If you are considering making redundancies in your business, it can be a challenging time – the need to get it right for your business and your people, time and other pressures and often uncertainty about how to handle the situation.
Having an awareness of some of the key elements of a fair redundancy process can help you plan appropriately and enable things to go more smoothly – and safely. If you are assessing whether to make redundancies in your business here are five things you need to know.
- What is (and isn’t) a redundancy situation
- What are some of the key things to think about in the planning stage?
- How long will it take to make redundancies (and can we speed this up)?
- Who is entitled to a statutory redundancy payment?
- What about employment tribunal claims?
1. What is (and isn’t) a redundancy situation
Broadly, a redundancy situation is where:
- There is a reduction in the requirement for employees to do work of a particular kind. For example, you have a reduction in customer enquiries, so you no longer need the same number of customer service employees and administration staff. For example, over the last few years, you have significantly upskilled your production team. As a result, you no longer feel the need for a supervisor layer in your management structure, as there is a reduction in the requirement for support with technical issues and daily oversight.
- There is a reduction in the requirement for work to be carried out at a particular location. For example, you are planning to relocate your business to new premises as they are more affordable and better suited to your needs.
- Your business or part of it will cease – for example, you plan to close one of your restaurants as it is no longer economically viable. As such, you no longer need the same number of employees in your business.
It’s important to make sure you have what in law is considered a genuine redundancy situation before acting. This is because you need to have a fair reason for dismissing an employee who has two years’ service or more; getting it wrong can lead to an employee complaining that they have been unfairly dismissed.
A couple of scenarios that businesses sometimes mistake for a redundancy situation are:
- Poor performance – an employee not doing well in the role / not hitting targets, is not on its own a redundancy situation. Remember, redundancy is about the role and not the person. If you have an underperformer, the right way to deal with this will usually be to use a performance management process.
- Where activities are outsourced to be done on your behalf and the Transfer of Undertakings (Protection of Employment) Regulations (TUPE) apply. For example, you are no longer going to directly employ a cleaner; instead, you are going to hire a cleaning company to do this for you. Want to know a bit more about TUPE generally? Check out an earlier Legal Update here.
2. What are some of the key things to think about in the planning stage?
If you think you have a genuine redundancy situation in your business it’s important to bear in mind that you will usually need to follow a fair redundancy process, identify the pool of employees who are at risk of redundancy, meaningfully consult, where applicable carry out a fair selection process and consider suitable alternative work (if there is any). There is a lot to think about when it comes to making redundancies and planning is key.
Before you announce the proposed redundancies or commence individual consultation with your employees, you will need to do some planning. Steps to take include:
- Identifying why you need to propose redundancies, how many redundancies you propose to make, and which roles/departments/areas will be affected and why (the pool for selection)
- Identifying whether there are any vacancies in the business that can be offered as alternative employment to those at risk of redundancy in order to avoid having to make those redundancies. You should bear in mind that you are under a duty to avoid making redundancies if possible. It will also be important to identify whether any of the employees in the selection pool are pregnant, are on or have been on maternity, paternity, adoption, parental leave, shared parental leave or neonatal care leave as special rules regarding priority for suitable alternative work may apply.
- Putting together a business case for redundancy as this will form the backbone of the consultation process
- Unless you are proposing to make all employees in the selection pool redundant, you will need to fairly select who will remain. A tribunal will want to see a simple, easily implemented and objectively fair method of selection. The most common method of selection used in redundancy situations is a ‘skills matrix’, which you will need to put together.
Whilst this may initially sound daunting, remember we are here to help.
3. How long will it take to make redundancies (and can we speed this up)?
The consultation period needs to be long enough for meaningful consultation to take place. This will involve having a number of individual consultation meetings with employees before redundancies are made. How long the redundancy consultation period should be will depend on the circumstances as unless you trigger the collective redundancy consultation requirements, there is no ‘set’ duration.
It will depend on a number of things, such as how many employees are at risk (and therefore need to be consulted) and management capacity to hold the meetings. To give you a rough idea, you are usually looking at around a fortnight for a small number of employees. You should contact us to discuss your particular situation when considering the length of a consultation period for your business.
We sometimes find that businesses want to move faster than would necessarily be safe. Rather than ‘cutting corners’ to try to get the process finished more quickly, you may want to discuss with us whether using settlement agreements / offering enhanced payments for voluntary redundancy could be a beneficial option for your business.
4. Who is entitled to a statutory redundancy payment?
An employee with two years’ service or more who has been made redundant is entitled to a statutory redundancy payment, provided they haven’t unreasonably refused an offer of suitable alternative work. The amount of the redundancy payment will depend on their age and length of service. Sometimes employees are contractually entitled to an enhanced redundancy payment, so don’t forget to check the position in your business.
5. What about employment tribunal claims?
If an employee has two years’ service or more, they can complain to an employment tribunal that they have been unfairly dismissed if they feel their redundancy hasn’t been handled appropriately. Other claims to be alert to include those involving discrimination and non-payment of a statutory redundancy payment.
If you are considering making redundancies in your business, please get in touch for advice on the situation you are facing. We can support and guide you from the planning stage and throughout the process.
Please bear in mind that if you are proposing to make 20 or more redundancies at one establishment within a period of 90 days or less, special rules apply. These include a requirement to carry out collective redundancy consultation and notifying the Secretary of State of your redundancy proposal by sending an HR1 form to the Redundancy Payments Service. As larger scale redundancies and the additional obligations for businesses can be tricky, it’ important to reach out for specific advice.
Have an HR matter you would like assistance with? Please contact us.