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Getting Redundancy Right

It’s never very nice having to tell people that they’re at risk of redundancy. And there are all sorts of things that can go wrong from a legal point of view. Getting it wrong can mean that you end up in court. Many employers don’t realise that redundancy is a dismissal and subject to the same rules as any other dismissal. This means that you must ensure you follow a fair and proper process when carrying out a redundancy programme.

The law on redundancy is principally contained in the Employment Rights Act 1996. The statutory provisions are fleshed out by case law.

Let’s start with a definition of redundancy. A redundancy occurs where a dismissal is wholly or mainly because the employer has ceased to carry out his business or intends to cease to carry out his business either:

  • for the purposes for which the employee is employed; or
  • in the place where the employee was employed.

Situations where employees can be made redundant include:

  • your business, or part of the business, has stopped operating or has become insolvent;
  • your business is failing;
  • you are moving into a new line of business which no longer needs certain employees’ skills;
  • a new system or technology is being introduced which means some jobs are no longer necessary;
  • some jobs no longer exist because the work is being done by other people, following a reorganisation of the workplace;
  • your business, or some of the work done, is moving to another area; and/ or
  • your business is being taken over.

Sometimes redundancies arise from the success of a business. For example, you may have grown your business to such an extent you need to move from a basic book-keeping function to a full-blown finance director.

No matter what the reason for redundancy there is a process that must be followed. The reason for any dismissal must be fair. The process must be fair and the way the process is applied must be fair. . Anything that suggests that it is a sham, a done-deal or improper in some way may lead to a finding of unfair dismissal. The process below is for small scale redundancy involving less than 20 employees.

The first thing to be established is who the redundancy will affect. Start with your proposal, which may result in redundancies. You need to be clear about what the organisation needs to thrive and make a decision about the proposal based on that. Will all our employees be affected or will it just be one department? If it is just one department, why is it this department over another?

When you first speak with employees who may be affected tell them what you are thinking about doing, why you are doing it and what might happen. Nothing is set in stone at this stage. Before you confirm your proposal ask employees for feedback and take a few days to consider it. After that you can decide whether to adopt, amend or completely re-write the proposal and will be able to let employees know which jobs are at risk.

If there are a number of employees in a pool and only the need for one to be made redundant, you will need a fair way to decide who will be made redundant. For this we use a selection matrix. This is a kind of score sheet. It lists specific objective criteria relevant to the job and general points such as discipline record. Each employee is scored and the employee with the lowest score is the one who is at risk. If the employee is in a pool of one there is no need to do this.

You are under a duty to consult with affected employees to see what can be done to reduce or remove the need for redundancy. The employee is encouraged to come up with suggestions as well as you. This can be done through informal meetings. Hold a couple of informal consultation meetings with the employee.

If there are any suitable alternative roles tell the employee about these and also tell him how to apply. Any refusal of a suitable alternative role needs to be reasonable otherwise the employee may lose his right to redundancy pay. You may need to consider whether transferred redundancy (also known as “bumping”) is applicable.

If there are no suitable alternative roles tell the employee this to make it clear you have considered it.

The final meeting with the employee is a formal meeting. Write to set up the meeting. The employee has the right to be accompanied by a work colleague or an accredited trade union representative. If between you have not found a way to reduce or remove the need for redundancy then you confirm dismissal for that reason.

After each stage of the process you should write to the employee and confirm what was said and the details of the next meeting. Redundancy is a dismissal so the employee has the right to appeal against the decision. You should tell him how to appeal when writing to him after the meeting.

If you need help with redundancy or getting HR problems resolved in your business, get in touch.

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