Times are hard and businesses change. Maybe there’s been a fall off in a particular line of work, a physical move, new equipment or ways of doing things differently that mean it isn’t viable to keep employing certain staff members. In order to stay efficient and cost effective, you may have to face the possibility of carrying out redundancies.
But beware; you may risk opening yourself up to even more problems.
As employment lawyers, we see time and time again, how bodged redundancies can lead to costly and time consuming Tribunal claims. Compensation for unfair dismissal is more than statutory redundancy pay, thus encouraging legal action from disgruntled employees. But we’re here to help. A few basic guidelines can help you avoid trouble later on. And of course, if you need detailed advice, get in touch with us direct.
- Be clear about what “redundancy” means
Some employers use “redundancy” as a means of getting rid of an unsatisfactory employee. The problem often arises because “redundancy” is thought of as being just another term for dismissal – it isn’t. Remember, it’s the job that is redundant – not the person. If you’re going to need someone else to fill the role, then it’s not a genuine redundancy.
- Always consult with your employees and consider other options.
There’s no getting away from it – redundancies are hugely upsetting, not just for the people directly involved but for other staff members too, who can feel disoriented and anxious that they’ll be next in line. So you should always consider whether there might be another solution, and this includes consulting with the affected employees, who may have their own suggestions as to how work could be done in a different way.
If a downturn or fall off in work isn’t likely to be permanent you could consider cutting back hours or temporary layoffs. Unless those measures are contained within your employment contracts, you’ll need to obtain the written consent of the affected employees. Although it’s not ideal, many will prefer this to losing their job.
Similarly you could consider introducing flexitime or zero hours arrangements, although again, you will need written employee agreement as this constitutes a change in contract.
If redundancies are the only answer, might some employees be willing to go for voluntary redundancy or early retirement? If you decide to make such a proposal, make it to all the employees involved – don’t single anyone out. But remember that even if someone volunteers for redundancy, that won’t necessarily prevent them making a claim for unfair dismissal if the redundancy itself is a “sham” – for example in the recent claim of White v HC-ONE Oval Ltd . The Employment Appeal Tribunal allowed Ms White’s claim (that the redundancy process had been engineered to ensure a full time employee to be retained in favour of two part time staff) to be heard, despite the fact that she had volunteered for redundancy.
- How to select candidates for redundancy
Firstly, decide on the “pool” of employees who could potentially be made redundant and prepare objective and fair selection criteria, for instance:
- skills, qualifications and aptitude
- standard of work and/or performance
- disciplinary record
Length of service can be taken into account (‘last in, first out’) but do not use this as the only reason – that could be viewed as age discrimination.
Bear in mind that the following cannot be used as selection criteria. They are automatically unfair and could trigger a Tribunal claim.
- Pregnancy and maternity
- family, including parental leave, paternity leave (birth and adoption), adoption leave or time off for dependants
- acting as an employee or trade union representative
- joining or not joining a trade union
- being a part-time or fixed-term employee
- The “protected characteristics” of age, disability, gender reassignment, marriage and civil partnership, race, religion or belief, sex and sexual orientation
- pay and working hours, including the Working Time Regulations, annual leave and the National Minimum Wage
- Offering alternative Employment
You should always consider whether those being identified as being at risk of redundancy could be moved into other roles. If you want to offer any or all of these employees alternative work, bear in mind the following:
- Job offers should be unconditional and in writing – the employee does not have to apply or go through an interview process
- The employee’s current contract must not have ended before the job offer is made
- You should show how the new job differs from the old – for instance duties, pay and hours – so the employee is fully aware of what they are taking on
- The job must start within four weeks of the old job ending.
If your employee accepts an alternative job offer they are allowed a trial period of four weeks to make a final decision (longer if you both agree, in writing). If you both agree that the job is not suitable then the redundancy proceeds. Employees who accept an offer of alternative work are allowed a 4-week trial period to see if the work is suitable.
If you think the job is suitable but the employee refuses to take it they may lose their entitlement to redundancy pay.
- Decide a timetable for the redundancy process
This will include time to consider any appeals against selection, and giving employees under notice of redundancy the right to reasonable time off to look for a new job or arrange training.
- Notify employees of their redundancy pay calculation
Only employees with two years of continuous service are entitled to a statutory redundancy payment (aside from any separate contractual right to redundancy pay within the contract of employment). Statutory redundancy pay is based on age, a capped weekly pay amount and the number of years of service. There’s a useful Government calculator at the following link Calculate your statutory redundancy pay – GOV.UK (www.gov.uk)
If your business is facing insolvency and you believe you cannot afford to make redundancy payments, the Redundancy Payments Service (RPS) (part of a government agency called the Insolvency Service) may be able to provide financial assistance. If an application to the RPS is approved then the payments will be made direct to the redundant employees.
- Alternative routes to dismissal
Reaching a settlement agreement can be an easier way of achieving the same outcome as redundancy. There’s many reasons why you might choose to go in this direction. Although a settlement agreement needs to be drafted and agreed by solicitors, it will free up management time that would otherwise be used in the (sometimes lengthy) redundancy process and reduce the emotional impact redundancies can have on your employees. And there’s no chance of negative publicity, as the existence and terms of a settlement agreement are always confidential.
Provided your employee/s agree, a settlement agreement will allow you to dismiss them for “other substantial reasons.” You will need to ensure the settlement amount offered reflects their entitlement to statutory redundancy and notice pay and provide a small ex-gratia payment in recognition of the agreement. Once signed, the employee waives their right to take legal action in respect of the dismissal, thus you will have peace of mind that the matter has been concluded and everyone can move on.
If you’d like to know more about the settlement agreement process, get in touch – we’d be happy to talk through it with you and explain how it might benefit your business.
Redundancies are an unpleasant fact of life, but making sure that you consult with your employees, treat them fairly and review alternatives to job loss will ensure that the process goes smoothly.
Our employment law solicitors can advise you on minimising risks and guide you through the redundancy and dismissal process. Please contact Zoe on 0203 858 9765 or email firstname.lastname@example.org. Mulberry’s has offices in Brighton and London.
This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.