short-term solution, that can lead to unfair dismissal disputes.
Cost-cutting should be holistic, and there are other ways to reduce your costs that don’t involve reducing staff numbers.
Look at your real estate spend, contractors or the cost of goods. Consider how your cash cycle can be shortened, your goods and services delivered faster or your billing and payment cycle could be overhauled. Headcount should be one of the last to go.
As economic conditions changed sharply with the impact of the COVID-19 pandemic, recovery can be equally as rapid. Being prepared to grow and having your most valuable resource — your people — engaged and ready to support that growth is crucial.
Trust is key in avoiding litigation
According to the 2021 Edelman Trust Barometer, there is a crisis of leadership with a growing trust gap globally fuelled by a rising tide of misinformation and mistrust in information sources. Business leaders have a critical and increased role to build and support trust in their organisations and communities in these volatile and uncertain times.
Rome wasn’t built in a day and the same goes with trust. In time of significant change — like the reduction of headcount — businesses that employ transparent and open chains of communication are likely to navigate the transitional period with greater ease and less disputes.
It’s important that business leaders speak openly and honestly about the plans in place to navigate the current climate. Share the challenges and consider mutually beneficial arrangements. The role of a leader is to provide clarity on the pathway forward, even in the face of uncertainty. Clear, consistent and authentic communication will help to reduce anxiety fueled by the unstable environment and create a stronger sense of team.
The reality is that COVID-19 has highlighted a two-speed economy, where some businesses are succeeding at unexpected levels, while others are failing to thrive. Disputes — including those regarding unfair dismissal — are part of business and are heightened in periods of change. It’s how businesses choose to deal with those disputes that will ultimately decide their outcome.
Simply, compromise and win-win outcomes will always triumph long term over hostility and a win-lose mentality. Conversations between employers and employees should be handled clearly, consistently and compassionately with dispute avoidance being the highest priority.