Historically, notice periods have been determined based on various factors, including but not limited to:
Length of time with the employer
Nature of the role’s responsibilities
Seniority
Industry
This is still the case; however, emerging trends and the competitive hiring market have influenced notice periods more so.
Notice periods are growing
Notice periods are on steroids in some pockets of the market at the moment and the necessity around this should be discussed. An example of what we’re seeing is something like a junior to mid-level finance role posing a 4-week notice period for less than 6 months with the company and 6 weeks once the employee has passed 6 months with the company. We have even seen contracts coming forward for a <$100k role requiring the candidate to provide 8 weeks’ notice.
Our consultant Jessicarecently conducted a no-frills poll on LinkedIn, asking if participants’ employment contract stipulates a notice period of longer than 4 weeks. 34% voted ‘yes’ and of those, 32% were below management level. This trend has begun to emerge post-pandemic, with employers imposing an extended notice period on employees at the ‘below Manager’ level.
Reel it back: what’s the law?
Candidates and sometimes even employers are unaware of the legal notice periods required and instead refer to the industry standard, which is commonly 4 weeks (now growing). These are the often-forgotten minimum notice periods imposed by the Fair Work Ombudsman:
Why are notice periods increasing?
This is a delayed symptom of the candidate shortage that the market has seen over the last year and a half. Employers want to retain skill and knowledge for as long as possible given the increasing battle to acquire new talent. They need sufficient time to both find new talent and provide an effective handover.
Longer notice periods are also a deterrent to staff looking for new roles, as the companies they may be considering applying for are looking for an immediately available candidate, or available in 4 weeks at a maximum.
Effectively, longer notice periods are an unstable way of creating stability within a business. Whilst this approach is completely understandable from an employer’s perspective, with them seeing it as a nice gap between a new hire’s period and the exiting employee’s extended period, there may be adverse consequences for the employer that aren’t immediately obvious.
Impact on the hiring landscape
Missed opportunity
From the employee’s perspective, a longer notice period means missing out on most job opportunities where the employer is only willing to wait 4 weeks or less for example. A longer notice period will eventually become a deterrent and point of negotiation for candidates across the market, as it reduces their appeal as a candidate in the future.
An unproductive exit
Notice periods often promise increased last-minute tasks, deadlines being brought forward and lengthy handover duties, as the company takes advantage of the last moments with the employee’s knowledge and skill. Extending this experience from something like 4 to 8 weeks can have a massive impact on an individual. This has the potential to cause lowered productivity from having mentally checked out, increased redemption of annual leave and even sick leave within their notice period as a means for them to counteract such a heavy exit.
Eventual balancing of the market
Another effect that won’t take long for organisations to realise is that although their exiting employee is sticking around for longer, in turn, they’re likely going to start coming across candidates who have a similar notice period when trying to fill the role. This trend affects the timeliness of both supply and demand, where the entire market will end up adapting. The new norm of extended notice periods will essentially slow down the hiring market as a whole. Whether this is seen as a good or bad thing will vary across industries and professions but it’s definitely something to consider when determining the notice period for opening roles. Every company has an impact on this.
An alternative solution
Employers should also/alternatively consider more ‘grassroots’ solutions such as better succession planning and knowledge distribution within a business. Looking at the justifications for extending a notice period, why not tackle them at the root, rather than experiencing panic and reactivity when an employee opts to leave their position? Implementing some of and more than the following can help alleviate the threats of an employee leaving:
Shared systems knowledge
Overarching team strategy
Shared client relationships
Universally available data
Reusable training processes
That being said, employees aren’t just there for their skills. Each person brings their own contribution to the personality and culture of the company. This is much more difficult to replace, so it is also important to consider the following:
Don’t make it hard to leave, make it great to stay.
Taking a leadership position in creating a great culture of enjoyability and security is where a company can truly tackle turnover at its core. There is a responsibility for managers to ensure that they create an environment where employees feel comfortable to voice their concerns or talk about wanting growth, without fear of adverse consequences, and with a feeling of optimism. Ultimately, turnover is a reflection of the culture. Rates vary across industries of course, but companies are at least able to compare retention performance within their industry.
Considering extending a notice period may just be the point where a company needs to reflect on what hasn’t been done in the lead-up to the end of their employee’s tenure. If a resignation causes panic and consideration of increasing notice periods, this may be a sign to look at improving and solidifying the processes and culture within the company, i.e., the grassroots.
For further advice, please reach out to Client Engagement Director Chris Crolla, as well as the team here, for a confidential conversation.
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