The psychological impact of being made redundant

Managing redundancy in as humane and supportive a way as possible is essential. By breaching the ‘psychological contract’, whereby employers promise job security and payment in exchange for the employee’s hard work and loyalty, organisations risk disrupting the trust and respect bestowed on them by all their employees.

Sometimes, redundancies are necessary, and recently many organisations have had to trim down their workforces to streamline their operations, reduce costs and care for their remaining employees. Some have handled this better than others.

But first, leaders must understand how employees across the organisation are psychologically impacted by redundancy.

Impact on ‘victims’

The victims are those made redundant, and the wellbeing of these employees is often thought about first. Most people only have one form of employment, and losing this financial security can severely harm their wellbeing, particularly if they have dependents reliant on a steady salary. Employers must bear this in mind and take appropriate action to support those being made redundant with some financial security after they leave the organisation.

Some employees, however, associate their work with far more than their salary. Work often provides people with a sense of identity, community and belonging, and purpose, and if employees have very close workplace connections, losing their job can risk cutting them off from who they believe themselves to be.

This is a far more difficult psychological problem to mitigate, but pre-emptive ways to prevent this include ensuring employees have a good work-life balance and increasing learning and development opportunities so employees can develop skills to support them throughout their career. Ensuring the existence of this positive company culture will help employees navigate redundancy, and leaders should help their staff find other opportunities or provide career guidance if necessary.

Impact on ‘survivors’ and ‘semi-survivors’

Often forgotten when thinking about how redundancy impacts the workforce, the survivors are the employees that remain following the job cuts. The semi-survivors are the employees that were made redundant and then rehired, a common occurrence during the COVID-19 pandemic.

Employers may believe those that remain are so glad to still have a job that there is no need provide them with wellbeing support. But redundancy impacts the whole workforce, and the remnants of stress from the potential of losing a job can impact a person for a long time after the threat has passed. Survivors may also feel a sense of guilt, wondering why they deserved to keep their job more than their redundant colleagues.

Furthermore, the survivors keep the organisation running after the job cuts. Navigating the new dynamics of a smaller workforce with increased responsibilities can be extremely stressful. It will take time for the dust to settle after losing employees, particularly if they played a highly collaborative role. Senior management must remain engaged with the remaining employees to ensure the organisational productivity and employees understand their new roles and responsibilities.

Remaining engaged will also help to repair trust between employees and senior management. Some employees may question whether redundancies will continue, and if they are next. For semi-survivors in particular, knowing that their employer would willing dispose of them when the organisation faces difficulty could lead to feelings of inadequacy, anger, and continued distrust.

It is vital that leaders openly communicate with their employees about the state of the business and implement all redundancies at once, rather than spreading them out. Ensuring employees know that their leaders have a clear plan of action means they will worry less about their future and trust will be re-established much faster.

Impact on ‘redundancy envoys’

It is unlikely many will feel sorry for redundancy envoys, the people tasked with implementing redundancies. However, for the leaders and HR professionals removing faultless people from their workforce, the psychological toll can be great.

In a research paper conducted by the Chartered Institute for Personnel and Development (CIPD), redundancy envoys described how many of them felt a sense of guilt and anger, many expressing redundancies would have been unnecessary if they had been more proactive months before. Many leaders stated they felt a sense of failure, which then leached into their personal lives and required them to seek medical help.

Some lower-level redundancy envoys shared this sentiment, claiming that poor business handling had put them in the terrible position of informing their colleagues they were jobless, often with no clear plan on how this would benefit the business in the long run.

These negative emotions could lead to a sense of detachment from their work, making it harder for these professionals to motivate themselves to continue working towards the organisations’ longevity. Some redundancy envoys, including senior leadership, even choose voluntary redundancy; when those leading the restructure choose to leave, business security decreases further.

Whether redundancies could have been avoided or not, they have a severe negative psychological impact for all involved that is impossible to avoid. It is vital leaders approach redundancies with support, open communication, and respect to ensure the best outcome for all those affected and guarantee the organisations’ future for those that remain.