Article: Should companies reduce their notice periods?

Employee Relations

Should companies reduce their notice periods?

Notice periods that are longer than two months can have a negative impact on employee productivity. The loss of focus or interest during long notice periods helps neither the employee nor the employer.
Should companies reduce their notice periods?

Kartik Mandaville, CEO of Springworks, a Bengaluru and Santa Monica-based HR technology startup, recently reduced the notice period for the company’s employees to two weeks.

"The current one month is long and it is an arbitrary amount of time for knowledge transition. If we work truly in sync, then this is never a problem. I understand that there is an abundance of opportunities and some of you would like to try them out for a variety of reasons. While I am sad to hear about a resignation, but at the same time, happy for your growth so we don't want to make it harder for you to leave if that is what you have decided to do," he announced.

While 30 days is the usual duration, the notice period in many companies can stretch up to three months.  

So, what made Mandaville adopt a different approach than what the industry norm is?

“We have been thinking about doing this for a while now. We believe in being an employee-centric company. And how do we do this? Reducing the notice period from one month to two weeks is a way to reduce the friction for employees when they are transitioning. This helps both the employees and the employer,” Mandaville told People Matters.

“Most people say that this would increase attrition but we believe that this will increase the number of applications we receive because people know we respect our employees. Most of the time, employees are willing to help for knowledge transfer even after they join the new company and this is very normal if they part ways amicably,” he says.

Explaining how a shorter notice period is a win-win for both the employee and the employer, Mandaville says, “Employees don't feel locked in or pressured to serve a one- or three-month-long notice period... If the employee is ready to check out and maybe wants a break before joining the next job, they can do it and they don't lose out on opportunities due to longer notice periods.”

It helps in employer branding, increases the number of applications, and therefore makes it easier to hire talent. Further, such a policy also helps in building a lasting relationship with the employee, he adds.

But There Are Advocates For Longer Notice Period, And For Good Reason

Chirag Doshi, People Head, Thoughtworks, India, feels a reasonable notice period of around two months is important for companies.

“The benefit is ensuring sufficient time to find a replacement, allow for efficient context-sharing with the new team member, and eliminate the reduction in the team's effectiveness when a person moves on from the role. Another benefit of this notice period is it becomes a deterrent for competing companies to hire someone at 'absurdly' high salaries to meet a burning need for an immediate project delivery. Knowing a candidate can join them only after serving the two-month notice period would encourage the competing company to adopt a measured long-term approach to hiring and compensation decisions,” he contends.

Long Notice Periods Can Hurt Employee Productivity

Doshi, however, concedes that notice periods that are longer than two months can have a negative impact on employee productivity. The likelihood of loss of focus or interest during long notice periods helps neither the employee nor the employer.

“Many companies have three-month-long notice periods. It would bode well for the industry to move to a shorter and more meaningful two-month notice period. If several companies simultaneously increase their notice periods, then it becomes difficult for companies to quickly hire people, forcing them to retain their 'exiting employees' for longer periods of time. This collective escalation of notice periods is not a beneficial trend,” he adds.

Notice Period Should Be Directly Proportional To Role Complexity

The purpose of having the notice period is to ensure work continuity and knowledge transfer when an employee is moving out of the role or leaving the organisation.

Sukumar Payala, who leads the HR operations and talent management at ANSR , a consulting firm that helps set up global capability centres (GCCs), says the duration of the notice period should, therefore, be directly proportional to the role complexity. “A notice period longer than what is typically required will turn counterproductive as it creates employee dissatisfaction. It not only causes employee productivity to drop but can also create a rub-off effect on other employees. Progressive organisations should keep the notice period ideally at 60 days, with an option to reduce it further where they deem fit,” he adds.

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Topics: Employee Relations

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