Dealing with Redundancy
Any downturn in business invariably means that many employers require to consider cutting costs. Often, this may involve compulsory redundancies. Those employers who ignore or are unaware of the correct procedures may well learn an expensive lesson at a subsequent Employment Tribunal.
To ensure compliance with existing regulations and eliminate Employment Tribunal claims employers must be aware of their legal obligations. The first of those is the need to consult with all employees who may be affected by redundancies and the necessity of ensuring that a fair and proper procedure is followed.
Many employers may consider the procedures expensive, time consuming and something of a nuisance but any failure to act reasonably and follow a fair and balanced procedure may well leave an employer high and dry at an Employment Tribunal. An employer who fails to follow the correct procedure can end up paying aggrieved employees substantial sums.
In summary a redundancy situation is where:
- an employer’s business is closed or
- a specific work place has closed down or
- there is a diminishing need for employees to carry out work of a specific type.
The reduction in work does not have to relate to work of the type the employee was employed to do and it is important to appreciate that it is the job that is redundant and not the individual. The choice of individual follows on from the decision to cut the numbers employed, but is an entirely separate matter that must follow a fair and logical sequence.
Redundancy can be a potentially fair reason for dismissal but, as with any dismissal, an employer must be able to demonstrate having acted reasonably and to have followed a fair procedure. An employer will not normally have acted reasonably unless discussion and consultation has taken place with affected employees (or their representatives where twenty plus redundancies are being considered) about the proposals and where it can be shown that the employer has adopted a fair basis upon which the selection for redundancy will be made.
Consultation
Employers have a duty to participate and enter into meaningful consultation with all those who may be affected by redundancy proposals. The point of consultation as well as attempting to avoid redundancies altogether or minimise the numbers involved is to lessen the impact of any redundancies. In actual practice individual consultation will almost certainly involve discussing the application of the chosen selection criteria with the employee or employees concerned. Consultation gives an opportunity to discuss with the employee the possibility of suitable alternative employment. In some cases this can mean an employee expressing an interest in another post within an organisation which otherwise the employer may have disregarded on the basis that it would be unacceptable to the employee.
Consultation is not about simply advising an employee he has been made redundant. More often than not it will involve a number of meetings with the employees concerned. The first meeting will be to tell the employee that his/her job is at risk and to advise the employee how the selection procedure will work in the event that redundancies become a reality. It also gives the employee the opportunity to reflect on matters and to come up with any alternatives for the employer to consider in any further meeting. In such a consultation process, the employee should be shown their own individual assessment. At this stage where an employee is likely to be made redundant then he or she would have the opportunity to dispute the selection criteria and raise any matters directly affecting his or her assessment.
Where 20 or more employees are to be made redundant from one establishment and that within a period of 90 days or less the employer must enter into collective consultation with trade union or any elected employee representatives. Failure to do so may result in an Employment Tribunal making a protective award to the employees affected by the failure to consult. The amount of any award is what a tribunal would conclude is just and equitable in the circumstances but with the current maximum being the equivalent of 90 days pay to each of the employee.
Selection
In assessing the reasonableness or otherwise of a redundancy dismissal an Employment Tribunal will more than likely look at the employers selection pool, i.e. the group of workers from which those who are to be made redundant are to be selected, the selection criteria applied and the manner of application.
Selection Criteria
If a selection pool for redundancy is reasonable an Employment Tribunal will then consider the selection criteria used by the employer. Any criteria must be objective and capable of measurement. If at all possible the selection criteria should be verifiable by reference to records and performance assessments.
For a dismissal to be fair an employer must ensure the selection criteria were applied in a fair and reasonable manner. In the normal course of events selection criteria will include length of service, attendance and disciplinary records and skills and knowledge of the individual employees. Criteria such as manner or attitude should be avoided as invariably that comes down to the personal prejudices of the individual or individuals making the redundancy selections. It should be borne in mind also that redundancy selection on grounds of health could conceivably give rise to claims under the Disability Discrimination Act. Where an employee’s absences are caused by disability then selection on the basis of his or her attendance could amount to Disability Discrimination. It is important also to ensure that the criteria utilised in making redundancy selections are assessed over a reasonable period of time specifically when long serving employees are involved.
This article was written by Bryan McLachlan of Hewats.
It is reproduced here with permission. Hewats maintain an extensive and up to date
reference library on all aspects of employment law and will be happy to advise employers whether sole traders, partnerships
or companies on all aspects of redundancy and employment law. In the long run, an advisory consultation before a redundancy
situation arises, may potentially save an employer significant sums.
The above is intended only as a general outline of the law
of redundancy for the guidance of employers and is not to be regarded as a definitive statement of the law.
Please read our disclaimer.