It is a reflection of the current economic situation that employers in all sectors are looking at their staffing levels and costs and contemplating redundancies. For many companies it has been a long time since they last had to do this, and a generation of managers, HR professionals and employees simply have not had any experience of dealing with this difficult exercise.

Since the consequences for individuals of losing their jobs are so serious it is essential that the process is handled carefully, correctly and sensitively, and that all alternatives are properly explored. Everybody in an organisation suffers when redundancies are announced, as even those not directly affected experience the stress and uncertainty of watching colleagues departing. Morale and confidence can be the first casualties and there is no guarantee that they will recover if the organisation's actions are viewed as anything other than fair, even handed and understood.

What is redundancy?

Traditionally redundancies occur, and employees are entitled to redundancy payments, when there is:

  • A closure of a business, either completely or at a particular workplace
  • A declining need for employees to do work of a particular kind

But the wider definition which is used to determine whether there is a specific legal obligation to consult is:

  • That the reason for the dismissal(s) are unrelated to the employee(s)

This could include reorganisations and reallocations of work, which might not have an impact on the overall number of employees.

Consultation

Unsettling the whole workforce is one reason companies give for trying to bypass the requirements for consultation – what is the point of worrying everyone if only a small number of people are going to be affected?

  • If an employer is considering making at least 20 people redundant over a 90 day period then there is a statutory duty to consult, and this consultation should begin at least 30 days before the first dismissal takes effect. 
  • Where over 100 employees are going to be made redundant over a 90 day period the consultation should commence at least 90 days before the first dismissal takes effect.

As long as the consultation begins in time there is no rule setting out how long it should take. It can be completed before the 30 or 90 day period ends, or it can be extended beyond the prescribed time, as long as all parties agree. As soon as the proposal that there be a number of redundancies is announced the employees should elect representatives to act on their behalf, unless there are pre-existing employee representatives or a trade union is recognised. Employees who are off sick, or on maternity, paternity or parental leave should be contacted separately so that they are not excluded from the consultation.

The consultation should be fair and transparent and it should be a two way process. It should cover matters such as:

  • The reasons for the proposals
  • The numbers and descriptions of the employees likely to be affected
  • The total number of such employees in the organisation
  • The proposed method of selection
  • The proposed method of carrying out the dismissals
  • The proposed method of calculating any redundancy payments
  • Any alternatives to redundancy

Employers are required to notify the Department for Business and Regulatory Reform (BERR) of the projected redundancies and must send notifications to BERR before any notices of dismissal for redundancy are sent out.

Even if there is not a legal requirement to consult, because the employer is considering making less than 20 people redundant, it is still good practice to consult and to have some meaningful discussions with staff about the possible alternatives.

The pool

Of course it makes sense to consult with the group of employees who are going to be affected. The first thing to do is to identify the pool of employees from which staff will be selected. Some care should be taken over this as the whole process could be tainted if certain groups are wrongly included in or excluded from the pool.

The selection criteria

Objective criteria which can be precisely defined and applied in an independent way should be agreed with the employee representatives, if possible. The organisation will have to ensure that it is left with a balanced workforce once the redundancy process has been completed, and will have to combine this with the need to adopt criteria which staff can see are fair. A combination of criteria is usually the best way to achieve this, so that employees gain points for different attributes, such as:

  • Attendance
  • Disciplinary records
  • Experience
  • Relevant skills and competencies
  • Capability
  • Training or qualifications

Rolls Royce recently amended its redundancy selection criteria to remove the provision that gave more protection to workers with long service arguing that it discriminated against younger workers. In a landmark decision the High Court ruled against them, concluding that older workers typically have more difficulty finding alternative work after redundancy, and that measures to protect them such as awarding points in this way are legitimate, even taking into account the Age Regulations 2006.

Alternatives to redundancy

If the decline or cessation of business is likely to be short term or temporary and the employment contract contains the relevant provisions it may be worth considering:

  • Temporary lay off
  • Short time working

Although after four weeks an employee can argue that he or she has in fact been made redundant. You must also check that your contract of employment contains a clause permitting this before you decide to impose these conditions. Other alternatives which are worth exploring with the employee representatives include offering:

  • Voluntary redundancies
  • Reduced hours / flexible working
  • Career breaks / sabbaticals
  • Secondments
  • Early retirement (but take advice about the pension implications of this)

Being supportive

As well as suggesting alternatives to redundancy, and indicating preferences for selection criteria and processes, the employee representatives may also have a view on what support affected employees would most benefit from. Some suggestions are:

  • Training for employee representatives
  • Help with CVs
  • Interview practice
  • Secretarial assistance
  • Inviting recruitment agencies into the office to give advice and discuss possible vacancies
  • Posting information about local vacancies on internal noticeboards
  • Giving time off to attend interviews
  • Providing information about training opportunities
  • Payments in lieu of notice
  • Financial advice

Having an open door policy and an open mind so that employees can make suggestions, express concerns and ask for help can make a world of difference to how someone feels about you and the company, especially after they have left.

Suitable alternatives

Once notices of redundancy have been issued, and the affected staff are working their notice periods, vacancies within the organisation may arise. Employees who are under redundancy notices should be advised of these vacancies and invited to apply. A member of staff who turns down an offer of a suitable alternative will not be entitled to a statutory redundancy payment. The question of whether an alternative is suitable depends on the location, status, work, terms and conditions being similar to the role which was redundant.

Redundancy payments

Statutory redundancy payments must be made to all redundant employees with two or more years' service. Employees will receive a week's pay (subject to a maximum of currently £330) for each year worked between ages 22 - 41. Years of service over 41 attract a week's pay (again, subject to the maximum of £330) multiplied by 1.5.

After redundancy

Employees who are made redundant are vulnerable to feelings of loneliness and isolation after the redundancy has taken effect. Keep talking to employees and asking how they are. Offer whatever support you can, be it help with CVs or interview practice. Nobody likes going through this process, but as with many things the "way" you do it is something you can have a positive effect on. The importance of maintaining good relations with ex-employees after redundancy is often overlooked but in a competitive environment relationships are all important. It is likely that as they move on your ex employees will be speaking to your competitors and your customers, and far better for them and you if they have something positive to say. Keeping in touch and continuing to offer support even after the employment has ended will make life a little bit easier for those who are really feeling the effect of the current economic climate.