Downsizing the Workforce

Exam code: 7115

Written by: Ashika|Reviewed by: Caroline Carroll|Updated 2 July 2026

Dismissal and redundancy

Dismissal (firing or sacking) is the termination of employment by an employer against the will of the employee
- Employees are usually terminated due to their misconduct (e.g. violating company policy) or poor performance
- The employer may choose to dismiss them immediately (without notice or compensation) or provide a notice period which they can work out
- In some countries, an employee can take the business to court if they feel they were unfairly dismissed
Redundancy is where a job role is no longer needed by a business and a worker is dismissed, usually with compensation
- The legal process for selecting workers for redundancy must be very clear and fair

Worker productivity	Lateness or absence data	Length of time employed	Workers with essential skills
Productive workers are most likely to remain employed	Reliable workers are less likely to be made redundant	Long-standing employees are usually more expensive to replace	Skilled workers could be transferred to other roles

Some workers are happy to be made redundant
- This may be because they have another job they can go to, they want to retire early or they want to start their own business
- Some businesses offer a good redundancy 'pay out' which is attractive to workers

Workforce planning is the process of determining the human resource needs for the foreseeable future, in terms of the number and skills of employees required
- When expanding, a business often requires more employees
- However, on some occasions they need to downsize the workforce (reduce the number of employees)

Lower demand
- Is likely to reduce the volume of output a business needs to produce
- Fewer workers are required to produce a reduced level of output
Integration with other businesses
- Through mergers or takeovers could mean that some workers' roles are duplicated
Business closure
- Will mean that only a few workers will be required to legally dissolve the organisation
Automation
- involves more machinery being used in the business
- Workers' jobs are replaced, with remaining workers focused on operating machinery
Retrenchment
- Is likely to mean that fewer resources of all types are required, including employees
Business relocation
- may allow a business to reorganise its operations, requiring fewer employees