The prospect of embarking on a redundancy process can be daunting for some employers both from an employee relations perspective, given the unsettling effect it can have on their workforce, and the fear of getting it wrong and facing potential employment tribunal claims. In this guide we set out the key steps to follow to help minimise risk and ensure compliance with the law.
(i) The law
In order for a dismissal to be fair, an employer must be able to demonstrate that it had a fair reason for dismissing the employee and that it followed a fair procedure. There are 5 potentially fair reasons for dismissing an employee, one of which is redundancy. In order to ensure that any redundancy dismissal is fair however an employer must also ensure that it follows a fair procedure which involves the following:
- Consulting with affected employees;
- Applying a fair and objective method of selecting employees for redundancy; and
- Considering alternatives to redundancy.
(ii) Is there a redundancy situation?
The first thing you need to consider is whether there is a genuine redundancy situation. In this regard, redundancies can arise in one of the following ways:
- A business closes or relocates.
- A particular workplace closes or relocates e.g. an employer decides to close one of its offices.
- An employer identifies a reduced need for employees performing a particular type of work e.g. technological developments mean they need less people to perform a particular role in the business.
(iii) Selection process – pools & selection criteria
Once you have identified a genuine redundancy situation you then need to think about who will be affected and, if it involves selecting from a group of employees, how you are going to select the individuals to be made redundant.
In some situations, it may be the redundancy only affects one individual for example where you are removing a unique role within the business. If that is the case you do not need to worry about selection pools or criteria.
If you have established that you need fewer employees to carry out a particular role then you will need to decide who should be included in the pool for selection and how you are going to select individuals from within that group to be made redundant. In terms of selection pools, you need to make sure that you include all employees who perform the same or similar role. As to the selection process itself, we advise using a selection matrix made up of a number of different, objective criteria which you can use to score each individual. Examples of possible criteria include disciplinary record, attendance record, skills, performance etc. The criteria should be evidence-based and non-discriminatory. For example, you should not take in to account any disability-related sickness absence as this would expose you to potential disability discrimination claims.
(iv) Consultation – individual or collective?
The next stage is to consult with affected employees. Where you are looking to make more than 20 people redundant within a 90 day period you will need to notify the Secretary of State and comply with your collective consultation obligations. [Briefly, this involves consulting with elected employee representatives or recognised trade union representatives. Different timescales apply depending on the number of redundancies that are proposed. Any failure to comply with your collective consultation obligations can open you up to claims from affected employees who can look to recover up to 90 days’ pay.] If you need any advice on your collective consultation obligations please contact Sarah Scholfield on 0161 833 5689.
If you are proposing to make fewer than 20 redundancies you must consult directly with the affected employees. Briefly, this involves holding a number of meetings with them to discuss the redundancy situation and how it affects them, the selection process including pools and selection criteria (where applicable) and any potential alternatives to redundancy. We advise allowing individuals to be accompanied to any formal consultation meetings.
(v) Notice of dismissal
Before confirming any decision to dismiss you need to give careful consideration to any suitable alternative employment that may exist within the business. In the absence of any alternatives to dismissal the final stage in the process is to write to the affected employee(s) to confirm their dismissal. The letter needs to confirm their entitlement to a statutory redundancy payment (where applicable), arrangements in respect of their notice period and any accrued untaken holiday. They should also be notified of their right to appeal the decision.