If you follow the correct process, an employer can dismiss an employee by reason of a redundancy or restructuring fairly. The key is a to have a “fair reason”. But, if you fail to follow the correct redundancy process and you risk an unfair dismissal or discrimination claim plus paying out compensation. Even worse, you could be dragged through the Employment Tribunal facing adverse publicity.
If you need some help in running your redundancy process please do call us. We are happy to provide a steer and estimated costs.
Why pick us?
We are specialist employment law solicitors meaning we will have dealt deal with a great number of redundancy situations. This translates to cost savings for you as we can quickly determine how best to proceed.
- We cover all the areas you will need. We help you to justify your decisions in a way most likely to avoid an employment law claim.
- Experience builds a commercial awareness and knowledge in how to apply our skills successfully to get the job done.
- We can meet a short notice at our central London offices. You will be looked after by a partner. Clients quickly realise we offer a great service.
Ideas for how support could help you
Employees have rights. Employees, dismissed by reason of redundancy, may be entitled to statutory redundancy payments. If employers make mistakes in the redundancy process, employees might claim unfair dismissal. For some clients, we manage the entire redundancy process. Other clients use us as a sounding board.
To help you we have explained:
Determining a fair reason for redundancy
A “fair reason” for an employee dismissal by reason of redundancy, is a reason that is wholly or mainly attributable to the business:
- Ceasing trading;
- Relocating; or
- Requiring fewer employees for a particular task.
Not every redundancy is genuine. The employee may claim their employer targeted them for other reasons. Employees challenge employers’ attempts to disguise dismissals as a redundancies.
Over the years we have seen that employers need support around aspects of the process. In response we have built up dedicated redundancy employment law specialists who handle not only the law but the practical implementation.
Selecting employees for a redundancy pool
Most problems arise around what to do with employees who are:
- Absent on sick leave;
- Approaching retirement age;
- On maternity leave;
- About to return from maternity leave; and
- Employee representations during the consultation process.
A decision is needed on whether employees should be placed on gardening leave to protect against a breach of restrictive covenants. Concerns revolve around the risk of the employee:
- Poaching clients, or
- Joining a competitor.
Communications to employees under the redundancy process
Many employers use us to help draft the communications presented to redundant or restructured employees. The right message has to be conveyed and obtaining agreement can make the process much easier.
Redundancy process best practice
The redundancy process requires a little planning and well drafted documentation. Nevertheless employers can execute the process quickly and effectively.
An employer planning a redundancy must follow defined steps to identify and then consult with affected employee(s). A failure to follow these steps could be grounds for an unfair dismissal claim.
Employers are obliged to consult with employees individually.
Employers who will make over 20 employees redundant in a 90 day period are obliged to consult collectively with employees. A failure to follow collective consultation can lead to penal damages awards of up to 12 weeks’ pay per employee.
Redundancy selection criteria
Employers must identify the pool of possible employees at risk. They must then score the at-risk employees to select the actual candidate(s). Redundant employees often challenge this scoring as unfair, especially if the employer did not consult.
Employers often identify a “pool of one”. This avoids having to score employees. Employees can challenge this, because employers did not correctly execute the required redundancy process.
The redundancy pool
There are no fixed rules about how to define a redundancy pool. If employers show their choice of pool was reasonable in the circumstances, an employment tribunal is unlikely to challenge the decision.
For example, it is not always unfair to choose a redundancy pool that is the same size as the number of redundancies. However, only choose this option if there are strong reasons for doing so. You should remain wary of overstating the commercial risks of a wider pool.
The choice of pool initially sounds simple. Just define the:
- Particular kind of work that is disappearing;
- Employees who do this work;
Redundancy pool: interchangeable skills
A wider pool may be required, especially if the work is “low-skilled” and the skills are interchangeable. Hence, the business should consider the extent to which employees do similar work, and their jobs are interchangeable. Look at the reality of employees’ day-to-day activities, as well as the employment documentation.
Identifying the pool is more complicated if your employees:
- Are multi-skilled;
- Do different types of work; or
- Can be required to do different types of work.
Objections that could be made by employees
Employees are more likely to object to being labelled as redundant, especially if they share interchangeable skills with other employees. Placing an employee in the pool because their current job is disappearing may be unreasonable, if:
- Another employee doing different work is ignored, yet the employee could do this other job;
- The employee has previously done other work;
- Another employee with interchangeable skills has less service.
Bumping to save employees
You can “bump” employees out of their jobs whose roles are not redundant, and into the selection pool. Employees who roles are redundant can fill these other roles. Your business is entitled re-organise, and to widen the selection criteria for redundancy beyond directly affected employees.
However, your business is not obliged to consider bumping. However, you may fall foul of unfair dismissal law if it would have been reasonable to consider bumping in the circumstances.
Commercial problems with a wide pool
Your business may be reluctant to draw up a wide pool, even if it would be technically correct to do so, because of the impact on employee morale.
Identifying a narrow pool, or just consulting with employees provisionally selected for redundancy, may make you more vulnerable to an unfair dismissal claim. It is difficult to assess whether the risks to morale and other costs of widening the pool outweigh the risk and cost of claims.
Alternatives to redundancy
An employer is obliged to consider alternatives to dismissal e.g.:
- Suspend or restrict recruitment;
- Terminate contractors, or not renew their contracts;
- Alternative roles: perhaps at a different group company. This may involve retraining and a statutory trial period;
- Bumping: dismiss a different employee;
- Reduced hours, pay reductions, or other cost savings;
- Consultancy arrangements; and
- Invite voluntary redundancy.
Appeals against the redundancy process
An employee can appeal the redundancy decision. Usually the appeal fails. However, employees are often advised to appeal before claiming unfair dismissal.
Employees who are dismissed by reason of redundancy may be entitled to a statutory redundancy payment. Additionally, they may be an express or implied contractual right to an enhanced payment.
Statutory redundancy payments
An employee with at least two years’ continuous employment at the “relevant date” is entitled to a statutory redundancy payment if they are dismissed by reason of redundancy.
Statutory redundancy pay is calculated according to a formula and is based on age, length of service and pay. Length of service and pay are both capped. The statutory maximum for 2017/2018 is £14,670.
The “relevant date” will depend on how an employee’s employment contract was terminated. If the employee was:
- Dismissed on notice, the relevant date is
- The date the notice expired;
- Summarily dismissed or resigned without notice, the relevant date is:
- The date of the dismissal or resignation;
- Working under a fixed-term contract that expired and was not renewed, the relevant date is
- The date of the expiry.
Contractual redundancy payment
An employee’s employment contract may contain provisions entitling them to an enhanced contractual redundancy payment. It is also common practice for a redundancy policy set out in another document or collective agreement to become expressly incorporated into an employee’s employment contract when it is referred to in the contract.
It is possible for there to be implied terms in an employee’s employment contract where a set of redundancy terms are regularly applied in a particular trade or industry or by a particular employer. This is implied by custom and practice.
When operating an enhanced redundancy payment scheme, an employer must be careful to ensure that the manner in which it applies enhancements will not leave it exposed to the accusation that it has disadvantaged some employees over others in a manner that is discriminatory.