“Canada’s Middle Management Cull: Expert Warns of Coming Layoffs”
The Drive for Efficiency and Higher Profits Takes its Toll
As we enter a new year, Canadian employees would do well to be aware of the trends unfolding in the United States. A front-page article in the Wall Street Journal on December 31 highlighted the massive downsizing of middle management that is taking place south of the border.
The Shift Away from Middle Management
The drive for greater efficiency, higher profits, and increased international competition has led to a significant reduction in the number of employees occupying positions between frontline workers and executive teams. In fact, U.S. managers now oversee three times the number of employees they did in 2017, according to research firm Gartner.
Meanwhile, LinkedIn’s Workforce Confidence survey found that close to one-third of employees claim to have bosses who are too stressed to support them. This shift towards a more streamlined organizational structure is not unique to the United States; it’s a trend that is also gaining momentum in Canada.
The Plight of Canadian Employers
It’s worse here. Declining productivity under the Liberal government, combined with higher taxes and reduced foreign investment, has made the plight of Canadian employers even more challenging than their U.S. counterparts. The Trump administration’s emphasis on reshoring has added to the difficulties faced by Canadian businesses.
The Wall Street Journal points out that many U.S. employers are demoting their middle managers rather than letting them go outright. However, in Canada, such demotions would be considered constructive dismissals, which can lead to costly severance packages for employers.
The Cost of Severance
In a recent article, senior partner Howard Levitt of Levitt LLP highlighted the issue of advance notice for demotions. Advance notice is essential for employers who wish to retain employees and provide them with a reasonable opportunity to find alternative employment.
However, this approach also makes sense from an economic perspective. When employers provide advance notice, employees are incentivized to find new jobs quickly, reducing the employer’s liability in case of wrongful dismissal claims.
The Unintended Consequences
An abundance of management layoffs will lead to far fewer comparable positions for laid-off employees to secure. This, in turn, will result in greater severance pay, further worsening the plight of Canadian employers and setting up an unanticipated corporate crisis for the next government to contend with.
As we move forward into this new year, it’s essential for Canadian businesses to be aware of these trends and prepare themselves for the inevitable changes that lie ahead. The middle management cull is coming to Canada, too; it’s time for employers to take proactive steps to mitigate the risks associated with this shift.
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