General tips for Employers - The Redundancy process

As a result of the challenging economic climate, many employers are embarking on restructuring and redundancy exercises. Does this apply to you? Perhaps you are closing your business, closing a workplace or there is a reduction in the need for particular employees.

If any of the above applies to your business, please take note of this article to ensure that you are undertaking the redundancy process fairly and most importantly, legally. This note, however, cannot be taken as legal advice, which can only be provided on the basis of specific facts.

The two most common redundancy situations are: a workplace closure and a reduction in the need for employees to do work of a particular kind. In both cases a fair redundancy procedure must be followed prior to reaching a decision to make a role redundant and dismiss an employee.

1. Are there ways to avoid the proposal?

Before an employer embarks on a redundancy or restructure process it must consider if there are ways to avoid making the proposal in the first instance. These may include: -

• Reviewing the use of agency staff, self-employed contractors and consultants.
• Restricting recruitment in affected categories of employment and in those areas into which affected employees might be redeployed.
• Reducing overtime to that needed to meet contractual commitments or provide essential services.
• Freezing salaries for a specified period.
• Considering the introduction of short-time working, job-sharing or other flexible working arrangements, where these are practicable.
• Identifying suitable alternative work that might be offered to potentially redundant employees.
• Inviting applications for early retirement or voluntary redundancy.

2. Key steps in a redundancy process

The key steps in a fair redundancy process include: -

• Communicating clearly with employees and ensuring that they are treated fairly and without discrimination.
• Genuine and meaningful consultation regarding ways to avoid or mitigate the number of compulsory redundancies.
• Considering allowing applications for voluntary redundancy.
• Fair selection for redundancy.
• A thorough search for suitable alternative employment.

3. Consultation

Where an employer is proposing to make redundancies it should enter into consultation with all affected employees on an individual basis and, where there are 20 or more employees to be made redundant at one establishment within 90 days or less, an employer has a duty to consult collectively with trade union representatives if a trade union is recognised by the description of employees affected, or consult with employee representatives elected if there are no trade union recognised. The consultation must begin at least 30 days before the first dismissal takes effect. If there are 100 or more employees to be made redundant within a period of 90 days or less, the consultation must begin at least 45 days before the first dismissal takes effect.

Consultation should concentrate on:

• avoiding dismissals altogether;
• if not possible, reducing the number of employees to be dismissed; and
• mitigating consequences of the dismissals.

For effective consultation to take place, the following information must be given to employees/employee representatives.

• reasons for proposals;
• numbers and descriptions of employees who you may dismiss as redundant;
• total number of such description employed;
• method of selection;
• method of carrying out the dismissals; and
• proposals for calculation of redundancy payments.

4. Voluntary redundancy

Some employers choose to offer employees the option to apply for redundancy. Although, there is no legal requirement to accept such applications, a potential downside of the process is receiving applications from employees who you want to keep. It can be particularly difficult to reject an application if only one person applies.

An employer should include potential volunteers when calculating the number of employees that it is proposing to dismiss at one establishment within 90 days by reason of redundancy for the purposes of collective redundancy consultation.

5. Fair selection for redundancy

If you are proposing to make a number of people redundant from a particular department/section e.g. managers, admin staff etc, then you will have to assess all the employees in that department/section along with any other employee who performs similar or like work at all locations. 

You will need to formulate fair assessment criteria. The criteria can be as simple or as complicated as you want to make it. What is key is that you identify those skills that are most needed for the targeted section/department. You may want to assess qualifications, communication skills, disciplinary record, profitability of employee etc. You should avoid using length of service if possible as this can cause claims for age discrimination. To complete the assessment you can conduct formal interviews or undertake a paper-based assessment. 

The assessments should be documented and carried out by two managers/partners/directors who know the affected employees, their abilities and how they work.  This should hopefully ensure there is no personal bias. 

6. A thorough search for suitable alternative employment

If a redundancy of a role is confirmed it is necessary to conduct a search for suitable alternative employment within the organisation. Another role will be suitable if the new role is similar to the job currently being undertaken by the employee and/or the employee’s ability and skill set match those required by the new role. Although a relevant consideration, employers should not assume that an employee who appears to be underqualified will be unable to fulfil the role and conversely, that a seemingly overqualified employee will not accept a more junior role.

7. Notification to the Department for Business Energy and Industrial Strategy (‘BEIS’)

It is essential that you give BEIS the following notices:

1. At least 30 days’ notice if between 20 and 99 redundancies are proposed at one establishment within 90 days or less; or
2. At least 45 days’ notice is required if 100 or more redundancies are proposed at one establishment within a period of 90 days or less.

• With either notice, they must be given before giving notice to terminate an employee's contract of employment.
• Use the Redundancy Payments Form HR1 and submit this to the appropriate Redundancy Payments Office.
• If you fail to notify the Secretary of State of larger scale redundancies, this is a criminal offence.

8. Protective award

If you fail to comply to consult with appropriate representatives about proposed redundancies, a claim can be issued to the Tribunal for a protective award. A protective award will punish a defaulting employer rather than compensate employees.

How can you support employees who have been selected for redundancy and help them to depart on good terms?

We asked Lisa Ashworth, Career Transition Coach and she said,

“For employees facing redundancy, the thought of finding a new job can seem overwhelming. Many employers recognise this and will provide Career Transition Service (“CTS”) or Outplacement Support as it is sometimes called. So what is this and it is worth doing? Studies have shown that using a Career Transition Services can cut an employee’s time to get a new job by 50% - that’s a lot.  A good quality service will support employees will with all the practical steps like getting the employee’s CV and LinkedIn Profile updated, and getting the employee started on a job search. The CTS can be a sounding board to help employees work out what they want to do next and how to position themselves in the market. They can also help with interview skills, where to find jobs and how to negotiate a job offer.  Overall, this support can build confidence which will ultimately mean the employee is taking more of the right steps to find a new job. The advantage to an employer is where an employee who is made redundant finds new work quickly the departure is likely to be smooth and amicable. “

Settlement Agreements

A potential alternative to conducting a full and thorough redundancy process and/or a route to achieve absolute piece of mind is to consider offering a settlement agreement to redundant employees via which such employees will waive their rights to bring claims against the company in return for enhanced compensation for the termination of their employment.

If you would like to discuss the redundancy process please contact our Employment Team who will be happy to discuss your questions.

Specialist advice should be obtained before taking, or refraining from taking, actions based on comments in this update which is only intended as a briefing note.