In a redundancy situation employers must act reasonably and follow a number of prescribed stages to avoid the risk of an unfair dismissal claim.  It is essential that advice be taken at every stage of the redundancy procedure from People Management Solutions.

Redundancy arises where fewer workers are needed through reorganisation, closure, relocation or a reduced need for particular skills.  It should not be used to resolve performance related issues, which should be dealt with through disciplinary or performance monitoring procedures.

Selection

In the case where an employee works in a unique role, which has ceased or diminished, then the employer will not have to follow a selection process.  However, where there are a group of employees who all have similar jobs, the employer will have to use selection criteria to choose fairly those employees at risk of redundancy.  The exception would be, where there is a closure of a specific department or site when all jobs cease to exist.

Employers should not use the following reasons for selection

  • Trade union membership
  • Sex, race, sexual orientation, religion
  • Part time workers
  • Fixed term contract employees
  • Disability
  • Pregnancy
  • Employees who have complained about the infringement of their statutory  rights or contractual rights, such as health and safety issues

Volunteers

Volunteers are a way to avoid or reduce compulsory redundancies and the request, in writing, for volunteers is good practice. The company must make it clear when asking for volunteers that it retains the right to turn down volunteers.  Employers will need to show that the decision to reject volunteers in favour of selecting others was reasonable.

Employees who volunteer for redundancy should not be dismissed until the statutory consultation requirements have been met.

Selection Criteria

The selection criteria should fit the needs of the particular redundancy but must be seen to be as fair and as objective as possible.

If an employer already has a redundancy selection policy, or has used certain criteria in past redundancy exercises, or there is an agreement between the employer and a recognised union, any departure from this policy, practice or agreement could potentially lead to successful claims of unfair dismissal.

Some employers may choose length of service as the reason for selection.  This is often referred to as “last in, first out”.   There is a potential risk of discrimination if you rely solely on this reason for selection, i.e. if the last new starters were all female, or part time, etc. It is therefore recommended that a number of criteria be used to fairly select employees who are potentially redundant.

Where the employer has no existing redundancy selection policy, certain objective selection criteria will need to be chosen to demonstrate that employees have been selected for redundancy on a fair basis.  Criteria may include length of service, performance, capability, conduct, attendance (excluding pregnancy and/or disability related absences) skills and timekeeping.  Wherever factual information exists on any criterion it must be used in preference to opinion.

When using a number of selection criteria, employers can use a matrix or chart to score employees against the specified criteria. In most cases, five criteria should be the maximum.

The selection criteria should be shared with all employees who are at risk of redundancy, preferably at the first consultation meeting.

Consultation

Consultation means having individual private meetings with the employees who are likely to be at risk of redundancy.  At the meetings the reason for the redundancy should be discussed, possibilities for alternative work and trying to avoid the redundancies completely (such as to alter or reduce hours of work with agreement).  A clear record of the information provided by the employer and of the reaction of the individual should be documented.

The employer should explain fully to each individual why he has been selected and, if a matrix has been used, he should be shown a copy of his individual matrix.  Copies of the matrices for other employees should not be shown to the individual selected for redundancy, but the total scores of other employees in the same unit of selection can be disclosed.

Unless special circumstances exist, there should be one consultation meeting with all employees at risk, detailing the proposed selection criteria followed by at least three consultation meetings with individuals selected for redundancy.  It is unfair to expect an employee to make reasoned representations about his proposed redundancy immediately upon being told of the proposed redundancy.  There should therefore be a period of at least 24 hours and preferably much longer between meetings and, if the employee so requests, the employer should be prepared to grant further time for the employee either to consider his response or to seek advice.

Management must decide whether to permit appeals both at this “at risk” stage, and when the individual is told that he or she will be dismissed as redundant.  The employee must be given the right to appeal the decision at the point of dismissal under the Statutory Dismissal and Disciplinary Procedures.

Thought there is no formal right of appeal at the “at risk” stage, it is still desirable that there is a proper discussion of issues raised by the employee.  For example, if, at this stage, the employee alleges that his or her assessment is based on errors of fact, this should be investigated and where an error has been made the assessment should be corrected.  The employee should be kept informed and it may mean that another has to be warned that he or she is “at risk”.  The “not at risk” list cannot be finalised until this consultation process is completed.

Where alternative work exists, the employee should be advised about all the vacancies.  This may be in the form of a formal offer, an invitation to apply for a particular position or simply alerting the employee to those vacancies that exist and how application might be made.

No announcements of the names of those selected for redundancy should be made until the end of the consultation process.  Neither should the employer take any other steps, e.g. by the announcement of any consequential reorganisation, prior to the end of the consultation process which indicate that the proposed redundancies have been confirmed.

Unless you are just planning to make a few people redundant then it is a good idea to plan a general announcement to the employees to explain the reasons for the proposed redundancies, how the selection procedure will be carried out and to give assurances about the future of the business. During consultation, the redundancy is always described as proposed, as the employer is unable to confirm a redundancy situation until meaningful consultation has been concluded.

The law requires you to consult with your staff when you are considering redundancies regardless of how many staff are involved.  Prior to consultation the employer will need to consider the reasons for selection of affected employees.

Fewer than 20 Employees

If you are proposing to make fewer than 20 employees redundant within a 90-day period, then consult with the employees who are potentially at risk of redundancy.  The pool of affected employees who are at risk should all be consulted with – for example if you have 6 secretaries and you now only require 4 then you would be consulting with all 6 secretaries before fairly selecting those to be made redundant.  To be able to demonstrate that consultation has been meaningful the period is usually a minimum of 2 weeks. Please contact People Management Solutions Consulting before you agree that meaningful consultation has been concluded.

More than 20 Employees

Where 20 or more redundancies are proposed at any one establishment over a period of 90 days or less, the employer is required to consult collectively with employee representatives.  These representatives are either:

a) from a trade union is recognised by the employer; or
b) employee representatives elected by the employees and who are employed at the time of their election.

In non-union cases the employer has a number of obligations.  The election of employee representatives has to be carried out in a fair manner. Sufficient representatives have to be elected in a secret ballot to represent the interests of all the affected employees.  Candidates must be drawn from the affected employees and no one can reasonably be refused.  All affected employees on the date of election are entitled to vote.  If the affected employees fail to elect representatives, the employer would have to consult with the employees directly.

Collective consultation should take place in good time, normally coinciding with the general announcement of proposed redundancies.  In any event it must begin:

a) at least 30 days before the first dismissal takes effect if between 20 and 99 employees are to be made redundant at one establishment over a period of 90 days or less, or:
b) at least 90 days before the first dismissal takes effect if 100 or more employees are to be made redundant at one establishment over a period of 90 days or less.

Any delay in the commencement of consultation puts the employer at risk of protective award claims by employee representatives, recognised unions or affected employees.

The protective award carries a maximum potential penalty for failure to consult properly of 90 days pay to all employees dismissed on the grounds of redundancy.  In cases involving the transfer of undertakings an additional award of up to 13 weeks pay may be made to all affected employees.

Advice on the election of employee representatives and collective consultation is available from the People Management Solutions.

Consultation Information

Employers should disclose certain information in writing to the employee representatives at the outset of collective consultation.  The following information is required to be disclosed:

a) the reasons for the proposed redundancies,
b) the numbers and descriptions of proposed redundant jobs
c) the proposed method of selecting the employees to be dismissed,
e) the proposed method of carrying out the dismissals including the timescales involved, and
f) the method of calculation of any redundancy payments

If the employer is proposing 20 or more redundancies within a period of 90 days the Secretary of State must be notified on the prescribed form HR1.  Failure to notify the Secretary of State may lead to a fine.  A copy of this form is normally given to employee representatives at the beginning of the consultation process.

Alternative Work

Employers must always consider offering alternative work, if it is available. The search for alternative work should usually extend throughout the employer’s own organisation or with an associated company.   If there is alternative work, all affected employees should be given sufficient details to consider the vacancies.

If the employer makes an offer of alternative work, it may in some circumstances be considered to be a suitable alternative work, which means that if the employee unreasonably refuses it, the employee is not entitled to a statutory redundancy payment.  Whether a particular job is to be regarded as a suitable alternative requires a comparison of the terms and conditions and duties of the redundant job and of the alternative job.  If the job is similar to that previously held and on the same, or not substantially worse terms and conditions, it is likely to be regarded as suitable.  It should be remembered that the test of whether the refusal of the offer was unreasonable depends on the circumstances of the individual employee.  The offer of suitable alternative work should be made before the employment contract ends and should, in practice, be made as early as possible, once it has been decided that the employee has been selected for redundancy.  Advice on whether any particular job is to be regarded as a suitable alternative or whether any offer has been unreasonably refused, should be obtained from People Management Solutions.

Trial Period

If an offer of alternative work (in other words not suitable alternative) is accepted, the employer needs to offer a statutory trial period of four weeks (which may be extended by written agreement).  If the new job is not acceptable to the employee, the employee is still entitled to their redundancy payment.

Time off to look for another job

Selected employees, who have two years service, have the right to reasonable time off with pay during working hours to look for another job or make arrangements for training for future employment.

Confirmation of Redundancy – Serving Notice

Once meaningful consultation has been concluded, you will need to write to the employee confirming the redundancy, the notice entitlement and details of the redundancy payments.

At the point of confirming the redundancy you should follow your normal procedure in respect of dismissal and hold a meeting, having given your employee a letter setting out the reason for the meeting.  The employee should also be given the right to be accompanied to this meeting by either a work colleague or an accredited Trade Union official of their choice.  In addition they should be given the right to appeal the decision.  Advice should be sought from People Management Solutions on completing this part of the redundancy process.

You must pay either the notice period set out in the contract of employment or statutory notice whichever is greater.  Statutory notice is one week for employees with more than one month but less than two years’ service and one week per additional year of service thereafter up to a maximum of 12 weeks. You can ask employees to work their notice, although they can ask you to let them leave early if they get another job.  If they do this and you agree to release them you will only have to pay notice up to the last day they worked for you. However, as you have served notice of redundancy they will still be entitled to redundancy pay.

Redundancy Pay

Employees can be entitled to statutory redundancy pay. They need to have completed 2 years service and the pay is based on age and length of continuous service, over the age of 18 up to a maximum of 20 years. The calculation is as follows:

for each complete year of employment

  • not below age 41 but below 65 –  1.5 weeks pay
  • not below age 22 but below 41 –  1 weeks pay
  • not below age 18 but below 22  –  0.5 weeks pay

The current weekly statutory maximum is £560.