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Employer's guide to dealing with redundancy

As an employer, you may not want to think about the possibility of having to make redundancies, but unfortunately they can be a reality of running a business, especially in a recession.

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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. Poor performance should be dealt with through your capability and disciplinary procedures. Never use redundancy simply as a tool to root out the poor performers as this carries a high risk of resulting in unfair dismissal claims.

Whether or not you are planning to make a redundancy, failure to prepare for the possibility of such a situation can leave you in danger of walking into a minefield of costly and time consuming problems.

Know how to identify a potential redundancy situation

Redundancy arises when an employer no longer requires a role to be carried out, where there is a reduction in the number of people required to fill a role, an increase in automation or when a business is closing or relocating. It is important to remember that redundancy is about the needs of your organisation and the change in the need for the role. It is not about the performance of an individual or their failings. 

Plan thoroughly and take advice

Where any potential redundancy situation is identified, plan thoroughly and timetable what actions you need to take. Take advice to minimise the risk of expensive and time consuming claims.Redundancy exercises take many weeks to carry out properly. Do not expect you can immediately dismiss employees.

Consult

The largest part of a redundancy exercise is carrying out consultation which needs to be fair and meaningful. This involves giving the person(s) at risk of redundancy a fair and proper opportunity to understand fully the matter about which he or she is being consulted and to express his or her views on those subjects with the person conducting the consultation process. All employees should be 'at risk' of redundancy only during the consultation process.

Consultation must begin in good time and must in any event:

  • Where between 20 and 99 employees are being made redundant, be at least 30 days before the dismissal takes effect

  • Where 100 or more employees are being made redundant, it must be at least 45 days before the first of the dismissals takes place

  • Consultation should consist of at least two meetings over a minimum of two weeks before any decision is taken to dismiss. This gives the individual(s) affected the chance to consider the situation. 

  • At all consultation and redundancy dismissal meetings, a member of staff has the right to be accompanied by a work colleague or trade union representative

Consultation is a two way process. Representatives and individuals have a right to respond to the redundancy risk, any selection methods and how these are applied, plus alternative ways in which jobs can be preserved. All of this must be discussed before you make a final decision.

Follow the statutory procedures

Statutory procedures apply to dismissals on the grounds of redundancy. They do not technically apply where the collective consultation provisions apply, but in practice employers are advised to follow them to show a degree of individual consultation and dialogue.

Consider who you put at risk

The reasons for the redundancy, and the likely areas or departments from which the redundancies will come, either from across the whole workforce or from specific departments, should be identified. 

Whilst it is often considered best practice to consider all those at risk, you may not want to cause a period of uncertainty for those who will stay. This is a fine line and an incorrect pool can ultimately make a subsequent dismissal unfair.

Identifying the pool for selection

Once you have made the decision that redundancy is necessary, it would be normal to request volunteers for redundancy before embarking on any compulsory selection process. When considering applicants for voluntary redundancy, you should bear in mind the balance in the skills and experience of your workforce, and reserve the right to reject applications.

Selection for redundancy

Having identified the pool for selection, it is then necessary to apply selection criteria in order to select those to go; this is usually done by a scoring process. Selection criteria that are potentially discriminatory should be avoided.

In a claim for unfair dismissal, the tribunal will consider the pool for selection. If the pool is reasonable, the tribunal will go on to look at the selection criteria applied. Such criteria must be objective and not reflect the personal opinion of the manager. They should also be verified by reference to company records of attendance, efficiency, length of service, sickness and so on. Examples of objective criteria are skills, knowledge and flexibility.

Those employees who have been placed at risk of redundancy, who have already been warned about the possibility of redundancy, should then be consulted on an individual basis.

As part of the process, you must also consider alternative employment where vacancies may be identified in areas where the potentially redundant employees do not currently work.

Final meeting and dismissal

Once consultation has taken place, you should hold a final meeting with each employee, to convey the decision to those selected as being at risk of redundancy. The redundancy may be confirmed and there will also be decision on the amount to be paid.

The final meeting, when those selected for redundancy are notified of their dismissal for redundancy, should always be a formal one.

Redundancy pay

A redundancy payment is compensation afforded to an employee because his or her employment has ceased. An employee may be entitled to either a statutory redundancy payment or a contractual payment, if you provide a contractual redundancy payment scheme. Contact our helpline if you need help calculating redundancy pay on 01565 626001

Notice and holiday pay

In addition to the employee’s redundancy payment, he or she is entitled to a notice period and to payment for any outstanding accrued holidays.

Time off for interviews

You should ensure that ant redundant employee with over two years’ service working their notice are allowed reasonable time off to attend interviews.

Use the right terminology

Consistently use the right terminology such as proposed, envisaged and intended to show that nothing is set in stone. All relevant documents are potentially required to be disclosed in any subsequent tribunal claim.

Lists of names identifying those to be made redundant, inappropriately worded e-mails or future organisation charts are traps for the impatient and unwary employer.

Effective communication is also important throughout all stages of the process, from the initial announcement right through to the redundancy discussions with the individuals concerned. Good communication ensures that all employees know what is going on and don't have to rely on the grapevine for information.

Look after those that are staying

The purpose of redundancy is to make an organisation run more efficiently and it is easy to lose sight of the employees who are going to stay and make that a reality. Consider how you will communicate with them, what you will say and how you can make the message for them positive.

Note: This article is provided for guidance only and does not constitute legal advice. We advise any employer in a redundancy situation to seek legal advice immediately – members should call us on 01565 626001.

Rewritten 20th June 2016

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