Managing redundancy

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Information about Managing redundancy
Business & Mgmt

Published on February 27, 2014

Author: CollinsonGrantHR

Source: slideshare.net

Description

Collinson Grant supports clients in managing redundancy exercises by insisting on meticulous planning before any announcement is made. This is intended to ensure that the legal issues are understood and that the communication of the news of the redundancies is as effective as possible.
Specifically, we offer skills and experience in:
 Creating an action plan and timeline for a redundancy exercise
 Calculating likely and actual severance costs
 Briefing managers on their responsibilities and necessary actions
 Drafting communications to representatives, employees, customers and external agencies
 Framing strategies for formal dialogue with employees’
representatives and consultation with individual employees
 Arranging election of employees’ representatives, running meetings with them and ensuring follow-up actions take place
Developing criteria for selection for redundancy that are legally compliant and support the needs of the business
 Conducting consultative meetings with individual employees
 Organising appropriate support for outplacement  Assisting in planning and implementing transfers.

Managing redundancy

Contents Our approach 1 Managing redundancy: definitions, constraints and basic practices 1 Ready reckoner for statutory redundancy payments 9 Redundancy consultation flowchart 10 Large-scale redundancy planning – vital action points 11 Large-scale redundancy – actions for the day of announcement 12 Outplacement 12

Name of the document Our approach Collinson Grant supports clients in managing redundancy exercises by insisting on meticulous planning before any announcement is made. This is intended to ensure that the legal issues are understood and that the communication of the news of the redundancies is as effective as possible. Specifically, we offer skills and experience in: creating an action plan and timeline for a redundancy exercise calculating likely and actual severance costs briefing managers on their responsibilities and necessary actions drafting communications to representatives, employees, customers and external agencies framing strategies for formal dialogue with employees’ representatives and consultation with individual employees arranging election of employees’ representatives, running meetings with them and ensuring follow-up actions take place developing criteria for selection for redundancy that are legally compliant and support the needs of the business conducting consultative meetings with individual employees organising appropriate support for outplacement assisting in planning and implementing transfers. Managing redundancy: definitions, constraints and basic practices The nature of ‘redundancy’ For most legal purposes, redundancy occurs when: the employer has ceased, or intends to cease, business, overall or in a specific location, or requirements have diminished, or are expected to diminish, for employees to do work of a particular kind, overall or in a specific location. ‘Redundancy’ is not separate from ‘dismissal’: it is simply a reason for dismissal. In many cases, employees may not only be entitled to a redundancy payment but may also have the right to claim unfair dismissal. This is one important reason why there are certain procedures and practices to be observed by managers when communicating and implementing redundancies. 1

Statutory redundancy payment Eligibility Employees should have two years’ continuous service. There is no upper age limit. Payment Payment is based on a scale, working back from the date of dismissal: per year of reckonable service from age 41 - 1½ weeks' pay per year of reckonable service from age 22 to 40 - 1 week's pay per year of reckonable service below age 22 - ½ week's pay Cut-offs and maxima operate, so that a statutory redundancy payment cannot exceed a certain amount: a maximum of 20 years’ reckonable service and, therefore (in conjunction with the scale above), a maximum of 30 weeks’ pay (see the ready reckoner at section 3 below); a maximum value on ‘a week’s pay’ (reviewed annually in February). It is permitted to pay enhanced redundancy payments which exceed these cut-offs and maxima. Alternative work When an offer of ‘suitable alternative employment’ is made but the employee rejects it, the employee’s entitlement to a redundancy payment is only maintained if the refusal is ‘reasonable’. The reasonableness or otherwise of a refusal is judged primarily by reference to the employee’s personal and domestic situation. An offer of another job that matches the employee’s skills on the same terms (pay, et cetera) in the same place would normally be ‘suitable’. So, unless the employee has quite compelling personal considerations for refusing it, doing so would quite probably be ‘unreasonable’ and would disqualify the employee from receiving a payment. An offer on inferior terms or in a different place will often cast doubt on the ‘suitability’ of the employment. Any reduction in pay that is more than trivial will definitely make the offered employment unsuitable. In such circumstances, the reasonableness or otherwise of a refusal is irrelevant. Trial period There is provision for a trial period of at least four weeks in any new job (whether ‘suitable’ or not – see above) that an employee undertakes on the redundancy of the original job. The employee is deemed to have accepted the new job when the trial period expires. If, during the trial period, the employee terminates, for whatever reason, or the employer terminates the employment for a reason arising out of the change, the employee is treated, for redundancy 2

Name of the document payment purposes, as dismissed from the original job for redundancy (so receiving a redundancy payment, unless the new job was suitable and the termination unreasonable). However, the original dismissal may still be unfair. Notification of, and consultation about, ‘mass’ redundancies When is consultation with representatives about ‘mass’ redundancies required? Collective consultation with the representatives of the affected employees is required when 20 or more redundancy dismissals are proposed to take effect at an establishment within 90 days or less. An employer’s failure to comply with this obligation attracts a ‘protective award’ of up to 90 days’ pay per affected employee. The appropriate representatives are those of the trades union recognised for the group or category of affected employees or, if employees are not covered by recognition, elected colleagues. So, it is quite common to consult at an establishment with a ‘mix’ of representatives. For this purpose, the definition of ‘redundancy’ is broader than that for redundancy payments. It extends to proposed changes to terms and conditions of employment as well as the outright elimination or reduction of jobs and employees. In deciding whether or not there are 20 or more dismissals proposed, the employer should disregard the prospect of ‘volunteers’ or of affected employees agreeing to changes – the key is whether, in the absence of consensus, contracts would have to be terminated in order to effect the desired change(s). In this context, the number of proposed redundancies does not need to include fixed-term contracts that would be expiring in any event. Prerequisites for consultation Consultation can only commence once: any necessary representatives for ‘non-union’ categories have been elected and all representatives have been supplied with prescribed information about the employer’s proposals, the reason(s) for them and the planned process for implementation (a ‘section 188’ letter). With regard to the provision of information, the representatives must also be given a copy of the Form HR1 that, under a separate statutory provision, the employer is required to send to the Insolvency Service of the Department for Business, Innovation and Skills to notify it of the planned cutbacks. When should consultation commence? Consultation should commence at least 30 days before the planned date for the first of the proposed dismissals. 3

This increases to 45 days if 100 or more redundancies are proposed. Nature and implications of consultation Consultation should be ‘with a view to reaching agreement’ (actual agreement is not obligatory) and should cover ways of: removing the need for the proposed redundancies reducing their number mitigating their consequences. The first two of these objectives entail the likely need for the employer also to debate with representatives the business considerations that underlie the proposal for redundancies and, sometimes, to consider alternative business solutions put forward by the representatives. Because of this subject-matter for consultation, neither the redundancies themselves nor the underlying business ‘drivers’ should initially be described in terms that suggest that a definitive decision has already been made. And the very need to consult with representatives about larger-scale redundancy exercises also means that an employer that quickly acts inconsistently with that notion and indicates that decisions have been made, whether by proceeding to deal with individual employees or through operational measures, runs the risk of being held to have breached the duty of collective consultation. So, although it is not necessary to continue consulting with representatives for a full 30-day or 45-day period, observance of the statutory duty will generally mean a need for some restraint in moving ahead with at least the visible signs of change. Sometimes, this causes frustration for employers. Almost always, it has implications for establishing timelines and action plans. The completion of consultation with employees’ representatives, whether with agreement or not, does not remove the need for subsequent consultation with the individual employees affected. Unfair dismissal The law on unfair dismissal can impinge on an individual employee’s redundancy in the case of: unfair application of the selection process for redundancy no, or insufficient, consideration of alternative employment an absence of, or inadequate, consultation with the employee. The following sections deal with basic procedures and practices to avoid difficulties with the points above. 4

Name of the document Selecting the people for redundancy Pools of selection Sometimes a redundancy exercise leads to the complete removal from the organisational structure of a specific type of job, regardless of how many postholders there are. Subject to an employer’s satisfaction of the other considerations (alternative employment and adequate consultation), this situation in itself tends to cause few legal problems. But an exercise may also entail the reduction in size of a section or group of employees with similar or transferable duties – a ‘pool’. Here, there is a need to select for redundancy some employees rather than others. Pools of selection should, in principle, be as broad as possible. They should comprise employees who have similar jobs and could undertake each other’s duties. The pool should not be designed to exclude particular employees or jobs without a valid reason. Seeking volunteers for redundancy There is no obligation on an employer to request applications for ‘voluntary redundancy’. But finding volunteers has the advantage of avoiding much of the antagonism and the exposure to dispute or litigation that can arise from ‘compulsory’ redundancies. Against that has to be weighed the likelihood that many volunteers may have long service and, therefore, entitlement to large payments on severance, and that some may still be of great value to the business. For these reasons, any voluntary redundancy scheme should feature a clear right of veto or rejection by the employer. Of course, that right should be exercised sparingly and for demonstrably good reasons. Excessive, tenuous reliance on it may well increase the chance of a successful claim for unfair dismissal from somebody who has been made redundant because a volunteer has been turned down. Setting criteria for selection for ‘compulsory’ redundancy It is necessary to set criteria so that the requisite number of employees can be selected from the pool as being at risk of redundancy. The criteria should be as objective as possible. Typically these would include relevant job experience and knowledge, volume of work, accuracy of work, range of skills, flexibility, co-operation and initiative, attendance (of course excluding any absence related to a disability or pregnancy/maternity) and length of service. It is important to define the scope of each criterion (in part, to ensure that its ‘components’ do not overlap with those of another criterion, so that a particular attribute or deficiency is not considered twice for the same employee). 5

Within each chosen criterion, there needs to be a grading or rating mechanism. Generally, this is expressed numerically, but it is important that the level attached to each number or grading should be defined in some way. Application of the selection criteria Every employee in a selection pool should be independently assessed or scored under the chosen criteria, and without reference to extraneous considerations, on a standard form or matrix. The evaluation should be done by a superior who is reasonably familiar with the work and record of the employees concerned. Consideration might be given to the use of two assessors or scorers with such familiarity (if so, the assessors should complete the assessment separately and then come to a joint conclusion). In any event, all documentation should be retained, both for the purposes of internal consultation and possible appeals (see below) and for use in any subsequent legal proceedings. When all the assessments have been done and a final assessment figure for each employee has been arrived at, every employee in the pool should be ranked and those with the lowest totals should be provisionally selected for redundancy or placed at specific risk of redundancy. The use of such expressions is important in view of the need for consultation with the individual. Alternative employment Employers are under a duty to consider and, where practicable, to offer employees opportunities for alternative employment. This duty is not confined to alternative work that is ‘suitable’ in the sense described for redundancy payment purposes. Even if the alternative work attracts less pay and/or has different duties, it should be at least notified to the employee for his or her consideration. The duty concerning alternative employment is not confined to the prospectively redundant employee’s current place of work. A multi-site employer should normally check all its locations for vacancies. And consideration might also be given to contacting any associated companies about job opportunities. Consultation with individual employees Why? It is important to consult an individual about his or her prospective dismissal for redundancy, whether that arises from the total removal of a type of job (or a workplace) or there has been selection from a ‘pool’. This is simply because the law of unfair dismissal requires that, before any decision to terminate employment is taken (on any ground), an employee should be informed why such a decision is being contemplated and should be given a chance to argue against it. And, in the context of redundancy, the simple fact that employees may be aware that their employer has a 6

Name of the document ‘redundancy situation’ within the business does not necessarily mean that they know the reason why they, specifically, are at risk. So, there is a need to make them aware why they personally risk the loss of employment and to allow them to consider and discuss the matter. If consultation with individuals is inadequate, or not meaningful, a claim for unfair dismissal is far more likely to succeed. The obligation to consult with each ‘at risk’ employee individually applies whether or not there has been earlier relevant consultation with employees’ representatives (see 2.3 above). To fulfil the need for consultation, provision for an absolute minimum of two meetings with an ‘at risk’ employee will normally be necessary. Initial meeting The initial meeting will be to explain to the employee that he or she is at risk of dismissal because of redundancy and, more importantly, why. So, the manager who attends the meeting must be familiar with and able to explain the reasons, particularly if the employee has been selected from a pool of colleagues. This meeting is principally about supplying information to the employee so that she or he can subsequently reflect on the situation and, if desired, ask for any clarification and/or challenge managerial thinking before a final decision is made. It is important to make clear that, at the point of this meeting, a final decision has not been made and that the situation will be discussed further with the employee. Subsequent meetings Subsequent consultative discussions, whether in one or more meetings, are about ensuring that the employee has had a reasonable opportunity to air any concerns about the basis of his or her proposed dismissal for redundancy and that any realistic opportunities for alternative employment have been canvassed. The length, shape and content of these ‘follow-on’ meetings are dependent on the particular circumstances and on the attitude of the employee. So, they are not easy to ‘script’ in any great detail. However, that fact should not preclude preparation and anticipation of an employee’s likely lines of challenge or questioning. Provided that it does not result in a managerial style that suggests a fait accompli, such an approach makes for a ‘smoother’ meeting that is less likely to antagonise than one which is faltering, and also increases the prospect that matters raised will be resolved quickly. Confirming redundancy The final consultative meeting (or one that is likely to be final) should be preceded by a letter to the employee, notifying him/her of the arrangements, specifying the basic purpose of the meeting, and stating that a possible outcome is the confirmation of dismissal for redundancy. If, at this meeting, there are no points raised, or if there arises no compelling reason to rethink the employee’s prospective redundancy, the fact of dismissal 7

(whether immediate or at some future time) and the right of appeal should be confirmed to the employee. At this point, she or he can be told that a letter of dismissal will be given or sent to him or her in due course, with a statement of payments (it is not consistent with the meeting having still been part of the consultative process to produce a letter of confirmation at this point). Written confirmation The subsequent letter confirming the redundancy and the payments due to the employee (so far as a statutory redundancy payment is concerned, a statement of entitlement is legally required) should reiterate his or her right of appeal and specify the addressee and timescale for any appeal that the employee might submit. Overall procedure Two points are worth making about all consultative meetings: An employee does not have a statutory right to be accompanied by anyone. However, if accompaniment by a colleague (or, where there is a recognised union, a union official) is requested, it is generally difficult to find a good reason for refusing it. Immediately after each meeting, it is sensible to make handwritten notes to summarise what was said. Appeals Unless an employer’s own procedures say otherwise, an appeal does not have to be considered and determined before the specified date of dismissal and will not ‘postpone’ the date of dismissal. However, an employer generally has an interest in ensuring that any possible difficulties or weaknesses with its approach are considered and resolved internally – minimising the risk of litigation. So, in this respect, the facility for a pre-dismissal appeal is less likely to inhibit an employee from appealing on the basis that ‘there’s no point, it’s too late’. In any event, an employee should normally be invited to a hearing to explain and clarify the grounds of his or her appeal. The manager hearing and deciding an appeal should be seen as ‘independent’ of the one who made the original decision. Normally, this person will be the dismissing manager’s line manager or a higher or equally ranked manager from another function. The outcome of the appeal should be confirmed to the employee in writing. 8

Name of the document Ready reckoner for statutory redundancy payments Service (years) 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Age (years) 17 1 - - - - - - - - - - - - - - - - - - 18 1 1½ - - - - - - - - - - - - - - - - - 19 1 1½ 2 - - - - - - - - - - - - - - - - 20 1 1½ 2 2½ - - - - - - - - - - - - - - - 21 1 1½ 2 2½ 3 - - - - - - - - - - - - - - 22 1 1½ 2 2½ 3 3½ - - - - - - - - - - - - - 23 1½ 2 2½ 3 3½ 4 4½ - - - - - - - - - - - - 24 2 2½ 3 3½ 4 4½ 5 5½ - - - - - - - - - - - 25 2 3 3½ 4 4½ 5 5½ 6 6½ - - - - - - - - - - 26 2 3 4 4½ 5 5½ 6 6½ 7 7½ - - - - - - - - - 27 2 3 4 5 5½ 6 6½ 7 7½ 8 8½ - - - - - - - - 28 2 3 4 5 6 6½ 7 7½ 8 8½ 9 9½ - - - - - - - 29 2 3 4 5 6 7 7½ 8 8½ 9 9½ 10 10½ - - - - - - 30 2 3 4 5 6 7 8 8½ 9 9½ 10 10½ 11 11½ - - - - - 31 2 3 4 5 6 7 8 9 9½ 10 10½ 11 12½ - - - - 32 2 3 4 5 6 7 8 9 10 10½ 11 13½ - - - 33 2 3 4 5 6 7 8 9 10 11 11½ 12 14½ - - 34 2 3 4 5 6 7 8 9 10 11 12 12½ 13 35 2 3 4 5 6 7 8 9 10 11 12 13 13½ 14 36 2 3 4 5 6 7 8 9 10 11 12 13 14 14½ 15 37 2 3 4 5 6 7 8 9 10 11 12 13 14 15 15½ 16 38 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 16½ 17 39 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 17½ 18 40 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 18½ 19 41 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 42 2½ 3½ 4½ 5½ 6½ 7½ 8½ 9½ 10½ 11½ 12½ 13½ 14½ 15½ 16½ 17½ 18½ 19½ 20½ 43 3 4 5 6 7 8 9 10 11 44 3 4½ 5½ 6½ 7½ 8½ 9½ 10½ 11½ 12½ 13½ 14½ 15½ 16½ 17½ 18½ 19½ 20½ 21½ 45 3 4½ 6 7 8 9 10 11 46 3 4½ 6 7½ 8½ 9½ 10½ 11½ 12½ 13½ 14½ 15½ 16½ 17½ 18½ 19½ 20½ 21½ 22½ 47 3 4½ 6 7½ 9 10 11 48 3 4½ 6 7½ 9 10½ 11½ 12½ 13½ 14½ 15½ 16½ 17½ 18½ 19½ 20½ 21½ 22½ 23½ 49 3 4½ 6 7½ 9 10½ 12 13 50 3 4½ 6 7½ 9 10½ 12 13½ 14½ 15½ 16½ 17½ 18½ 19½ 20½ 21½ 22½ 23½ 24½ 51 3 4½ 6 7½ 9 10½ 12 13½ 15 16 52 3 4½ 6 7½ 9 10½ 12 13½ 15 16½ 17½ 18½ 19½ 20½ 21½ 22½ 23½ 24½ 25½ 53 3 4½ 6 7½ 9 10½ 12 13½ 15 16½ 18 19 54 3 4½ 6 7½ 9 10½ 12 13½ 15 16½ 18 19½ 20½ 21½ 22½ 23½ 24½ 25½ 26½ 55 3 4½ 6 7½ 9 10½ 12 13½ 15 16½ 18 19½ 21 22 56 3 4½ 6 7½ 9 10½ 12 13½ 15 16½ 18 19½ 21 22½ 23½ 24½ 25½ 26½ 27½ 57 3 4½ 6 7½ 9 10½ 12 13½ 15 16½ 18 19½ 21 22½ 24 25 58 3 4½ 6 7½ 9 10½ 12 13½ 15 16½ 18 19½ 21 22½ 24 25½ 26½ 27½ 28½ 59 3 4½ 6 7½ 9 10½ 12 13½ 15 16½ 18 19½ 21 22½ 24 25½ 27 28 60 3 4½ 6 7½ 9 10½ 12 13½ 15 16½ 18 19½ 21 22½ 24 25½ 27 28½ 29½ 61+ 3 4½ 6 7½ 9 10½ 12 13½ 15 16½ 18 19½ 21 22½ 24 25½ 27 28½ 30 12 12 13 14 12 13 14 15 13 14 15 16 17 11½ 12 11½ 12 14 15 16 17 18 12½ 13 12½ 13 15 16 17 18 19 20 13½ 14 13½ 14 16 17 18 19 20 21 14½ 15 14½ 15 17 18 19 20 21 22 23 15½ 16 15½ 16 18 19 20 21 22 23 24 15½ - 16½ 17 19 20 21 22 23 24 25 26 16½ 16½ 17 17½ 17½ 18 20 21 22 23 24 25 26 27 18½ 19½ 21 22 23 24 25 26 27 28 29 9

Redundancy consultation flowchart 10

Name of the document Large-scale redundancy planning – vital action points Confirm local practice on any trades union representation: full-time officials or employees’ representatives? Confirm the proposals for closure – the target dates, numbers, negotiating mandate Decide on the ‘constituencies’ and number of elected representatives for groups of affected employees not covered by union recognition, and on the post-announcement timescale for completing the electoral process Agree on an approach to enquiries from comment’/’Nothing to add to press statement’? the press: ‘No Confirm the key managers and the retention terms they will be offered Tell the key managers of these terms Confirm managerial responsibilities: Steering Group, Negotiating Team, and Support Confirm the key employees and the terms they will be offered to stay on Agree on a plan for communication: Confirm audiences: employees, customers, suppliers, media, ‘authorities’, others Prepare a ‘core statement’ Agree on core internal and external scripts Prepare an initial message for contacting any full-time union officials Prepare an announcement to employees Make a list of employees absent because of sickness, maternity, holiday, et cetera. Prepare letters to these people Prepare Form HR1 Prepare the section 188 letter Prepare answers to Frequently Asked Questions and circulate them to key managers Consider: sabotage, discipline and service to customers Brief the key managers on the announcement and their role Prepare general communication to other locations 11

Draw up an initial, broad timetable for consultative meetings with employees’ representatives. Large-scale redundancy – actions for the day of announcement Advise managers, supervisors, any local union representatives and shift workers to be present at meetings as mentioned below Brief managers and supervisors Brief any full-time union officials Meet local union representatives Agree on the date of the next meeting with full-time and local representatives (timing of meetings will be subject to any need to elect representatives for non-union categories) Meet all the employees present and inform them of the intentions Brief the staff in reception on how to respond to enquiries from the media Issue a news release to the media Send Form HR1 to the Department for Business, Innovation and Skills Get the sales team to inform customers Advise other plants of the announcement Contact absent employees Send a confirmatory letter to all employees containing, if necessary, arrangements for nomination and election as employees’ representatives. Outplacement Outplacement is the term used to describe various initiatives designed to facilitate an employee’s, or former employee’s, prompt transition into another desired position, career or vocation (or the training for such). The principal forms that we offer are individual counselling or coaching and a workshop on ‘job-search skills’. Although there are some overlaps in broad subject-matter, there are substantial differences of emphasis and approach. Individual counselling or coaching is, as its title suggests, geared to the particular individual and his or her needs and wishes. Of course, the programme deals with such matters as finding job opportunities, preparing a curriculum vitae, and interview techniques. But, because of its exclusive nature, it can also devote time to the person’s reaction to redundancy, so that a positive outlook and demeanour are (re-)established, and to his or her 12

Name of the document personality traits and generic vocational interests, so as to explore suitable options for the future. For these reasons, individual outplacement is provided by a qualified psychologist. The workshop, which is intended for a number of employees simultaneously, can only touch relatively lightly upon the reactions and ‘make-up’ of individual members of the group. Its focus is on the practicalities of job opportunities and selling oneself, whether on paper, by phone or face-to-face. However, with the introduction of appropriate external presenters, it can be extended to deal with subjects such as managing finances, pensions and investments, and state benefits. Both types of programme normally feature the option for follow-up sessions or advice. However, this process tends to be easier to manage on the individual outplacement programme. Our experience is that these offerings to departing or former employees are well received by the participants and viewed favourably by the staff staying on. They go some way to improving employee relations and settling things down after a redundancy exercise. So, outplacement is a natural and sensible thing for an employer to consider. The type of programme that is appropriate will, ultimately, depend on the employer’s wishes, the grade of employee and the attitude of the employee(s). Given its considerably higher unit cost, it is fair to say that the use of the individual outplacement programme tends to be confined to senior executives or employees to whom the employer has a particular loyalty, or where the legitimacy of the redundancy may be in some doubt. 300513 13

Costs People Organisation Productivity Performance Restructuring United Kingdom Mainland Europe United States of America Complexity, Direct costs, Employee relations, Employment law, Implementing change, Integrating organisations, Lean, Managerial controls, Organisational design, Overheads, Performance management, Pricing, Process improvement, Procurement, Reward, Supply chain, Transitional management, Value chain analysis, Workforce planning collinsongrant.com collinsongranthr.com

33 St James’s Square London SW1Y 4JS United Kingdom Telephone +44 20 7661 9382 Facsimile +44 20 7661 9400 Ryecroft Aviary Road Worsley Manchester M28 2WF United Kingdom Telephone +44 161 703 5600 Facsimile +44 161 790 9177 Web www.collinsongrant.com www.collinsongranthr.com

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