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With the UK economy continuing to be buffeted by the storm of the global financial crisis the effects are starting to be felt nearer to home in the "real" economy. For many businesses slashing costs is now a priority and, sadly, that often includes making staff redundant.

The law relating to redundancy is complex and there are many opportunities for employers to get it wrong! Unfortunately, if employers do end up in the employment tribunal following redundancies they often find that their mistakes are extremely costly. In a redundancy situation taking professional advice early is crucial.

An employee will be redundant when their place of business closes or re-locates or where the employer no longer needs as many (or any) employees to do work of a particular type - for example, where a large customer account is lost.

Rights on redundancy. Employees may have various rights on redundancy, such as:

• A statutory redundancy payment if they have been employed for two years or more and have not unreasonably refused an offer of suitable alternative employment. The payment is calculated by a formula based on the employee's age, length of service and weekly pay. The maximum payment is currently £9,900.
• An enhanced redundancy payment if they are entitled to this under their contract of employment or due to the establishment of a custom or practice.
• To claim unfair dismissal (generally only if they have been employed for 12 months or more).
• To claim a protective award for failure to consult collectively. The maximum award is 90 days' actual pay (there is no cap on the amount).

Unfair dismissal
An employee can bring an unfair dismissal claim in a redundancy situation if they have one year's service. It is irrelevant that they do not have the requisite service to also claim a statutory redundancy payment.

Redundancy is a potentially fair reason for dismissal. However, a dismissal for redundancy can still be unfair if:

• the employee's job is not genuinely redundant;
• an employee is unfairly selected for redundancy;
• the employer fails to consult with the employee;
• the employer fails to consider the employee for other positions;
• the employer fails to follow a fair procedure (it is unlikely that just following the statutory minimum dismissal procedure will be enough to render a dismissal fair).

Redundancy wrongs: Some of the more common traps for employers .

• Give yourself enough time: Understandably employers often want to finalise redundancies as quickly as possible, not only to save costs but also because they believe this is better for the affected employees' morale. However, a bit of extra time spent planning and going through the correct procedure will save you money in the long run by giving you the best defence to any future tribunal claims.
• Remember that it is the job not the person who is redundant: While the current economic climate might be considered a good opportunity for general headcount "housekeeping" this should be avoided because if there is not a genuine redundancy situation the dismissal will be unfair - there should be a genuine reduction in the needs of the business.
• Individual or collective consultation? If you are making 20 or more employees redundant at one establishment in any 90 day period you will have to consult collectively with the employee representatives of the affected employees before giving the employees notice. Don't forget that affected employees may include those who are not being made redundant. If you do not have existing employee representatives the employees will need to elect some and the timetable will have to be adjusted accordingly. Just because you consult collectively this does not excuse you from consulting individually.
• Counting to 20: Don't forget that voluntary redundancies are still redundancies - you need to include them in your calculations to ascertain which legal obligations apply.
• Understand how many establishments you are dealing with: The collective consultation obligations are set by reference to the numbers of redundant employees at each "establishment". Broadly an establishment means the local unit to which employees are assigned. However, ascertaining what amounts to an establishment is a difficult issue and will depend on the facts of each case.
• Procedure, procedure, procedure: If you are making fewer than 20 employees redundant at one establishment then you will not have to consult collectively but you will have to follow at least the statutory minimum dismissal procedure otherwise the dismissal will be automatically unfair. Don't forget that this requires the employee to be given a right of appeal against the decision to dismiss. However, in a redundancy situation a fair procedure is likely to involve more than just going through the statutory procedure, further consultation meetings are likely to be necessary.
• Consultation should be meaningful: There should be adequate consultation with the individuals/employee representatives including consideration of how the redundancies can be avoided or their effects mitigated. You should consider carefully and reply to any representations made during the consultation process. The consultation must be genuine and not a sham even if it seems unlikely that another outcome can be reached (i.e. you must not enter into the process with a closed mind to possible alternatives to redundancy such as reduced working time).
• Ask for volunteers: It is good practice to do this before making compulsory redundancies. However, make sure that you can refuse volunteers who are crucial to the business. The last thing any employer wants is to get into a dispute because the "wrong" person volunteers. Make sure that when you ask for volunteers it is clear there is no right to be made redundant and that the employer's decision on which volunteers to accept is final.
• Make sure your selection criteria are fair and transparent: Any method for selecting the employees must be fair and free from any taint of discrimination - watch out for any selection method which could indirectly discriminate on the basis of disability or age. For example, rather than simply looking at years of service it may be more appropriate to score employees on their relevant skill set. Employees need to be given enough information to understand why they rather than others have been selected for redundancy. This will enable them to challenge their selection during consultation if necessary.
• Consider all possible alternatives: An employer needs to keep an open mind about finding suitable alternative employment within its organisation for employees who are being made redundant. This extends to vacancies with associated employers i.e. other companies in the same group. It is good practice to let employees know about all vacancies - even if these are more junior than the position which they are leaving.
• Think about age discrimination: Long running contractual redundancy payment schemes could be open to challenge - particularly by younger employees. Don't assume that just because the terms have been agreed with the trade unions they are safe. Consider carefully why your scheme is structured the way it is and whether it could be amended to achieve this in a fairer way?
• Don't forget employees who are not in the work place: If employees who are on sick leave or maternity leave etc. are to be made redundant don't forget about them - they need to be consulted with as well. Women on maternity leave MUST be offered any suitable alternative positions before other employees.

 

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