“You’re fired”? Beware hasty redundancies

1. Identify a potential redundancy situationRedundancy arises when an employer no longer requires a role to be carried out or when a business is closing (redundancy can also occur even where the business is being relocated).

It’s important to remember that redundancy is all about the needs of the organisation, not about the performance of an individual.

Don’t forget, TUPE is not redundancy. Where you are outsourcing, insourcing or there is a change in a provider of a service, the employees are likely to transfer under TUPE and are not necessarily redundant.

2.  Plan thoroughly and take adviceTimetable what actions you need to take. Take advice to minimise the risk of expensive and time-consuming claims. Don’t expect you can immediately dismiss employees.

3.  Consult, consult, consult!The largest part of a redundancy exercise is carrying out consultation. Collective redundancies (where 20 or more employees are proposed to be dismissed within a period of 90 days) require the giving of specific written information and consultation with trade union/employee representatives over prescribed periods (a maximum of 90 days) before any employee can be given notice. Individual consultations also need to take place.

Consultation is a two-way process and is a dialogue that is not pre-determined when it starts. It involves face-to-face meetings. Representatives and individuals have a right to respond to the redundancy risk, any selection methods and how this is applied and alternative ways in which jobs can be preserved must be discussed before the employer makes any final decisions.

4.  Follow statutory proceduresStatutory procedures are still with us until 2009 and apply to dismissals on the grounds of redundancy.

5.  Consider who you put at riskThe pool of employees who may be at risk will need to be identified. While it’s considered best practice to consider all those at risk, employers will often not want to cause uncertainty for those who will stay. This is a fine line and an incorrect pool can ultimately make a subsequent dismissal unfair.

6.  Get your selection rightWhere employers need to select from a pool, selection must be by criteria which is objective, capable of measurement and non discriminatory. LIFO carries an age discrimination risk (which needs to be carefully assessed with your adviser). Attendance should discount any absences caused by disability or pregnancy.

7.  Know how much employees will getIdentify the cost of contractual notice or payment in lieu of notice and redundancy payments. In collective redundancies, formal notice is usually unable to be given until the prescribed periods have elapsed. Statutory redundancy payments are based on length of service, age (which is still allowed) and salary (current maximum £330 per week) and can be as much as £9,900. Employees may also be entitled to more if there is a contractual right to an enhanced redundancy payment or there is a custom and practice of paying higher rates. There may also be issues regarding the pension scheme if enhanced entitlements arise on redundancy.

8.  Watch your language!Use the right terminology such as proposed, envisaged and intended to show that nothing is set in stone. Act consistently with this terminology. All relevant documents are potentially required to be disclosed in any subsequent employment tribunal claim. Lists of names identifying those to be made redundant, inappropriately worded emails or future organisation charts are traps for the impatient and unwary employer.

9.  Beware of future recruitmentIf there are vacancies available which can be filled by those at risk of redundancy, then they must be offered to them. Seeing job adverts is an easy way to antagonise those made redundant and any employment tribunal will carefully scrutinise when such vacancies arose.10.  Look after those that are stayingEmployers often focus on those likely to be leaving and forget those  who are staying. Ironically, redundancy exercises are all about making an organisation run more efficiently, yet we lose sight of the people who are going to make that a reality.

Consider how you will communicate with the employees who are staying, what you will say and how you can make the message for them positive. Avoid the drip-drip effect. It’s far better to announce redundancies in one swoop than to constantly revisit such uncertainty.

Phil Allen is an employment law partner at Mace & Jones. You can contact him at phil.allen@maceandjones.co.uk.

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