Redundancies are, unfortunately, big news at the moment. Given the impact of COVID-19 on the economy, in combination with the winding down of the Coronavirus Job Retention Scheme, many businesses are having to think about the best way to restructure their organisation in order to ensure survival.
It has recently been reported that, in June, 1,888 employers filed plans for 156,000 job cuts, a six-fold increase from June 2019. While in July, 1,784 firms made plans to cut nearly 150,000 jobs, an almost seven-fold increase on the same period last year. This information is based on those employers who are planning collective redundancies (i.e. 20 or more redundancies at a single "establishment") and so are legally required to notify the government of their plans. The reality is that far more businesses would have been planning redundancies then and more still will be making employees redundant in the coming months, and the true figure will be much larger. Acas has reported a marked increase in calls to its helpline on the subject, with calls concerning redundancy up by 160% over June and July when compared to the same period in 2019.
In timely fashion, Acas has issued updated guidance for employers who are considering making redundancies. The guidance helpfully adds clarity to changes regarding redundancy and notice pay for furloughed employees. As set out in the guidance, furloughed employees are entitled to redundancy pay based on their normal wages, not their furlough rate. Basic awards for unfair dismissal cases must also be based on full pay rather than furlough pay.
Acas stresses that redundancy should always be a last resort after having made attempts to save roles. Suggested measures to retain jobs include:
- implementing a hiring freeze
- offering voluntary redundancy or early retirement
- temporarily reducing working hours
- asking employees to voluntarily stop working for a short time
- retraining employees to do other jobs in the business
- letting go of temporary or contract workers, and
- limiting or stopping overtime.
Employers should also consider moving employees into suitable alternative roles. If another role is indeed "suitable" and it is not offered, Acas advises that this can be judged as unfair dismissal. Indeed, employers' failings around the process of managing suitable alternative roles is a common cause and contributor to tribunal claims, including in the recent case of Gwynedd Council v. Barratt & Other.
Gwynedd Council v. Barratt & Other
Employers generally use an objective scoring matrix when selecting employees for redundancy. However, in this case, instead of applying a scoring matrix to determine which employees would be made redundant, the council decided that new positions would be decided by an application and interview process. Both claimants applied for roles but were unsuccessful. The council did not consult with the unsuccessful employees and there was no right of appeal – the claimants were subsequently made redundant. The Employment Tribunal found that the redundancy process was unfair, because of the use of an interview process, and the Employment Appeal Tribunal (EAT) has now endorsed that decision.
The EAT found there was a difference between a redundancy process where employees are considered for alternative roles using a “forward-looking” selection process, such as the competitive interview process used in this case, and a process of consultation and selection using fair and objective criteria. In this case, the claimants were applying for essentially the same jobs that they had been carrying out previously – as such, the process was more akin to a process to select employees for redundancy from a competitive pool. Because of this, requiring the employees to interview for their own jobs, with no consultation or appeal, was unreasonable and the dismissals were unfair.
This will no doubt be a significant finding for employers who are currently grappling with redundancies, and who are unsure how best to go about selecting for their new, rationalised workforce.
In light of the Gwynedd Council case, the key takeaways for employers are that they can use an interview process when considering redundant employees for alternative employment, where that alternative employment is for a genuinely new role. However, interviews are unlikely to be the right approach if the roles are essentially the same as those which the employees had previously been carrying out. In those cases, the employer should identify appropriate “pools” and then select employees for redundancy using fair and objective selection criteria.
However, it is important that employers show they attempted, or at the very least considered, alternative measures to prevent job losses in the first place. If redundancies are indeed unavoidable, employers should take advice and review the Acas guidance to ensure they are managing each stage of the redundancy process correctly. Otherwise, the increasing tide of redundancies will be met with a similar rise in tribunal claims.