Fundamental considerations for redundancy.

When making redundancies, several procedures need to be followed regarding the consultation process, redundancy payments, and alternative job roles in the company. Failure to comply with the correct procedures could result in the employers facing financial penalties as compensation to the employees, as well as redundancy fines for failing to comply with required processes.

Seeking professional advice before making redundancies is the best way to minimise the risk of a claim being made against you as an employer, or the company as a whole which can damage your reputation. It also ensures that processes are implemented with proper employment practice in mind.

Here are a few guidelines:

Before you start

Even in obvious cases, you are now required to inform staff of the reasons for redundancy in the form of individual consultations. If you are undergoing large-scale redundancies of 20 or more employees, it is likely that you will need to make collective consultation provisions, such as involving the trade union or other workers’ representatives. This means that the consultation process often needs to begin well in advance.

Redundancy is polite dismissal

Redundancy is a form of dismissal, and therefore there is a risk of ELRC claims for unfair dismissal. There are many circumstances to consider when deciding which of your employees will face redundancy, and issues of discrimination should be at the forefront of your decision making process. Making the newest employee redundant, for example, could lead to age discrimination claims; similarly, redundancy decisions based on sickness records can leave you open to disability discrimination claims.

Procedural fairness

A fair procedure for selection for compulsory redundancy must be objective and take account of a wide range of factors. Many companies use a matrix made up of measurable factors such as targets met, qualifications, skills, ability to relocate, and disciplinary and attendance records. You can also ask for volunteers before you start the selection process. Provided that the redundancy package is attractive enough, some employees may find a large redundancy payment an attractive option, and decide that voluntary redundancy would be the best option for them.

A fair procedure for redundancy should allow for an absolute minimum of 2 weeks for consultation. Where 20 or more redundancies are planned (at one workplace) in a 90 day period there will be a minimum period of collective consultation of 30 days. Notice should not be given until the end of the consultation period. Notice must be given to all employees facing redundancy at the end of the consultation process, and the notice period must be honoured.

It is essential to check whether your staff can be offered alternative employment, at other locations or in related organisations. Unless there is a mobility clause in the contract of employment, the employee cannot be forced to move locations, but must be given the opportunity if it is reasonable.

Redundancy payments by operation of law

If your business has contractual redundancy schemes, it is important to consider the overall costs of these schemes before making the redundancies. You may also offer discretionary schemes which are more generous than the statutory schemes and mean that you can make enhanced ex gratia payments (e.g. based on length of service). This does not count as age discrimination because older workers face more difficulty in finding a new job.

Review and right of appeal

Once the organisation has gone through the consultation process and fair selection procedures, employees should be given the right to appeal the decision.

Offer references

Employers should attempt to provide support for those that are going to have to look for a new job, such as help with CV writing and job hunting. At the very least, all employers should reassure those being made redundant that they will receive a good reference.

Settlement Agreements

In some cases, an employer may wish to ask those being made redundant to sign a settlement agreement which means the employee cannot bring any claims against the employer for dismissal. This legally binding document is usually signed in return for an enhanced payment, and the employer must give the person in question the opportunity to seek independent legal advice.

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