Are redundancies absolutely necessary?
Making redundancies is a big step and can have a significant impact on those employees who are affected. As such, before any rash decisions are made, it is important to consider the alternatives
You consider any of the following as an alternative to redundancy:
- Reduce overtime
- Freeze pay increases
- Freeze recruitment
- Reduce number of agency/temporary staff
If redundancies are necessary what procedure do I follow?
There is no one set policy which employers must follow however they should act reasonably throughout.
The best way to prepare and protect yourself is to have a robust redundancy policy so that when you redundancies do arise, you will have a clear route/procedure to follow.
What if I don't have a redundancy policy?
Whilst having a redundancy policy is very useful, there is no legal requirement for you to have one. Every employer has act reasonably throughout the redundancy process which includes following three key elements:
- Consideration of alternative employment
How long do I have to consult with employees?
This all depends on the number of redundancies that are taking place. If you have between 20 and 99 redundancies taking place in the one period then you have a minimum obligation to consult with employees are no less than 30 days. For 100 employees or more that period extends to 90 days.
If there are fewer than 20 employees being made redundant then there are no minimum periods which apply. However, each employer should consult with its employees for a reasonable period. A failure to do so could lead to claims against you for unfair dismissal.
How do I decide who to select for redundancy?
This depends on the nature of the redundancy. If there are sufficient volunteers for redundancy then the process can be relatively straight forward.
However, if you need to make compulsory redundancies then this can be a difficult exercise. You may have those employees who you may prefer, and others you dislike however you cannot let this cloud your judgement. You need to ensure you have an objective and justifiable basis for selection,.
One of the most common ways of selecting employees is to identify a pool of employees which you can select from.
When identifying a pool you should make sure that you are including staff who carry out the same, similar or interchangeable roles.
Once you have arrived at a pool for selection, it is best to apply a set of objective criteria and score employees against this. This can include performance, skills, qualifications disciplinary record etc.
ACAS recommends that you using terms such as 'flexibility', 'attitude to work' or 'commitment', as these are hard to quantify and can be subjective.
It is usually advisable to steer clear of criteria which could give rise to allegations of discrimination for example age, length of service or sickness record.
Do I have to look for a suitable alternative position or can I just dismiss?
A key element of a fair redundancy process is to consider a suitable alternative role. Redundancy should be a last resort. If you unreasonably fail to look at suitable alternative positions then you may leave yourself open to Tribunal claims.
What is a suitable alternative vacancy?
There is no hard and fast rule for this, however there are some guiding criteria which affect suitability.
These include whether their current role is similar in terms of:
- Nature of the duties
If the employee is offered a suitable alternative employment and unreasonably refuses it then you may be within your rights to withhold their redundancy pay (see below).
What will the employee be entitled to?
If you dismiss an employee by reason of redundancy and they have at least two years’ service, then they are entitled to a statutory redundancy payment as a minimum. The amount will depend three keys factors; the employee’s length of service, age and rate of pay (subject to a maximum of £464).
Employees will be entitled to:
- one and a half week’s pay for each full year of service in which the employee was aged 41 years or more,
- one week’s pay for each full year in which the employee was between the ages of 40 and 22
- half a week’s pay for each full year in which the employee was aged up to and including 21.
You can also offer enhanced redundancy as an incentive for staff to take voluntary redundancy.
Regardless of whether it’s statutory or an enhanced redundancy, you also have to ensure you give them sufficient notice and all outstanding wages and holiday pay on termination. These are due in addition to the redundancy payment.
What if I get it wrong?
Making compulsory redundancies can be minefield for employers, however it is important maintain transparency throughout the process. If you do dismiss an employee by reason of redundancy then you should give them the opportunity to lodge an appeal against the decision.
If an appeal is lodged, then you have handle this carefully. It is important to consider each element of the appeal and justify why you reached the outcome you did.
If you fail to carry out a fair redundancy and/or appeal procedure then the employee may bring claim against you in the employment tribunal providing they have two years’ service.
It is therefore important to take legal advice throughout the process. Our specialist team can be on hand to guide you the process dealing with any issues as and when they arise, thus minimising the risk of any claim against you.