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Understanding redundancy

Being made redundant

HR Consultant Julie Davis gives a comprehensive guide to redundancy and explains where unfair dismissals can occur when being made redundant.

Being made redundant is not the same as being dismissed for other reasons such as performance or conduct.

Julie Davis explains how employers can conduct the process fairly if a member of staff is being made redundant, and what employees should be aware of to ensure they are not the victim of an unfair dismissal when being made redundant.

Redundancy can occur in the following scenarios:  

  1. When the job you are doing no longer exists;
  2. Your employer needs less people to do the work;
  3. Your employer closes down or is sold;
  4. The business needs to restructure the way they operate and certain jobs need to be replaced with jobs that are different i.e. skills or seniority.

Management restructures are necessary when the needs of the business change.

An employer cannot treat senior colleagues differently to other employees if anyone is being made redundant. Employment rights are the same for all employees and failing to follow the procedures laid out below can be very costly for businesses.

Legitimate reasons for being made redundant can be varied. Businesses sometimes have to cut costs and look to reduce the number of employees to achieve this. Changing technology or new systems can also impact on the number of employees required to do work of a particular kind.

Follow a fair procedure

Employers have a responsibility to treat all employees fairly and follow the correct process if redundancies are being considered. Even if an employer has a legitimate reason for redundancy, failure to follow the correct procedures puts the employer at risk of an unfair dismissal claim, on the grounds of redundancy.

‘Suitable Alternative Employment’ and ‘Trial Periods’

If an employer has alternative roles available which would be deemed suitable for that employee, this option must also be considered rather than just making an employee redundant. These suitable alternative roles should be undertaken for a ‘trial period’ before any final decision is made.

There are specific rules that govern ‘suitable alternative employment’ and ‘trial periods.’ Further advice should be sought on this complex aspect of legislation, and Burnetts can offer this support.

Voluntary Redundancy v Compulsory Redundancy

An employer may ask for volunteers if they are looking to reduce the number of employees and individuals can put themselves forward for redundancy.

A compulsory redundancy occurs when no or insufficient volunteers put themselves forward or voluntary redundancy is not an option. The chosen employees have no option about being selected and are chosen by the employer using selection criteria or by way of competitive interview.

Unfair Dismissal

A redundancy dismissal can be unfair, even though jobs have disappeared, if the employer has:

  1. failed to consult properly;
  2. unfairly picked an employee for redundancy;
  3. failed to offer suitable alternative employment if it is available.

Certain reasons for selecting employees for redundancy are deemed 'automatically unfair', e.g. because of trade union membership or because they are pregnant.

Individual and Collective Redundancy

If less than 20 employees are being made redundant in one establishment, then these are ‘individual redundancies’. Always check what the employer’s policy or procedure says: an employer can be obliged to collectively consult even when less than 20 employees are being made redundant.

If there are 20 or more employees being made redundant in one establishment within a 90-day period, it is classed as a collective redundancy. With a collective redundancy scenario, the employer must consult with employee representatives or recognised trade union representatives for a minimum of 30 days before any dismissals take place. If it is more than 100  employees who are being made redundant, the consultation period is 45 days.

Individual consultation

An employer must always consult with its employees before making any redundancies. The consultation should be meaningful and genuinely consider the employee’s views.

Employees should be spoken to individually and told the reasons why they might be being made redundant, employees should be allowed to input into the redundancy process and put forward suggestions to reduce the number or avoid employees being made redundant.

Collective Redundancy

If the employer is considering making collective redundancies, they have a duty to consult with elected employee representatives or recognised trade union representatives. Failure to do so could lead to employees making claims through the Employment Tribunal Service for a protective award. This is an award of up to 90 days' pay per employee.

Redundancy Selection

An employer should use a fair and objective way of selecting the employees who are being made redundant. Selection criteria should be evidence based and non-discriminatory. The employer should not select an employee because she is absent on maternity leave or pregnant.

Examples of fair selection criteria can include: performance (evidence based), qualifications and skills to do the job needed, disciplinary and attendance records can (subject to adjustments for any disability) also be used to select employees for redundancy.

Redundancy Pay

Statutory redundancy pay is based on the following calculation:

  • How long an employee has been continuously employed (minimum 2 years)
  • The employee’s age
  • The employee’s weekly pay, up to a certain limit (£489 current maximum)

Employers may offer a more generous redundancy package when someone is being made redundant, but this is entirely at their discretion unless set out in a policy.

Disputes

Employees can often feel they have been unfairly selected when being made redundant due to incorrect application of selection criteria or for some other discriminatory reason.

One of the most common causes of disputes, when an employee is being made redundant, occurs where the employee believes they have been incorrectly grouped (“known as pooling”) together with others.

Also there is a growing number of employees claiming that their employer has created a sham redundancy situation as a way of getting rid of them in circumstances when there are absence or capability issues.  Employees subject to sham redundancy situations will have a legitimate right to appeal against the employer’s decision and to make a claim to the Employment Tribunal.

In order to ensure that employers do not face action in the Employment Tribunal, all redundancy decisions must be made in a transparent way, with evidence to support the decisions about why those employees were chosen.  Burnetts can offer this support to businesses.

If employees feel as though they have been subject to a sham redundancy situation when being made redundant, it is strongly advised they seek legal advice early on so as not to miss the deadline for making a claim in the Employment Tribunal.

For more advice on redundancy please contact Julie Davis on jda@burnetts.co.uk or 01768 800855.

About the Author

Julie Davis profile photo

Julie Davis

Julie is an experienced HR Consultant.

Published: Friday 22nd September 2017
Categorised: Education, Employment, HR, Lawyers for Business, Legal Services in Newcastle, Penrith, Small Business / New Business, Tourism & leisure, West Cumbria

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