Embarking on a redundancy process can seem like a daunting task and a decision that I know you won’t take lightly. It is the last thing many business owners thought that they’d need to consider at the start of this year. But 2020 has presented us all with significant challenges and hurdles, and it may be that you’ve considered all other viable options to redundancy, but you have no choice. If that’s you and you have to make redundancies, this is what you need to know.
1. Genuine redundancy situation
First and foremost, you’ll need to consider the business’s needs and how you intend to resolve the situation, such as how many redundancies you intend to make, when, and where.
It is important to remember that the statutory definition of redundancy must be satisfied, set out at Section 139(1) of the Employment Rights Act 1996; broadly speaking, it includes where:
– The business closes;
– The workplace closes (for example the closure of one, or more, of several sites);
– The requirement for employees to do work of a particular kind have ceased or diminished or are expected to cease or diminish.
It is not uncommon for disputes to arise regarding a redundancy situation’s genuineness, so keep in mind the above and be clear on your rationale. Keep a record of the thought process that you have undertaken to arrive at your proposal.
There is no mandatory procedure to follow, and there is a good reason for this. Each redundancy situation will have unique factors that need to be taken into account. The reality is that a redundancy procedure should be more of a fluid process than a regimented box-ticking exercise, and employees will value being listened to and being engaged in the process rather than feeling that you’re doing something because the process says you have to.
For example, the process will be somewhat different when the business is closing entirely to one where the company is embarking on a reduction in headcount due to the diminished need for employees of a particular kind.
In every case, though it is essential to ensure that the procedure is fair, which will inevitably include:
– Identifying an appropriate pool from which to select potentially redundant employees (if applicable, for example where you need to reduce the number of employees);
– Identifying objective selection criteria to score those employees in the defined pool and undertaking a scoring exercise (if appropriate, for example, this isn’t necessary where the intention is to close the business down);
– Warning and consulting with those affected;
– Considering alternatives to redundancy (for example, seeking volunteers, alternative cost savings, considering alternative roles).
3. Union & number of redundancies
If you intend to make 20 or more employees redundant at one establishment within 90 days, you will need to engage in collective consultation with a trade union or if no trade union is recognised, elected employee representatives. You are also required to notify the Redundancy Payments Service by completing an HR1 form of your intentions.
It is important to note that undertaking collective consultation does not do away with the need for individual consultation; they are both equally important parts of the process to ensure fairness.
The collective consultation requirements are set out at Section 188 of the Trade Union and Labour Relations (Consolidation) Act 1992 and must include ways of:
– Avoiding the redundancies;
– Reducing the number of employees to be dismissed; and
– Mitigating the consequences of the dismissals.
Collective consultation should also include the proposed pool from which redundancies are to be made, and selection criteria proposed to be adopted.
How you go about identifying the pool will depend on the reason for making redundancies. For example, if it is because the business is closing, then it is a straightforward exercise of placing everyone at risk (and any selection criteria would also be redundant). However, if there is a diminished requirement for employees to do work of a particular kind, you will need to apply your mind to how the pool should be defined. Examples of factors to consider include:
– The type of work that is ceasing or diminishing;
– Whether any employees are doing similar work;
– Whether any employees’ job or skills are interchangeable.
5. Selection criteria
The selection criteria should be objective and independently verifiable wherever possible.
Potentially fair criteria include:
– Performance and ability;
– Length of service;
– Attendance record;
– Disciplinary record.
Be aware of the potential for particular criteria to be directly or indirectly discriminatory. For example, “Last In First Out” (“LIFO”) used as a sole criterion is likely to be indirectly discriminatory on the grounds of both age and sex.
Consultation is a vital part of a fair redundancy procedure. Care should be taken to ensure that consultation starts while the proposals are at a formative stage, that adequate information and time is provided so that affected employees can respond, and that conscientious consideration is given to all responses. Consultation should take place over an appropriate period depending on the circumstances.
It is not possible to give a definitive list of what should form the subject matter of consultation as that will depend on each case’s circumstances; however, broadly speaking, it should give the employee the opportunity to:
– Respond to the basis on which they were selected, including the pool, the selection criteria, and their scoring (including challenging their selection assessment and putting forward factors that may impact their score and selection. Also, note that this may result in someone else with a lower score after adjustments being at risk and you will need to go through the same process with them);
– Put forward suggestions for ways to avoid their redundancy (this may include for example reduced working hours or reduced remuneration);
– Consider any alternative employment positions that may exist;
– Raise any other concerns that the employee may have.
For a suggested step-by-step guide to redundancy, click here.
If you are considering or undertaking a redundancy process and would like advice, support or reassurance, please do get in touch – I’d be happy to help.
This blog provides general guidance only. Expert advice should always be sought in relation to particular circumstances.