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Redundancy is unfortunately a solution that is quick to appear when money and productivity are in short supply, but businesses should think hard and consider all the possibilities before taking this route.
Make sure that you are not over reacting to pessimism. There will always be unexpected events that will impact on a business but market awareness and adopting a proactive approach to your business will help in avoiding the need for redundancies.
Be careful you don't end up paying out for redundancy only to be re-employing four months later due to an upturn in business. Minimise the risk by developing planning and employment strategies that deal with the requirements of short-term fluctuations. Are there other areas where savings can be made?
Once the 'word' is out there is no going back and the impact on morale and market reputation can be quite damaging.
What is a redundancy?
Legally, a redundancy is where a dismissal is wholly or mainly attributable to the closure of a business, relocation of the workplace, or reorganisation resulting in a reduced need for employees.
Redundancy is about the needs of the business and a change in requirements. It is not about the individual's failings in their role. Deal with poor performance through the capability procedure. Never use redundancy simply as a tool to sort out the poor performers. This carries a high risk of resulting in unfair dismissal claims.
Redundancy – fair or unfair dismissal
Whichever way you look at it, redundancy is a dismissal. So how do you avoid claims for unfair dismissal?
Redundancy is a potentially fair reason for dismissal so long as there is a genuine redundancy situation and the procedure is fair in all respects including a proper consultation is carried out and a fair selection criteria applied.
When do you have to collectively consult?
Employers are required to consult with representatives at least 30 days before the first proposed redundancy, where more than 20 employees are proposed to be dismissed, or at least 90 days before where more than 100 are proposed to be dismissed.
Collective consultation must be concluded before any individual can be given notice and their notice period can start to run.
Who do you have to consult?
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Recognised Trade Unions
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Existing staff bodies if, when they were elected, their remit included redundancy consultation.
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Elected representatives if there are no representatives or they do not represent all of the affected employees
What do you consult about?
The elected representatives must be given certain specific information in writing about the proposals. Collective consultation should be undertaken with a view to reaching agreement and must include consultation about ways of:
If you are proposing to dismiss less than twenty, you still need to individually consult, but do not need to collectively consult (unless you have an agreement with the Trade Unions that says otherwise).
If the collective consultation rules apply, you also must send a form to the Redundancy Payments Office (the HR1) confirming the proposals and provide a copy of the form to the representatives. The same timescales apply as for collective consultation. Failure to send the form is a criminal offence.
Costs and penalties for non-compliance
Depending on the age, service and salary profile of the staff selected from the pool, costs can be high, especially if there is a contractual right or a custom and practice of paying more.
Claims for unfair dismissal can be substantial and with no limits in the case of discrimination claims. Time taken in planning and seeking advice can be invaluable in reducing risk.
Mistakes in the consultation process can be costly. Failure to consult and non-compliance can result in serious financial penalties being imposed by a tribunal. Serious breaches can result in each employee being awarded a ‘protective award', equivalent to 90 days pay, even though the statutory requirement was only 30 days consultation.
Don't act on impulse – seek advice
Don't go it alone. Before embarking on a redundancy programme, it is better to discuss the issues first with a solicitor or HR Advisor.
About the author
This article was written by Christopher Ellis of Mace & Jones Solicitors. Mace & Jones provides advice on all aspects of redundancy and can provide training for managers, which is tailored to suit your organisations needs.
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