Redundancy in the Spotlight

Published: 26th August 2008

Welcome back from your holiday!

In keeping with numerous recent surveys revealing that widespread job losses are looming we are seeing an increase in clients seeking advice from us on redundancy.

Employers are in danger of walking into a minefield of costly and time consuming problems if they mismanage the redundancy process and fail to plan. Each redundancy exercise, however small, requires considerable preparation and a good understanding of the legal implications.

Here are our top 10 tips for employers who are faced with a redundancy situation:

1. Identify that you do have a potential redundancy situation.

In practice redundancy arises when an employer no longer requires a role/roles to be carried out, where there is a reduction in the number of people required to fill a role/roles or when a business is closing (redundancy can also occur even where the business is being relocated).

It is important to remember that redundancy is all about the needs of the organisation and the change in the need for the role. It is not about the performance of an individual or any other failings of that individual.

Don't forget, TUPE is not redundancy. Where you are outsourcing, insourcing or there is a change in a provider of a service, the employees are likely to transfer under TUPE and are not necessarily redundant.

2. 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 time to carry out properly and can cover many weeks. Do not expect you can immediately dismiss employees.

3. Consult, consult, consult!

The largest part of a redundancy exercise is carrying out consultation. Collective redundancies (where 20 or more employees are proposed to be dismissed within a period of 90 days) require the giving of specific written information and consultation with trade union/employee representatives over prescribed periods (a maximum of 90 days) before any employee can be given notice. In addition (and in any event) individual consultation will need to take place.

Consultation is a two way process and is a dialogue that is not pre-determined when it starts. It involves face to face meetings. Representatives and individuals have a right to respond to the redundancy risk, any selection methods and how this is applied and alternative ways in which jobs can be preserved must be discussed before the employer makes any final decisions.

Collective consultation must begin at an early stage and before actions are taken which may take the employer on an irreversible route to redundancy.

4. Follow the statutory procedures.

Statutory procedures are still with us until 2009 and apply to dismissals on the grounds of redundancy. They do not technically apply where the collective consultation provisions apply but in practice employers are well advised to follow them as a minimum to show a degree of individual consultation and dialogue.

5. Consider who you put at risk.

The pool of employees who may be at risk will need to be identified. Whilst it is often considered best practice to consider all those at risk, employers will often not want to upset and have 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.

6. Get your selection right.

Where employers need to select from a pool, selection must be by criteria which is objective, capable of measurement and non discriminatory. LIFO carries an age discrimination risk (which needs to be carefully assessed with your advisor) whilst attendance should discount any absences caused by disability or pregnancy.

7. Know how much employees will get.

Identify the cost of contractual notice or payment in lieu of notice and redundancy payments. In collective redundancies, formal notice is usually unable to be given until the prescribed periods have elapsed. Statutory redundancy payments are based on length of service, age (which is still allowed) and salary (current maximum £330 per week) and can be as much as £9,900. Employees may also be entitled to more if there is a contractual right to an enhanced redundancy payment or there is a custom and practice of paying higher rates. There may also be issues regarding the pension scheme if enhanced entitlements arise on redundancy.

8. Watch your language!

Use the right terminology such as proposed, envisaged and intended to show that nothing is set in stone. Act consistently with this terminology. All relevant documents are potentially required to be disclosed in any subsequent Employment 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.

9. Beware of future recruitment.

If there are vacancies available or likely to be available which can be filled by those at risk of redundancy, then they must be offered to them. Seeing job adverts is an easy way to antagonise those made redundant and any Employment Tribunal will carefully scrutinise when such vacancies arose.

10. Look after those that are staying.

Employers often focus on those likely to be leaving and forget those employees who are staying. Ironically, redundancy exercises are all about making an organisation run more efficiently and effectively and yet we lose sight of the people who are going to make that a reality. Consider how you will communicate with the employees who are staying, what you will say and how you can make the message for them positive. Avoid the drip-drip effect. For employee morale it is far better to announce redundancies in one swoop than to constantly revisit such uncertainty.

If you would like to discuss any of the above points please speak to your usual contact in the Mace & Jones Employment and HR Team.