Mitigating the Trauma of Redundancy

Written by Kirsty Turnbull, COO and Wellbeing Coach, Career Money Life.

If you’ve ever experienced redundancy (chances are you have and more than once), you know it’s not just about losing a job and finding another job. It’s a whole lot more than that. For most people, even when you can see it coming, the redundancy notification still feels like a punch in the guts. It’s not a quick recovery either. The grief cycle sets in, and you find yourself swinging through emotions – shock, anger, confusion, and hopefully, eventually, acceptance. But some days, it feels like you’re going back and forth like a pendulum. Moments of traction and results provide a burst of dopamine fuelled hope and a nice hit of oxytocin. Then, just like that, the shine wears off and you’re back to cloudy, fearful thinking. Stress with a capital S.

The redundancy forecast for the third quarter of 2024 is looking ominous. In Australia, 27% of organisations are planning redundancies in the next quarter alone and this number has been steadily rising (Human Capital Magazine). Meanwhile, turnover remains high, with 20% of organisations experiencing significant churn.

Looking forward, the forecast for 2024-25 suggests an unemployment rate increase to 4.5%, with weak job growth expected. This aligns with the broader economic outlook, where businesses anticipate ongoing labour market disruptions and redundancies as part of longer-term shifts in industry needs and productivity goals.

Redundancies pose a considerable risk to both employee mental health and employer brand. Research consistently shows that job loss is one of the most significant factors affecting mental health, with impacts like anxiety, depression, and stress frequently experienced by those affected.

For organisations, failing to adequately support employees through redundancy transition can tarnish employer branding, leading to decreased retention and recruitment difficulties as prospective employees become wary of how redundancies are handled.

While we often talk about these figures from a business perspective, we don’t always pause to consider the personal impact of losing a job.

The traditional outplacement industry is consumed with mitigating risk for its client organisation and has, for too long, been consumed with the technicalities of job search (above the iceberg), turning a blind eye to the mental health impact of transition.

There is a link between redundancy and trauma, both in terms of emotional and psychological impact.

Loss of Identity and Control: Redundancy can trigger a sense of loss of control, and for many, their job forms a large part of their identity. Losing this role can feel like losing a part of oneself, which can cause psychological distress. According to research, job loss has been associated with feelings of shock, anger, and grief, much like trauma from other significant life events.

The Psychological Impact of Uncertainty: When someone loses their job, they often face prolonged uncertainty, which can lead to chronic stress. Anticipation of job insecurity before the redundancy itself can exacerbate feelings of fear, leading to post-traumatic stress symptoms in some cases. These symptoms may include insomnia, anxiety, and hypervigilance.

Link to Trauma: Studies have found that role redundancy can sometimes result in psychological trauma, particularly for those who are blindsided by the decision or feel powerless in the process. The unexpected and uncontrollable nature of job loss is often likened to a traumatic event. A 2016 study by the Journal of Vocational Behavior highlighted that the emotional distress caused by redundancy is comparable to experiencing bereavement or relationship breakdowns, which are recognised as traumatic life events.

Financial Strain and Emotional Toll: Financial insecurity following redundancy adds another layer of stress, often resulting in prolonged anxiety, feelings of shame, and a sense of hopelessness. This can worsen trauma symptoms and lead to long-term mental health challenges like depression or even post-traumatic stress disorder (PTSD) in severe cases.

Why Mental Health Matters in Role Redundancy

Redundancy is one of the top contributors to anxiety and depression. A recent Australian study found that people who lose their jobs are twice as likely to suffer from mental health issues like depression, stress, and sleep disorders (Human Capital Magazine).

And it’s not just people exiting who feel the impact. If mental health isn’t supported during organisational change and external transitions, the risk of psychosocial injury ripples across the organisation, affecting morale, productivity, and your employer brand.

Holistic Career Transition Support mitigates the risk of psychological injury. 

In today’s climate, with 27% of organisations planning redundancies soon and turnover rates of up to 20% in some industries (Deloitte, Human Capital Magazine), it’s never been more important to have a comprehensive career transition strategy. Transitioning out of a role doesn’t have to be a lonely, stressful experience. By investing in a holistic career transition program, starting with how you support your notification process and notification team, companies can not only protect their people but also boost trust, engagement, and keep their reputation intact.

The redundancy notification impacts the mental health of both the employee receiving the news and the manager responsible for delivering it.  It’s a moment of truth for your Psychosocial Risk Strategy.

Impact on Exiting Employee:

Immediate Emotional Impact

• Shock and Disbelief: Research from the Australian Psychological Society shows that 72% of employees report feeling immediate shock upon hearing the news of their redundancy. This initial shock often leads to difficulty processing further information presented in the meeting. 
• Emotional Distress: A survey by HR Daily found that 80% of employees feel high levels of anxiety and distress during the actual notification meeting. Many employees describe it as an emotionally overwhelming experience, often feeling blindsided even when redundancy was expected. 
• Cognitive Impairment: Studies reveal that around 60% of individuals experience a cognitive freeze during the redundancy meeting, struggling to take in or remember information provided. This response is part of the fight-or-flight reaction triggered by intense stress. 
• Physical Responses: During redundancy notification meetings, 1 in 3 employees report experiencing physical symptoms such as shortness of breath, increased heart rate, or even feelings of faintness (Human Capital Magazine). 

Longer-Term Psychological Effects

• Grief and Loss: A 2017 study published in the Journal of Occupational Health Psychology revealed that many employees experience stages of grief, akin to Kubler-Ross’ grief model, with anger, denial, and depression being the most common emotional reactions following the meeting. 
• Mental Health Decline: Research from Beyond Blue indicates that employees who are made redundant are twice as likely to develop serious mental health issues, such as anxiety or depression, in the months following the meeting.
• Self-Esteem and Identity Impact: A UK-based study by the Chartered Institute of Personnel and Development (CIPD) reported that 56% of employees said their self-esteem and sense of professional identity were deeply affected during the meeting, often resulting in feelings of inadequacy or failure.

Impact on ‘Telling’ Managers:

• Emotional Toll on Managers: According to research by the Australian Psychological Society, 40% of managers who deliver redundancy notifications report feeling high levels of stress and emotional exhaustion in the aftermath. 
• Impact on Decision-Makers: A survey from HR Daily shows that 35% of managers who conduct these meetings experience psychological strain, reporting feelings of guilt, sadness, and worry about the well-being of the impacted employee. 
• Burnout Risk: A 2020 study by Randstad revealed that 26% of managers delivering redundancy news are at risk of burnout due to the emotional burden of the process, especially when they have strong connections with the employee.

Long-Term Effects on Managers:

• Reduced Job Satisfaction: A Gallup poll indicated that 29% of managers who deliver frequent redundancy messages experience a reduction in job satisfaction, impacting their overall workplace engagement. 
• Secondary Trauma: Delivering distressing news can lead to a phenomenon called ‘second-hand trauma’. Around 15% of managers feel a lasting emotional impact after terminating an employee, especially if they lack proper training or support (Human Capital Magazine).

These stats underscore the importance of providing support not only for employees but also for managers involved in redundancy processes. Traditional career transition providers have been applying tired and outdated frameworks for preparing managers for notification meetings, a go-to way for delivering the message (read: dehumanised way), and supporting people with traditional job-search career transition programs.

There’s a better way.

Career Money Life’s CareerHub Future Fit Program is a first-of-its-kind career transition experience. It’s different. On purpose. It’s built to support every person with their unique transition needs – holistically. 

In keeping with their shaking up the traditional career transition industry, Career Money Life brings a first-of-its-kind framework for the notification process. Delivery of the redundancy consultation and notification does not have to be mechanically cold and robotic. If you have ever been notified of redundancy or are responsible for redundancy notifications, you’ll know all too well how mechanical and inhumane the process can come across.

If redundancies are a common and legitimate context for exiting an organisation, why aren’t we integrating a better way of delivering the redundancy message?

There’s a new, better, kinder, softer way of redundancy notification that is anchored in neuroscience and psychological wellbeing.

Checklist for HR: Are You Doing Enough to Support Mental Health During Redundancies?

Is your program holistic? Does it go beyond the technicalities of job search support to address mental health and wellbeing during career transition? Does it go beyond career and support the financial wellbeing of people? Does it support all potential pathways for transition (not just job search)?

How are you mitigating risk of psychosocial injury? How is your exit process, redundancy process and organisational change strategy supported by your organisation’s psychosocial risk framework?  What are the ways in which you mitigate psychosocial risk for both impacted employees and leaders of change?

Are you offering choice? Employees should have the option to choose between counselling, coaching, and wellbeing resources. Empowered choice boosts program engagement, transition outcomes, supercharges wellbeing strategies and mitigates mental health risk. 

Is support available for the long term? Transition can take time. Does your program provide unlimited access to support for as long as needed? Or, does it leave people in the cold? 

Can employees use credits to access flexible, personalised services? Every transition is different. Are you offering a marketplace of options that suit individual career, money and life (wellbeing) needs?

Are you extending EAP support? Extending your EAP support for a period of 3 months is best practice following redundancy notification, further mitigating risk. Do you have support in place post-notification for impacted employees and notification managers? 

Are you protecting your brand? Not supporting employees through redundancy can damage your employer brand. Are you investing in a holistic and choice-centric transition program to show your commitment to caring for your people? 

Are you prepared for the redundancy consultation and notification meetings? Even if redundancies are the norm in your organisation, when did you last revisit your notification process and messaging for the latest best practice and the safest impact?

Career Money Life is different from traditional career transition providers. On purpose.

• We provide a best-in-class blend of a fixed program experience plus a variable program component which brings to life a fully personalised and holistic experience.
• Our fixed program experience (Career Hub Future Fit Program) is a significantly lower price point than traditional providers, supports each unique role level and type and fully empowers participants for a high-touch blend of in person, virtual, one-on-one, group and platform based career technology.
• Our variable program experience (Marketplace Credit) empowers participants to choose the additional support they need. Participants use their credit to purchase the additional services they need for their unique transition journey in support of their career, money and wellbeing needs. This ensures that you, as the career transition sponsor, doesn’t waste precious budget on the program features that will have a low engagement / variable uptake.
• Unused expired credit is rolled back to your account to repurpose. Zero wastage.

Ask us about the new best in class way for supporting the notification process.

Invest in better career transition support that prioritises wellbeing. 
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