Running a business can be rewarding. We also know that it can be extremely stressful, particularly in difficult times. One of the most stressful decisions an employer can make is to make redundancies.
The one thing you don't want to do is make a difficult situation worse by handling redundancies badly. Not only might this result in unfair dismissal claims against you but it is also likely to result in disillusioned and de-motivated staff who remain in the business, just at a time that you need them firing on all cylinders.
Darbys' Employment Team has substantial experience of handling redundancy exercises for businesses of all shapes and sizes. Here we give an outline as to the sort of process that you may need to follow in your own case. However, each case is different so we urge you to take tailored advice from us if you plan to effect redundancies.
Redundancy has to be fair. To achieve this, there are three essential elements:-
1. Fair and objective criteria for selection of those people who are to be made redundant;
2. Consultation with relevant people; and
3. Is there any suitable alternative employment for those that are selected?
1. Fair and objective criteria for selection
The first question that an employee usually asks when being told that he/she has been selected for redundancy is "Why me?” This is a perfectly reasonable question to ask and there needs to be a good answer to the question.
The answer will depend on whether that employee is in a stand-alone position or is in a group or what is known as a "pool for selection”. For example, in the former case, a business may decide to lose its Financial Controller and to spread the duties of that post amongst other existing staff. Since it is the post that is going and there is only one person holding that position, there is generally no need to have any other criteria for selection.
On the other hand, you may have ten people making widgets and there is a downturn in business such that you need to lose five of those staff. In such a case, it is usual to score each of the employees in that "pool” against a series of selection criteria and then select the bottom five employees for redundancy. Where possible, the same person should score all of the employees and that scoring should then be verified by a second person. Typical criteria might include performance, skills/qualifications/training, flexibility, attendance record, time-keeping and disciplinary record. Any "statutory” absences (such as maternity leave or disability-related sick leave) should be disregarded.
Length of service can be used as a criterion for selection but only as one element. We generally advise that employers should use length of service as a tie-breaker if all of the scores are equal.
2. Consultation
Consultation with the individual employees who are selected for redundancy is essential in all cases.
Where you are planning on making 20 or more redundancies from one establishment within a period of 90 days, collective consultation rules apply. These are complex but, in essence, involve consulting also with staff representatives, being representatives of any trade unions recognised by the business and/or staff representatives elected or appointed for this purpose. The penalty for failing to comply with the collective consultation rules is up to 90 days' pay for each employee.
If you are not making that many redundancies in that space of time, then you just need to consult with those people who have been selected for redundancy.
Consultation needs to last for a reasonable period of time. What is reasonable will depend on all the circumstances of the case, including the size of the business, the number of redundancies involved, etc. Where the collective consultation rules apply, the consultation period will be no less than 30 or 90 days, depending on the number of redundancies being planned.
Businesses should not be afraid to change their plans should any valid representations be made during the consultation process. After all, one of the reasons for having to consult is trying to avoid or reduce the need for redundancies in the first place.
Although the law requires businesses to consult with those selected for redundancy, do not forget the staff who will be staying behind - they need reassuring and motivating.
3. Suitable alternative employment
If there are any suitable alternative vacancies, they should be offered to staff who are at risk of redundancy. If there are any "at risk” staff who are on maternity leave, they are entitled to alternative employment as a priority over any other "at risk” staff.
If an offer of suitable alternative employment is made, there is a statutory trial period of 4 weeks to allow each side to assess suitability. If the position does not work out, the employee is treated as being made redundant from the original job.
An employee who unreasonably refuses an offer of suitable alternative employment could lose his/her entitlement to a statutory redundancy payment.
As stated earlier, this is a huge and complex topic and this is very much an overview. It is essential that you take advice on your own particular circumstances.
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