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Seven Things That Employers Should Know About Redundancy

It is open to employers to review and reshape their organisations to make sure that they are fit for purpose and running effectively and in a cost-effective way. It is inevitable that at some stage every employer will have to go through a redundancy process to ensure that they get and keep their organisation in the right shape.

As well as legal risks, the redundancy process has a human cost, so it’s important to think it through very fully and plan in detail before embarking on the exercise.

1. What is redundancy? Redundancy occurs because you have ceased to carry out your business or intend to cease to carry out your business either for the purposes for which the employee is employed or in the place where the employee was employed; or because the requirements of your business for employees to carry out work of a particular kind have ceased or diminished or are expected to do so, or the requirements in that place have ceased or diminished or are expected to do so.

2. Redundancy is the act of last resortYou must take such steps as you reasonably can to reduce or remove the need for redundancy. This might include:

  • seeking applicants for voluntary redundancy and/or early retirement;
  • seeking applications from existing staff to work flexibly;
  • terminating contracts with self-employed workers;
  • laying off casual or sub-contracted staff;
  • imposing recruitment restrictions;
  • reducing or banning overtime;
  • filling vacancies with existing employees;
  • retraining employees and then moving them to other parts of the business;
  • implementing temporary lay-offs or short-time working;
  • agreeing a reduction in hours and/ or wages.

3. Selection for redundancy Employers must use a procedure which is fair, objective and non-discriminatory. Where you have to select some individuals from a group of people doing the same job, the approved way is to put together a matrix based on a range of objective criteria. This will include a range of objective criteria, such as attendance, disciplinary record, appraisal rating, skills or qualifications. Note that there are special protections for women who are pregnant or on maternity leave and you must not select a part time employee for redundancy for a reason connected with his part time status. Employees at risk of redundancy should have the chance to comment on firstly, the criteria you have chosen and secondly, their scoring against your criteria.

4. Redundancy notification procedure Before making anyone redundant, you must carry out reasonable consultations with affected employees, advising individuals of the risk of redundancy and taking such steps as are possible to reduce or remove the need for redundancy. To ensure procedural correctness you must still offer the right to be accompanied and a right to appeal against the decision to dismiss.

5. Duty to consult Redundancy is a dismissal and that means that employers must ensure that they have taken all reasonable measures before implementing the final step. While there is no minimum statutory consultation period when making fewer than 20 employees redundant, you should still consult on an individual basis, otherwise the dismissal procedure may be considered to be unfair. If you are proposing to make more than 20 employees redundant at the same establishment in a 90 day period, you have to go through a statutory process.

6. Garden leave and time off It is usual for companies to put employees who are at risk of redundancy on garden leave. Employees are often very upset by the news and need time to compose themselves. There is also the possibility that a disgruntled employee may cause damage to the business. An employee who is given notice of dismissal because of redundancy is entitled to reasonable time off with pay during working hours to look for another job, or to make arrangements for training for future employment.

7. Redundancy pay To qualify for redundancy pay, an employee must have two years; continuous service. The amount of statutory redundancy pay depends on length of service, age and a week’s pay, currently capped at £430. You can enhance redundancy payments; if you do so, take advice do ensure that it doesn’t offend against the age discrimination legislation. For more information and free eBook about redundancy click here. 

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