What are the penalties for re-recruiting someone you have made redundant?

Gudrun Limbrick asks if there is any going back after making an employee redundant.

Redundancy has traditionally marked the end of working life. In extreme cases, it has to be said that sometimes it has marked the end of life itself. For this reason it can be a terrifying prospect for both employee and employer alike. For the employee it signifies an end-point, not just of a job, but perhaps of a career. For the employer, it is a massive burden of responsibility and the decision to make someone redundant is not an easy one and, by definition, it comes at a time of tremendous difficulties and pressures for the whole company.

Because it can be such a significant point in an employee’s (working) life, at a time of financial and other problems for the company concerned, it is, of course, an issue where there is significant legislation to protect those concerns.

In very basic terms, the aim of this legislation is to encourage useful dialogue between the employer and the prospective candidate for redundancy during the process, to give some support in terms of finding another job and, most famously, to give them a financial cushion so that the individual can support themselves during the transition time.

In short, the employer has responsibility to arrange, or provide, for the employee:

  • redundancy pay

  • a notice period

  • a consultation with the employer

  • the option to move into a different job in the same company

  • time off to find a new job.

It is clear that in some circumstances, these tasks are carried out better than in others for all sorts of reasons. Sometimes the company is in such dire straits that they find it almost impossible, despite their best efforts, to communicate with and support their employee. Also, significantly, not all employees are eligible, largely because of their length of employment and employment status, for the above basic rights.

And of course, the honest truth is that the whole process is only really going to be viewed positively by all parties concerned if the individual finds suitable alternative employment before the redundancy pay runs out (or perhaps decides to leave the rat race for good and live out the rest of their days on a paradise island in the Pacific).

“Letting people go” is however, not viewed in quite the same straightforward manner any more. Traditionally, it could be argued that the prospect of redundancies represented failure for employers — a dreaded sign of quite how bad things had got. This is, of course, still true for many companies who tend to see redundancy as very much the last (and worst) possible resort.

However, there is a growing popular opinion that redundancy is now something very different. There are, arguably three very different elements to this change in the popular view of redundancy. These are based on footballers and bankers; restructuring; and a revolving door of redundancy.

The world of football may not seem to have much relevance to the depressing world of redundancy except for just this one little thing — the idea that “letting people go” means money. The media is filled with stories of the pay-offs football managers, for example, receive when they are ushered out of their clubs after a goal drought. Millions of pounds, it is regularly reported, are given to these men in return, basically, for a being a bit rubbish at their jobs. Rubbish they may be, but their contracts invariably turn out to be watertight, guaranteeing them an income equivalent to a small multi-national, whether or not they remain in their jobs. The public perception of being let go is shifting to take into account these huge high profile compensation packages for being “let go”. For the vast majority of employees, however, redundancy is far from being the meal-ticket it is perceived to be. For the employer, it is never easy to explain a redundancy payment which is far lower than the individual was hoping for or needs.

The second element in the change in public perception derives from “restructuring”. Far from the view of redundancy as a feared last resort for companies, the prospect is now viewed with considerable suspicion. Is the redundancy “real”, or is it an opportunity for the company to get rid of “dead wood” by means of “restructuring” so that relevant jobs simply no longer exists? It is now rarer to see a company for which there is genuine sympathy for the prospect of letting people go. Rather, it is far more usual to see suspicion and contempt, whether or not this is deserved by the employer. This, of course, impacts on all negotiations not only with the employee concerned but potentially the wider staff, the local communities, customers, the media and partner organisations.

The third is the recent phenomenon of the redundancy revolving door — a potentially very lucrative move for the individual. It came as no surprise when it was revealed last year that more than 10,000 full-time workers had been made redundant from the NHS in England since the restructuring of the service began in April 2013. The Labour Party said that non-clinical NHS staff made redundant during this time received average pay-offs of £43,000 and 2300 NHS staff received packages worth six figures.

What did come as a surprise was the revelation that, according to Department of Health figures, 3950 staff made redundant between May 2010 and November 2013 had been hired back within the NHS on various types of permanent or temporary contract. This may be good for the individual’s wallet, but the point that was made in the media is that it cannot be a good use of NHS money. It is another blow to the reputation of redundancy and all the protections that should be in place.

It is the employment contract which has the final say on the terms under which a redundancy payment is made by the employer. This will stipulate the conditions, if any, under which a person has to repay their redundancy payment. However, it is not good PR for the NHS or the credibility of the redundancy system.

Late last year, the Government announced that these particular revolving doors are no longer going to turn. Public sector executives who receive large redundancy payments will no longer be able to keep the money if they return to a “comparable” sector job.

However, this restriction will not apply to all redundancies — only those individuals earning more than £100,000 if they are appointed to a post in the same part of the public sector within a year of leaving. And even then, they may only be required to repay a proportion of what they have received dependent on the length of time between posts.

The whole business of redundancy is a delicate balance between doing the right thing by employees without any hint of exploitation of the system by either the employer or the employee. The employer also has an ethical and moral responsibility to do right by the individual concerned but also to do right by the whole company and all the remaining employees and stakeholders. It is a complex system which is, arguably being more complex in the face of negative public opinion. It would not be surprising if this latest Government announcement is not the last refinement of the system we hear.