"Each time there is a recession, claims of ‘unfair redundancy’ clog up the employment tribunals," says Edwards. "Compensation for unfair dismissal could be as much as £66,200 per person – and that doesn’t include the cost of a redundancy payment. So take great care."
He says the first classic error is if employees are not genuinely "redundant": "I recall being amazed by an employer who made someone redundant ‘as a punishment’ for laziness. If you plan to dismiss someone, be clear about your real reason."
The second danger is unfair selection. If you need to make a few people redundant out of a group doing similar jobs, you must justify your choices. "Objective selections may be legally risky," continues Edwards. "Taking staff attendance records into account may seem fair – but if an employee’s absence is due to a disability, it could be discriminatory to hold that against them. Back in the seventies, trade unions often insisted that redundancies should be based on ‘last in, first out’, but times have changed. Today, that could constitute age distrimination.
"Employers often make subjective selections. I remember wincing when I heard an employer explain to a tribunal that he retained one secretary rather than another because ‘it was like comparing a Rolls Royce to a rusty old banger’. The tribunal was not impressed, and he had to pay up."
The third bear-trap is "consultation". To make a person redundant without first consulting with them is unfair. Once there is a plan to make cut-backs, it should be discussed with the person (or people) affected.
Failure to give adequate consideration to alternative action is the fourth danger area. There may be plenty of options – including a shorter working week, pay cuts, or redeployment to another branch of the business. "There’s always the risk that disgruntled redundancy candidates will demotivate the rest of the workforce, or even commit acts of sabotage," warns Edwards. "I once acted for a caterer who feared a canteen cook facing dismissal would put something nasty in the soup. The over-riding need to safeguard the business should be balanced with treating the person as fairly as possible."
Martin Edwards is head of employment law at Mace & Jones.