A Guide to Redundancy

The ongoing economic downturn is expected to lead to further people in the UK being laid off or made redundant. Many sectors of the economy have been hit all over the country. However, although your customers and accommodating bank may have disappeared, the law on unfair dismissal has not. If you make staff redundant without following proper procedures for consultation, considering alternative jobs and making redundancy payments, you could be taken to the employment tribunal and suffer the financial penalty, not only in compensation for unfair dismissal but also in larger scale redundancies for failing to properly consult.

Advice from the beginning of the process can help smooth the way in what is always a difficult situation and minimise the chances of a successful claim being made against your company or organisation.

Here are a few guidelines:

Before you start

Recent case law indicates that you are obliged to tell staff the reasons for the redundancies. In many cases it will be obvious, but staff may be told in advance of individual consultation that the company needs to cut jobs to survive.

If you are making 20 or more employees redundant, there are collective consultation provisions which may be triggered will usually involve trade union or other workers’ representatives. In these circumstances, unless overtaken by events, employers must begin consulting  about the redundancy process well in advance.

Redundancy is dismissal

Make no mistake: Redundancy = Dismissal. As with any other dismissal, whether for misconduct or incapability, an employer must follow the correct procedure or risk tribunal claims for unfair dismissal. A correct procedure is likely to be a fair procedure. An employer should  not base selection purely on ‘last in, first out’ or you risk age discrimination claims. You should not base selection purely on sickness absence or you risk disability discrimination claims. And  certainly an employer should not single out or ignore women on maternity leave or it will risk sex discrimination claims (indeed there are special rules which create additional obligations in respect of alternative vacancies in respect of women on maternity leave). 

A fair procedure

A fair procedure for selection for compulsory redundancy must be objective and capable of being demonstrated to be so. Many companies use a matrix made up of measurable factors such as having met sales targets, qualifications, skills, ability to relocate, disciplinary and attendance records. You can also ask for volunteers before you start the selection process. Provided that the redundancy package is attractive enough, some employees may be tempted by the opportunities such a payment may provide..

A fair procedure for redundancy will usually allow an absolute minimum of  2 weeks for consultation.

Where 20 or more redundancies are planned at one workplace in a 90 day period there will be a minimum period of collective consultation of 30 days. This rises to 90 days where 100 or more redundancies are planned. Notice should not be given until the end of the consultation period. Some employees will have long notice periods and remember that  even where contractual notice may be expressed as 1 month all employees are entitled to their minimum statutory notice which is up to 12 weeks’ notice for anyone with 12 years or more service.

It is essential to check whether your staff can be offered alternative employment, at other locations, or in associated companies. However, you cannot force people to move to other locations if there is no mobility clause in their contracts of employment.

You will need to hold individual consultation meetings with the employees. Staff may have questions about the selection scoring system which you will need to address. They will also want to know about the redundancy payment they are likely to receive.

Statutory redundancy payments

Some businesses have contractual redundancy schemes which have significantly enhanced benefits Care should be taken to ensure accurate costs projections in respect of such schemes.

Separately, some companies have discretionary schemes which are more generous than the statutory schemes and can decide to make enhanced ex gratia payments (e.g. based on length of service). The government has decided that this does not count as age discrimination because older workers face more difficulty in finding a new job.

Consideration should always be given to how any contractual or discretionary scheme will operate in practice and what the implications are for the business.

Right of appeal

Once the consultation has taken place, and the fair selection procedure has been applied, there will inevitably be bad news for some employees. Redundancy procedures should contain a right of appeal. Employers should take this seriously and make every effort to reconsider the redundancy, if possible.  But it is never an easy decision, and specific care needs to be taken where “bumping” (moving one employee out of a job to make room for another) is likely.

References

A good employer will do all they can to make the redundancy process as smooth as possible. Larger companies may be able to offer job hunting advice or help with CVs. But even the smallest employer should offer to provide a reference to prospective new employers and should reassure the employee that a dismissal because of redundancy does not reflect badly on the employee’s conduct or capability.

Compromise Agreements

A prudent employer may in some cases wish to close the door on any possible employment tribunal claims from redundant ex-employees. The way to do this is to ask the employee, who is given the opportunity to take independent legal advice, to sign a compromise agreement. This is a legally-binding document whereby the employee, usually in return for an enhanced payment, agrees not to bring any claims against the employer resulting from the dismissal.

Healys specialist employment department can help you with all aspects of individual and collective redundancy. We can provide advice, model documents and help with selection criteria.

We can also advise and assist with consultation process and the financial modelling for any redundancy exercise.

To discuss your Redundancy or wider employment law requirements please contact us

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Nicholas Evans
Consultant
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Julia Stirling
Consultant Solicitor
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