Stuart Chamberlain, Croner-i author and employment law consultant, gives 10 top tips for employers when carrying out individual consultation redundancy processes ― that is, where fewer than 20 employees are to be made redundant from one establishment within a 90-day period.
The coronavirus crisis has created great uncertainty for British employers and their staff. The Government has instructed most employees and workers to stay at home. Remote working is the norm. Some employers have already considered ways of responding to the crisis: layoffs and short-time working, unpaid holiday or paid annual leave. Employees and trade unions may be willing to accede to these proposals in this temporary emergency. And the Government is to invest millions to support businesses and employees’ wages ― the Job Retention Scheme. But a spectre now haunts British business ― the spectre of redundancies. The temporary measures may not be enough. Employers are looking to reduce headcounts and costs, aware that their business may not survive the crisis. They are looking at redundancy.
If the employer follows these tips they should reduce the possibility of legal claims after the redundancy process is finished.
1. Ensure that it is a genuine redundancy situation
Redundancy is a potentially “fair” reason for dismissal but the employer needs to be sure that the situation falls within the statutory definition of a redundancy: that is, the closure of a business or workplace because of a fall in customer demand; or a diminished need for the employer to carry out “work of a particular kind”. Redundancy must be the real reason for the dismissal. It must not be used as an excuse to get rid of unpopular or unsatisfactory employees.
2. Follow your own policies and procedures
If you have a redundancy policy or procedure, then it should be followed by the employer. It should also be made available to “affected” employees.
“Best practice” in redundancy is set out in Acas guidance (although the Acas Code of Practice is not relevant to redundancies).
If you do find yourself at the employment tribunal, the tribunal, having satisfied itself that the reason for the dismissal is redundancy, will go on to consider whether or not you have followed a fair procedure.
3. The importance of good communication
Good and clear communication with your workforce is vital, especially with those “affected” by the redundancy situation.
Provide staff with an “early warning” of the possible loss of jobs. Such an announcement should not come like a bolt from the blue. Indeed, if staff know early about the situation, some may come forward with suggestions of how to avoid redundancies or at least to minimise its adverse effects.
Do not inform employees that they are redundant by text or email and, above all, avoid language during the consultation process (see below) that gives the impression that a final decision about who has been selected for redundancy has already been made. The affected employees should be known as those “at risk” from redundancy. They are not technically redundant until they have received a redundancy payment and have left your employment.
4. Meaningful consultation
You must consult employees in a redundancy situation. This must be “proper and meaningful”. The process is fundamental to a fair dismissal for redundancy. If you do not , any redundancies you make will almost certainly be found to be unfair dismissals at an employment tribunal.
You should provide employees with adequate information about the situation and you should consider their responses carefully and seriously. The employee must be given details of their financial entitlements, including: the size of the redundancy payment (and if it is enhanced ), if there is to be pay-in-lieu-of notice (PILON ― but only if it is in the employee’s contract), any outstanding wages and annual leave payments on termination. And of their right of appeal, which, ideally, should be conducted by a different senior manager.
The rules about collective consultation do not apply in this situation ― you are making fewer than 20 or more employees redundant within any 90-day period at a single establishment.
There are no set rules to follow if there are fewer than 20 redundancies planned, but it is good practice to fully consult employees and their representatives. Consultation does not have to end in agreement, but it must be carried out with a view to reaching it, including ways of avoiding or reducing (mitigating) the redundancies.
5. Get the selection criteria right
You should think carefully about the factors to consider in deciding who stays and who goes. You could ask: what particular work is ceasing or diminishing and who currently carries out that work? These factors must be objective; they cannot be subjective or discriminatory, so avoid subjective criteria and personal opinion.
Potentially fair criteria include: performance; attendance and sickness record; skills associated with taking the business forward; and flexibility. Length of service (including “last-in, first-out”) can be used as part of a matrix but not on its own ― it can be age discriminatory.
Absence for pregnancy-related illness, disability-related absence, maternity or other family-related leave should be discounted in the selection and reasonable adjustments should be made for disabled employees.
You should identify an appropriate pool from which to select potentially redundant employees. Employees should be selected for redundancy fairly, as a result of a fair and consistent application of the criteria.
it is possible to have a pool of only one employee ― as the work they carry out is unique and diminishing.
6. Don’t forget absent employees
Remember to include those employees who are on long-term sickness absence or maternity/parental leave in the redundancy consultation process. Keep them informed and always send them the same information in writing as other employees. They should also be consulted individually. You should be flexible in your dealings with these employees and you may need to make reasonable adjustments to accommodate each individual’s circumstances.
7. Suitable alternative employment
You are required to make reasonable efforts to search for suitable alternative employment for those employees “at risk” of redundancy. Any dismissal is likely to be found unfair if you have not considered whether there was suitable alternative employment for these employees in your organisation.
If a number of “at risk” employees are interested in the same alternative role, they should be invited to apply for the role and there should be a competitive interview process.
Remember that any potentially redundant employees on maternity (or adoption) leave have an automatic right to be offered any suitable vacancies in front of all other “at risk” employees.
8. Time off to look for work
All employees with two years’ service who are given notice of dismissal by reason of redundancy have a statutory right to take a reasonable amount of time off during working hours to seek alternative employment, or to arrange training for future employment. Accept that some of this may have to be paid time off.
9.Tying up the loose ends
You should only confirm in writing that an “at risk” employee is redundant after the consultation period is finished. Serve the requisite contractual notice and ensure that the redundancy payments are correct.
You may wish to make a payment-in lieu-of-notice (PILON), rather than allowing the employee to serve out their notice period with you. However, you should avoid making a PILON unless the employee’s contract of employment allows you to do so. Any such payment will be subject to deductions of tax and National Insurance contributions.
You may also wish to mitigate any future risk of the employee making a claim for unfair dismissal at an employment tribunal by using a settlement agreement. You could offer some additional payment to secure this.
Remember that only employees with two years’ service are entitled to a statutory redundancy payment. Any payment to those with fewer years of service is merely ex gratia.
10. And prepare for the future
The whole redundancy exercise should be a response to an actual need to cut costs to achieve a better business future. If you have done the process properly you should now have the right employees in the right jobs to secure this future.
And do not underestimate the uncertainty caused by this redundancy exercise, even among those not selected for redundancy ― the survivors. Some reassurance will be needed.
There are a host of legal hurdles that you will have to jump to ensure that your redundancy process is not open to challenge. These tips have highlighted these elements. It is essential that you follow a fair procedure and communicate effectively with the affected staff.
Last reviewed 25 March 2020