Getting redundancy right

Redundancy is one of the most important topics in the current climate, as business owners and senior managers get to grips with the crippling effect of COVID-19 on their businesses. Therefore, if businesses are considering dismissing employees on grounds of redundancy they must understand what it is and how to get it right, to avoid disputes and/or costly tribunal claims.

Redundancy is a potentially fair reason for dismissal. In broad terms, there are three main redundancy situations: closure of a business as a whole, closure of a particular workplace where the employee was employed; and reduction in the size of the workplace.

An employee cannot challenge whether the employer acted reasonably in creating the redundancy situation and an Employment Tribunal cannot investigate the commercial and economic reasons which prompted a closure or look into the rights and wrong of the employer’s decision. However, an Employment Tribunal is entitled to investigate whether the redundancy situation is genuine.

Once it is established why the business needs to make redundancies and there is a genuine redundancy situation, an employer must ensure that a fair process is followed. So, what is a fair process?

Consultation

The employer must carry out a consultation. The employer should give as much warning as possible of impending redundancies to enable the union and affected employees to consider possible alternative solutions and if necessary, find alternative employment. Consultation is very important in redundancy situations and requires the employer to consider options which would not involve making the employee redundant including early retirement, seeking volunteers, alternative employment, lay off and short-time working. The consultation meetings should allow the employee to raise/discuss any concerns they have.

Where 20 or more employees are being made redundant over a period of 90 days or less, an employer has a duty to:

• Inform and consult appropriate employee representatives. Where 100 or more redundancies are proposed, consultation must begin at least 45 days before the first dismissal takes effect. For less than 100 redundancies, the consultation period is 30 days.
• Notify the Secretary of State (on Form HR1). Notification must be received by the Secretary of State at least 45 days before the first dismissal, where the employer proposes to dismiss 100 or more employees within a 90-day period. Where less than 100 redundancies are proposed, the notification period is 30 days.

Fair selection

As a first stage, the employer must choose a fair pool from which to select the redundant employees. Employers have a lot of flexibility in deciding the pool, provided they apply their mind to it and act with genuine motives. Once a pool has been chosen, the employer can choose any reasonable selection criteria, provided these can be objectively measured and are not discriminatory. Ideally, the selection criteria should be discussed with the affected employees and the employer should try and agree on the criteria, to avoid disputes later on. The criteria may include, length of service, productivity (if it can be objectively assessed), timekeeping and employer’s future needs.

The employer should meet with the employees to discuss the selection criteria and scoring. Ideally, two managers should score the employees to ensure transparency and fairness.

Suitable alternative employment

The employer must at least look for alternative employment and should offer any suitable available vacancies. The employer’s duty is not limited to offering similar positions or positions in the same workplace and they should consider the availability of any vacancies with associated employers. Employers must give sufficient detail of the vacancy and allow a trial period of up to 4 weeks. Employers may also consider other options to avoid redundancies such as salary reductions or demotion.

Speaking to employees as soon as possible is likely to make the process easier for both parties as employees would appreciate honesty and transparency. The key is communication and employers should ensure they take notes of all meetings.

The material contained on this website contains general information only and does not constitute legal or other professional advice and should not be relied upon as such. While every care has been taken in the preparation of the information on this site, readers are advised to seek specific legal advice in relation to any decision or course of action.