Getting redundancies right
Updated: Oct 18, 2020
Even with the support of furlough and the Coronavirus Job Retention Scheme many employers are sadly finding that they may still have to make redundancies given the changing face of their sector, in light of the pandemic and impact of lockdown.
Any restructure or redundancy exercise is likely to be stressful and emotional.
Although employees can continue to remain furloughed, or flexibly furloughed, employers should start considering if they will need to make any redundancies in the future. This is particularly relevant if employers intend to use the Government’s Scheme to contribute to some of the costs of notice pay before the Scheme closes.
Any restructure or redundancy exercise is likely to be stressful and emotional. Although employees can continue to remain furloughed, or flexibly furloughed, it is important that any redundancy process is dealt with in a fair and proper manner. Failure to follow a fair procedure could lead to costly claims in the Employment Tribunal.
A redundancy situation can exist where a business, or part of it, is shut down completely, shut down at a specific location (even if moving to a new location) or the requirement for employees to do work of a particular kind has reduced or ceased.
There are some key considerations when considering redundancies:
Employees with at least two years continuous service have a statutory right not to be unfairly dismissed.
Depending on the number of redundancies proposed the employer needs to follow a minimum consultation period. If you propose to dismiss between 20 and 99 employees within 90 days or less, the obligation to notify the Redundancy Payments Service is triggered. Whether this must be done 30 days or 45 days before dismissals take effect will depend on how many employees are involved.
Where fewer than 20 redundancies are proposed, there is no legal consultation period, but it is advisable to undertake a consultation exercise to assist in showing a fair procedure has been undertaken.
Employers are required to inform and consult with 'appropriate representatives' of any employees who may be affected, where it is proposed to dismiss 20 or more employees at any 'one establishment' within a period of 90 days or less. This is called collective consultation.
There are minimum periods for collective consultation. This is at least 30 days before notice of dismissal is given, or 45 days if 100 or more employees are affected.
Consultation should include discussions about what steps you are taking (or have taken) to avoid redundancies; ways to reduce the number of employees being made redundant; and ways to mitigate the consequences of dismissal on the affected employees.
Your reasons for making people redundant should be explained clearly.
Endeavour to find if any employees are interested in voluntary redundancy.
The employer will need to define the method of selection and any selection criteria they intend to use. Employers are able to design a selection criteria in a manner which works for the business, subject to certain conditions.
Individual consultation should take place in all cases, and at all stages.
All redundant employees will need to be given appropriate contractual or statutory notice to bring their contract of employment to an end. (See my website for information on notice pay, via this link)
Throughout the redundancy process, and during any period employees at risk of redundancy are working out their notice, an employer has a duty to consider alternative employment opportunities for them.
Once notice has been issued, the employee has the right to reasonable paid time off to look for work or undertake training.
All selected employees have the right of appeal against selection.
Any employee with two years' service or more are entitled to a statutory redundancy payment. This is calculated based on their length of service, age and weekly pay, in line with a statutory formula.
Employees and Trade Union representatives who are furloughed can take part in consultation exercises.
There are a number of legal claims employees might bring in relation to redundancy, which is why it is important to plan all redundancy exercises carefully.
Redundancy exercises should not be used to deal with conduct or capability issues (although these aspects of employment history can be fairly used in any selection criteria).
In addition to potential claims of unfair dismissal, employers should be aware that if an employee has a protected characteristic, as defined by the Equality Act, then their right not to be discriminated against is a day one right. Employers should ensure their process guards against discrimination.
The most successful redundancy exercises are those where there has been clear and transparent communication with the individuals concerned and the reason for redundancy is clear and the business has shown there has been no alternative to dismissal.
If you are unsure about any aspect of the redundancy process you are advised to seek professional advice.
Please contact me if you have any questions about redundancy exercises.