With the full impact of Brexit yet to be determined, we are living in uncertain times. Some employers will find that market conditions leave them little choice but to carry out redundancies. As set out in my earlier blog, it is advisable for employers to consider alternatives to redundancies before commencing a redundancy process. However, there will inevitably be occasions where redundancies cannot be avoided.
The below top ten tips provide guidance for employers when carrying out individual consultation redundancy processes (where less than 20 employees are to be made redundant from one establishment within a 90-day period). By following these tips, employers will reduce the risk of getting it wrong and exposing themselves to potentially valuable claims. In part two of my blogs on fair reduncancies, I will be providing guidance for employers in respect of collective consultation redundancy processes.
Top ten tips
1. Genuine redundancy
Employers should avoid dismissing employees for redundancy in an attempt to disguise an ulterior motive for termination of employment, such as poor performance or misconduct. Before commencing a redundancy process, they should always ensure that the statutory definition of redundancy is met and be able to establish that redundancy is the real reason for the dismissal. Good examples of redundancy situations are where there is a diminished requirement for work of a certain kind, or it is necessary to close a particular branch of the organisation due to customer/market demand.
2. Compliance with relevant policies and procedures
If the employer has a redundancy policy or procedure, then it should be made available to affected employees and followed by the employer. It is advisable to also follow the Acas guidance on redundancies, to ensure best practice.
3. Selection pools
Employers should identify an appropriate pool from which to select potentially redundant employees. When identifying a pool, a good starting place is to consider what particular type of work is ceasing or diminishing, and who carries out that work? Interchangeable skills may also need to be considered. It is possible to have a pool of only one employee, where this decision can be justified, for example because the work they carry out is unique and diminishing.
4. Include absent employees in the process
Remember to include employees on long-term sickness absence or maternity leave in the redundancy consultation process. They should be kept informed and receive the same information in writing as other employees. They should also be consulted with in person where appropriate and reasonable adjustments and flexibility should be offered to accommodate the individual’s circumstances.
5. Fair and objective selection criteria
Selection criteria should be used that do not depend on the opinion of the person applying the criteria, but rather are measurable, for example with reference to HR records and /or appraisals. Potentially fair selection criteria can include, for example, performance and ability, disciplinary records and attendance records (although absence for pregnancy-related illness, disability-related absence, maternity or other family-related leave should be discounted). Criteria which could be discriminatory should never be used and reasonable adjustments should be made for disabled employees. Employees should be selected fairly, as a result of a fair and consistent application of the criteria. It is recommended that two managers separately undertake the scoring exercise for each employee, in the interests of objectivity.
A proper and meaningful consultation needs to be carried out with the affected employees, when the redundancy proposals are still at a formative stage. This is fundamental to the fairness of any dismissal for redundancy. Employees should also be provided with adequate information on which to respond, within an adequate timeframe. Any employee response to the consultation should be carefully and conscientiously considered and responded to by the employer.
7. Suitable alternative employment
Employers should make reasonable efforts to search for suitable alternative employment, and where available, bring it to the attention of employees at risk of redundancy. Where there are a few employees at risk of redundancy who are interested in the same alternative role, they should be invited to apply for the role and a standard competitive interview process should be followed (save for where any potentially redundant employees are on maternity (or adoption) leave, where they have an automatic right to be offered any suitable vacancies). A dismissal is likely to be unfair if, at the time of dismissal, the employer gave no consideration to whether suitable alternative employment existed within its organisation.
8. Time off to look for work
An employee who is given notice of dismissal by reason of redundancy has a statutory right to take a reasonable amount of time off during working hours to seek alternative employment, or to arrange training for future employment (provided they have at least two years’ continuous employment at the termination date). Some of this may have to be paid time off.
9. Get payments right (statutory and contractual)
Ensure that you check the employee’s contractual rights under the (relevant) employment contract and staff handbook and ensure those rights are honoured, in particular with regard to notice provisions, benefits, bonus entitlements, stock options and holiday entitlement. In addition, make sure that you calculate the correct statutory redundancy payment (as well as any company enhanced payment in accordance with any company redundancy policy and/or custom and practice) and apply the right tax treatment to all of the post-termination payments and benefits. Also, ensure that you treat employees consistently with regard to any enhanced redundancy package offered, to avoid claims for discrimination and/or breach of actual or implied contractual terms.
10. Consider a settlement agreement
Employers often offer an ex gratia payment to employees who are dismissed by reason of redundancy, in addition to their contractual and statutory rights, in exchange for entering into a settlement agreement under which the employee waives the right to bring any legal claim against the employer arising out of their employment or its termination. Sometimes this decision is reached after carrying out a risk/benefit analysis, or it may be the employer’s custom and practice or it may be a gesture of goodwill. Whatever the circumstances, it is usually worth considering whether it would be appropriate.
All of the above tips should be carried out with the use of careful language to emphasise that no decisions have been made until the end of the process and each step should be properly documented (for example a business case for the redundancy situation should be drawn up, notes of consultation meetings should be taken and written invitation and outcome letters should be provided to employees in respect of the consultation). Finally, it is important to promote employee engagement throughout the process, as this is likely to lead to a smoother and more successful process.