RSS feedsThe current economic climate has made redundancy a reality in a number of industry sectors. If an employer wishes to avoid the cost of an employment tribunal claim, which is not only expensive to defend, but also has the hidden costs of adverse publicity and poor employee relations, they need to consider the procedure very carefully.
There are a number of simple steps which can be taken to ensure a legally compliant procedure which is fair both to those being made redundant and those who remain in the business.
The importance of planning at the earliest possible stage cannot be overstated. Given the sensitive nature of the subject, it may be more appropriate to carry out this exercise off-site.
The first step is to be absolutely sure about the business case for cutbacks. Are they required and are there any alternative courses of action which could avoid redundancies? There may be opportunities for making savings through natural wastage such as forthcoming retirements and the end of temporary contracts.
The correct structure should be identified and any roles which could potentially be made redundant should be highlighted. The technique of thinking in terms of job roles, as opposed to people, allows an employer to be more objective in the decisions that they make. If there is a genuine closure of a site or cessation of work of a particular kind and redundancies are required, the legal definition of redundancy has been met. One major pitfall is in the failure to identify the pool of employees from which the redundancies will be selected.
Legal ins and outs
At this point it is important that the employer brushes up on his or her employment law knowledge or speaks to an expert to highlight any potential pitfalls.
In addition to consultation with employees who are affected, it is also important to consider how to communicate with employees who are not affected by the proposed redundancies. Consideration also needs to be given to external communication with clients and other stakeholders.
So what are the main requirements of a fair redundancy process?
Consultation is the key and it is worth noting that a protective award of 13 weeks’ pay per employee could be awarded by an employment tribunal in certain cases where the employer does not fulfil their obligation to consult.
Although there are statutory consultation requirements if the employer proposes to make 20 or more redundancies at one site, it is best practice to apply the same principles when fewer redundancies are being considered.
Consultation must be a genuine two-way dialogue on suggestions for avoiding or reducing the number of redundancies, the method by which the employer proposes to carry out the redundancies, and how to reduce the impact of these redundancies. The consultation period is an ideal opportunity to receive requests for voluntary redundancy as a possible alternative to compulsory redundancies.
Although there is no prescribed length for the consultation period when fewer than 20 redundancies are proposed, employment tribunals will look to see that employees have been given enough time to ascertain the facts, consider alternative solutions and take steps to find alternative employment.
In cases where a selection pool is required, the employer will have to think carefully about the criteria it proposes to use to select employees for redundancy. The criteria need to be fair, objective and non-discriminatory and their application should be fair and consistent, allowing for any representations from employees.
Employers will also need to demonstrate they have considered opportunities for alternative employment.
Three steps to compliance
They must follow the statutory three-step dismissal procedure which was introduced as part of the Employment Act 2002. In brief, this means the employ er must write to the employee to set out the grounds for considering dismissal and arrange a formal meeting to discuss the matter.
The meeting is then held after the employee has had enough time to consider the proposed dismissal, and the employee must be given an opportunity to present their case. If the decision is taken to dismiss, the employer must put this in writing, confirming the right of appeal.
If the employee decides to appeal they must do so in writing, and the employer must invite them to a meeting to discuss the matter and set out the final outcome in writing. The employee must be given the right to be accompanied to these meetings by a work colleague or card-holding trade union representative.
Redundancy payments are based on age and length of service, with a two-year service qualification for entitlement.
Depending on the individual circumstances, it may be appropriate to make a payment in lieu of notice rather than make the employees work their notice period. Employees will be entitled to a reasonable amount of time off work to look for alternative employment.
The employer also needs to consider how they will support those employees who remain in the business to ensure trust and goodwill is maintained.
Demonstrating fairness throughout the redundancy process is absolutely critical in maintaining positive working relations and this will hopefully prevent the survivors from looking elsewhere for employment.
Strategies for avoiding redundancies
The need for effective HR management becomes more important during adverse trading conditions as employers should seek to get the best from staff.
Reviewing the organisational structure is the first step in ensuring operational effectiveness. This may provide opportunities for re-profiling jobs to match operational requirements or to merge teams to create more effective work groups.
If a reduction in hours is required, it is important to take advantage of naturally occurring opportunities such as not recruiting into roles left vacant through retirements, resignations or the expiry of fixed-term contracts. Revised working arrangements such as job shares are also worth considering.
If employers do not currently measure key HR indicators, now is a good time to start. Sickness absence, employee turnover, recruitment, overtime, employee expenses and pay and benefits can all be significant employee costs and a good starting point for implementing any savings is to monitor the current position and quantify the cost to the business.
Look for the positives
Positive aspects of HR management should not be overlooked. Effective
succession planning and investment in training and development will lessen the
risk of key employees looking elsewhere for work.
The current trading conditions mean that organisations will need to work harder
to remain competitive and maintain employee engagement and commitment. Employee
engagement and communication initiatives such as suggestion schemes, newsletters
and focus groups and employee representatives are all positive ways of ensuring
employees are well informed, motivated and focused on the challenges ahead.
Now is a good time to ensure salary and wages policies are up-to-date and competitive to ensure the employer is getting value for money. It is also important to ensure that key employees are not lured away by more attractive packages.
Finally, if an organisation needs to recruit to fill key vacancies, it is critical to use sound techniques to implement an effective recruitment process.
Considerations for larger employers
If an employer is considering making 20 or more redundancies on one site, it has to declare the following to the Department of Business Enterprise and Regulatory Reform by submitting form HR1.
- Reason for the proposed redundancies;
- The numbers and descriptions of employees whom the employer proposes to dismiss as redundant;
- The total number of employees of any such description employed at the establishment in question;
- The proposed method of carrying out the dismissals, including the period over which the dismissals are to take effect;
- The proposed method of selecting employees who may be dismissed; and
- The proposed methods of calculating the amount of redundancy payments.
If there are 20 or more employees to be made redundant over a 90-day period, the employer must consult for a period of at least 30 days prior to the first dismissal. This period is extended to 90 days where100 or more redundancies are being considered.
Fair representation
Consultation must be conducted through appropriate representatives, who may be trade union reps or elected employee representatives. Employers must also give ample time to conduct a fair election process for employee representatives prior to the start of the consultation.
Under the Information and Consultation of Employees Regulations (2004) (ICE regulations), organisations with 50 or more employees have a duty to consult with their employees.
The ICE regulations were introduced in response to a European directive which requires employers to inform and consult with employees over matters which relate to the business, its prospects and any decisions that are likely to impact on employees.
The case for informing and consulting with employees is particularly compelling during difficult trading conditions. Employers of more than 50 employees should set up a group of elected reps even if they are not considering redundancies at this time.
Adrian Rowley is an HR consultant at Cooper Parry
