Sally Lomas Fletcher, associate solicitor with Jacksons Law Firm, with some straight forward answers to 10 questions surrounding redundancy…
1. What constitutes a redundancy situation?
In layman’s terms it is where a business or a workplace closes or where the employer’s requirement for work of particular kind ceases or diminishes either in one workplace or across the business as a whole. Part time as opposed to full time work is not work of a particular kind. Reorganisations can sometimes result in redundancies but not always; a reduction in headcount is a useful indicator but not always determinative.
2. Who is at risk?
Those employees who work in a business or workplace that is closing or those whose particular kind of work has ceased or diminished. An Employment Tribunal is not concerned about the economic reasons that led to the redundancy situation, just that the need to make redundancies is genuine and not a pretext for some other reason for dismissal.
3. When do you inform the workforce?
If an employer is proposing to dismiss 20 or more employees for redundancy in one establishment, he has a duty to inform and consult appropriate employee representatives at least 30 days before the first dismissal takes place. If there is more than 100 employees to be made redundant, the consultation period rises to 45 days. Proposing to dismiss means something less than a decision having already been made but something more than a possibility that it might occur. This is in addition to individual consultation with those at risk.
4. How do you consult with affected employees?
Initially an employer may inform the employees in a group setting of the possible need to make redundancies. This should be done as soon as possible to give employees adequate warning. Thereafter individual consultation meetings (face to face where social distancing is possible or remotely if necessary) should be held with those at risk of redundancy. There is no statutory right for an employee to be accompanied to redundancy consultation meetings but it is good practice to allow this. Employers should consult on ways to avoid compulsory redundancy, the application of any selection criteria and whether there is any suitable alternative employment. An employer should also provide information regarding redundancy payments and notice pay/pay in lieu of notice.
5. Who should be included in a selection pool?
It is for the employer to determine the selection pool. An employer only has to show that it was reasonable for him to use the selection pool that he did. It is preferable to keep the pool as narrow as possible. It is possible to have a pool of one in some circumstances where an employee holds a stand alone post.
6. How should you select employees for redundancy?
Employers often devise selection criteria to select for redundancy. Those selection criteria must be within the range of reasonable responses open to the employer (a Tribunal will not substitute its own view as to what it thinks the criteria should have been, provided those used by the employer were reasonable). If possible those selection criteria should, on the whole, be objective but it is possible to use subjective criteria too. It is also possible to weight criteria such that some are considered more important than others by the employer. Common criteria include disciplinary records, skills, qualifications, standard of work etc.
Note: Employers should be careful when using absence as a criterion such that absences for disability related reasons are discounted to avoid claims for discrimination arising from disability.
Employees are entitled to see their own scores but are not entitled to see the scores of their colleagues.
Another strategy employers adopt is to dismiss all employees in the pool and invite them to apply for alternative roles. It is not necessary to consider selection criteria in such cases. Employers can invite applications and have a competitive interview process. It is still important to consult in such situations.
7. What constitutes suitable alternative employment?
In each case it depends upon the tasks to be performed, the skills required, salary and other benefits, hours, level of responsibility, status, location etc. An employer should not assume that a senior employee would not consider a lower paid and lower status role. It only applies to vacancies – there is no need to create a role. Alternative employment can be offered subject to a 4-week trial. Provided he has not unreasonably refused suitable alternative employment, an employee at the end of the trial may elect not to take the job and his employment will be deemed to have been terminated by reason of redundancy and he will be entitled to a redundancy payment.
Note: Employees on maternity leave must be offered suitable alternative employment before anyone else.
8. How do you follow a fair procedure?
For a redundancy to follow a fair procedure an employee is entitled to adequate warning and meaningful individual (and where appropriate, collective) consultation; fair selection; the consideration of suitable alternative employment and the opportunity to appeal the decision to make the employee redundant. Strictly speaking the ACAS Code of Practice does not apply to redundancy dismissals but the principles of fairness which underpin it are relevant in the context of redundancy.
9. How much notice are selected employees entitled to?
Employees are entitled to notice of termination by reason of redundancy. They are entitled to either their contractual notice or statutory minimum notice, whichever is greater. Statutory minimum notice applies with those with over one month’s service (no notice is due up to one month’s service). After one month and up to 2 years’ service, an employee is entitled to receive one week’s notice. Thereafter an employee is entitled to receive one week’s notice for each year of service up to a maximum of 12 weeks’ notice for 12 years’ service.
Note: an employer can require an employee to take holiday in the notice period provided he gives the employee twice the length of notice of the leave the employee is required to take. This avoids having to make a payment in lieu of untaken holiday upon termination.
10. What payments are employees entitled to on dismissal for redundancy?
If an employee has 2 years’ continuous service then he is entitled to a statutory redundancy payment which is calculated with reference to his age, length of service and salary (a week’s pay is currently capped at £538 per week). Sometimes employers have a contractual redundancy scheme which provides more than the statutory scheme. The payment is tax free up to £30,000. The employee is also entitled to notice or pay in lieu of notice but that is paid subject to deductions for income tax and National Insurance contributions.
If you require advice on making redundancies, the Employment Team at Jacksons Law Firm are on hand to help. (firstname.lastname@example.org)
Sally Lomas Fletcher
Associate Solicitor, Jacksons Law Firm