The great resignation: stemming the tide

Media articles and boardrooms are full of talk of the “great resignation” – but why is it happening now, and what practical steps can businesses take to address it?

The trend undoubtedly impacts all parts of the economy, from healthcare to retail, and the phenomenon is connected to other related issues, for example the “Striketober” that hit businesses in the US last month. This article looks at some of causes of this phenomenon, the issues employers face as a result and how they can manage them effectively, with a focus on office-based roles.

Why now?

On the whole, workers and businesses have embraced remote working during the Covid pandemic. Many employees have been grateful to keep their jobs and keep themselves and their families safe, and businesses have been reassured by the continued productivity of their staff during a period of economic turmoil.

However, while working from home many workers have felt more isolated and less connected to their employers. Office workers also have more job opportunities available to them, as they realise they no longer need to commute to work five days a week. These trends may have an impact on loyalty, meaning that, as lockdowns have lifted or eased, workers may feel more prepared to move on, with all the cost and risks that entails for businesses.

Other staff have suffered from burnout, finding it difficult to separate their work and home lives as their laptop screen glows at them from the kitchen table, intruding on their downtime. As the pandemic has brought into focus the importance of health and family, many employees are now looking for different opportunities that provide more meaning and balance.

Finally, the surge in economic activity as countries exit lockdowns has created a visible upturn in job vacancies, with associated increases in pay and improved conditions on offer.

These trends are magnified in “team move” scenarios, where employees move en masse to a competitor. There is also talk of a similar trend dubbed “turnover contagion”, whereby a critical mass of departures, in particular of those who are perceived as successful or popular, makes others in the same team or organisation consider their own future and wonder whether the grass is greener on the other side.

What’s the risk for businesses?

High staff turnover inevitably forces employers to spend significant time and money in recruitment and training new joiners. A business without a stable workforce becomes a less attractive place to work, feeding a vicious cycle of attrition.

In our knowledge-based economy, the protection of intellectual property and confidential information, including customer contacts, presents another key risk for employers at a time of high staff turnover. These are among the most valuable assets an organisation has.

Breaches of confidentiality obligations or restrictive covenants, whether committed intentionally or not, can result in significant financial losses, including lost business. Companies also need to spend time and money addressing the knock-on issues, including potential litigation and possible obligations to report breaches to regulators. These issues become even more serious where they result in reputational damage from the perspective of customers and the wider public.

When it comes to restrictive covenants, as the competition for talent becomes fiercer, new hires may have more leverage to persuade employers to loosen proposed contractual restrictions, something they may regret down the line. On the flip side, employers may be tempted to risk inducing prospective employees to breach restrictions to which they are subject. Where employees are hired to work in one jurisdiction and then relocate elsewhere, for example as a result of companies allowing them to live and work closer to family as a retention tool, there are issues around whether the geographic scope of restrictive covenants remains appropriate, as well as whether the restrictive covenants are enforceable under the law of the “new” country. Similarly, in the turmoil of the pandemic, with companies downsizing or restructuring, some employees have taken on different or expanded roles and responsibilities, but their contracts have not been reviewed to ensure their restrictive covenants are still appropriate. All of this means that a business may not be as well protected as it would hope, if and when employees decide to move on.

Companies should keep a close eye on legal developments in relation to restrictive covenants. The UK government recently consulted on whether non-competes should be banned or only permitted where compensation is paid. The consultation was launched in the context of the UK leaving the European Union and the Covid pandemic, in order to drive innovation and drive the post-Covid economic recovery. The proposals would represent a fundamental shift for businesses. It remains to be seen whether the government will make any changes to the law in this area.

What can businesses do?

The first thing employers can do to mitigate risks arising from staff attrition is to stop employees from thinking about leaving in the first place. The return to a more “normal” office-based or hybrid working pattern following lifting of Covid restrictions provides an opportune moment to engage with employees, from consulting with them about proposed models of flexible or hybrid work, to making changes to the office environment to make it attractive and sociable.

Managers should also ensure that catch ups and team meetings are re-instated where they might have been neglected, or are refreshed to reflect new pressures and priorities. With the increased blurring of physical boundaries between work and home, employers could consider taking a more informal or conversational approach to these discussions.

Some organisations are allowing employees to work from other countries, whether on a temporary or permanent basis, and on the face of it this may present a tempting way to significantly widen the talent pool for a business. Such decisions should be approached very cautiously, in large part due to the complex rules and risks around immigration, employment rights, social security and tax (including the possibility of triggering a ‘permanent establishment’ for corporate tax purposes).

As always, but particularly at a time of high turnover, it is important to ensure that template contracts and policies are fit for purpose, including to reflect the new world of hybrid work. Employers should also spend time educating staff about these issues, reminding them of the obligations they are subject to, which may in turn make them think twice about leaving to join a competitor.

Where employees do leave, employers should ensure that offboarding processes are up to standard. The return of company property at the end of employment can also be slower when employees are not in the office. Possible measures include reminding employees of their contractual obligations, and requiring them to confirm in writing that they have returned all company information and property and will comply with their post-termination obligations. Where it is permitted under the employment contract, garden leave is a simple mechanism to restrict the employee’s activities whilst their notice period runs down. In some cases we are also seeing companies offering senior employees a deferred bonus, or paying them for continued compliance with a post-termination non-compete, even though they are not contractually required to do so, to reduce the risk of them breaching their restrictions.

Some employers are also choosing to perform enhanced monitoring of employees’ activities once they give notice. However, employee monitoring is subject to stringent data protection safeguards, including considering whether you have a legal basis for implementing monitoring systems and given sufficient information to staff. Businesses should also be mindful of the employee relations impact of such systems, especially with the renewed focus on engaging with and trusting employees in order to motivate and retain talent.

The last word

In recent years businesses have had to adapt to an enormous number of changes – economic, legal and cultural. The great resignation is just one of these. However, employers can adopt strategies to stem the tide, not only to minimise the risks and costs for their own organisations, but also to cultivate a more engaging and attractive environment for talent to flourish.

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