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Managing Redundancy

In these days of economic downturn, the newspapers contain daily reports of companies looking to make redundancies in order to secure their financial future.  Redundancy may well be a solution for many. However, unless the process is handled correctly then the employees who are let go could have a claim for unfair dismissal even if the redundancy situation was genuine and the employer was acting in the best interests of those whose jobs were saved.

The message of this email bulletin is to take advice if contemplating redundancies in order to ensure that you minimise your risks as far as possible because the money that you are trying to save by making the redundancies could actually end up being paid out in compensation and legal fees if you get it wrong.

However, the starting point when considering if redundancy is the right option is to establish that a situation exists which meets the statutory definition of redundancy. To satisfy the legal definition, an employer must show that:

  • It has ceased, is ceasing or intending to cease to carry on the business for the purposes of which the employee was employed by it (business closure);
  • It has ceased, is ceasing or intending to cease to carry on that business in the place where the employee was so employed (workplace closure); or
  • There is a reduced requirement for employees to carry out work of a particular kind or to carry out work of a particular kind at the place where the employee was employed to work (reduced requirement for employees).

If your predicament does fall into one of the above categories, you need to think about how many people are likely to be affected. If you think the business may need to lose 20 or more people then you need to start collective consultation with recognised trade unions or employee representatives and should seek specialist advice to ensure that you have complied with the legal requirements.

If, however, the numbers affected are smaller, then the next step is to look at how to select the most appropriate person(s) to be made redundant. 

Fair selection involves the fair application of objective selection criteria to the correct pool of employees.  The factors that you need to consider when identifying the correct pool are whether employees are doing similar work and/or whether their skills or jobs are interchangeable. 

Once the pool is established, fair criteria must be applied to that pool in order to identify which of the people in the pool should actually be made redundant. The selection criteria used must be objective.  They should not reflect someone’s personal opinion, but should be capable of being verified independently.  Examples of fair criteria would be attendance record (discounting any disability or maternity related absences), disciplinary record, or quantifiable skills and experience.

Having decided upon the criteria, the employer still needs to ensure that a reasonable and thorough consultation process is followed. This means advising all those potentially affected as soon as possible that they are “at risk” of redundancy. The first consultation meeting could be either a group meeting but should be held in order to explain why the business has come to the difficult conclusion that redundancies may have to be made.

The next meeting should be a one to one meeting where staff are given the opportunity to discuss whether they have any suggestions as to how the redundancy situation can be avoided.  The selection criteria that you have decided to use should also be explained at this stage, if not before. The business should also explore whether there are any options available other rather than redundancy, which includes offering any vacancies of whatever nature to those at risk, regardless of how suitable or otherwise they may be for the individuals in question.  It is sometimes easier and quicker to allow the employee to consider all vacancies so that any discussions on whether there is any suitable alternative employment are more productive and efficient.  If there are no vacancies, then the staff need to be advised of this.

After a suitable period of time, the staff at risk should be invited in writing to a third and final consultation meeting.  This third meeting needs to be held in order to comply with the Statutory Disciplinary and Dismissal Procedure which are still with us, albeit for a limited period. 

At this meeting, the employee has the right to be accompanied by a trade union representative or a work colleague and they need to be advised of this in the letter inviting them to the meeting.  During this third meeting, staff should be told of any responses to any suggestions they have previously made as to how the redundancy situation can be avoided and should be given the opportunity to make new suggestions. Employees should be given an opportunity to comment on/challenge the score that they have been given against the selection criteria and you should carefully consider their comments, together with any new suggestions for avoiding the redundancy situation, before any decision is given.  The employees at risk also have the right to know their scores against those criteria although should not be told anyone else’s score.

This means that, ideally, people should not be told that they are redundant even at the end of this final meeting. Instead, assuming that there were no suggestions put forward which cause an employer to review the situation, and assuming that the employer had the evidence to answer any scoring challenges that have been made, the employer should advice the individuals of the fact that their employment is terminating by letter after the meeting.  They must also be given a right to appeal against the decision in this letter.

If the redundant member of staff decides to appeal, they must be invited to a further meeting to discuss that appeal.  This meeting should, ideally, be conducted by someone more senior than the person who conducted the previous consultation meetings.  As a result, it is worth considering from the very beginning who will be the most appropriate person to deal with the redundancy process and any subsequent appeal.

The fundamental things, and the hardest things to get right, are selecting the pool and the selection criteria. Identifying just a role is often not enough and time should be taken in order to ensure that the decisions made at this early stage are as fool proof as possible. Having individuals in mind from the very beginning is also a recipe for disaster. Redundancy is not an excuse to single out poor performers or to get rid of the oldest/newest members of staff and assuming that those selected will not complain because “everyone knows that times are hard” would definitely be a mistake.

This bulletin is only a very basic outline of what must be done. Every redundancy situation is unique and the best advice is to take advice on the whole process not just the procedure to be followed. 

If you require further advice or assistance with regards to redundancy procedures please contact Burnetts’ Employment Team on 01228 552222.

About the author

Published: Thursday 15th January 2009
Categorised: Employment

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