The latest business tendency survey showed us that certain industries have been struggling due to the COVID-19 pandemic. One of the many consequences is that many organisations are contemplating a range of workforce measures, including redundancies.
No employer finds the experience of making employees redundant easy or pleasant. However, following good principles of redundancy management will help protect against tribunal claims, minimise the stress for departing employees, and the potentially negative impact on remaining staff’s morale.
What is redundancy?
Redundancy is a potentially fair reason for dismissing an employee. An employment tribunal will not treat a dismissal as a redundancy dismissal unless it is caused by:
- The closure of a business; or
- The closure of a particular workplace; or
- A diminished need for employees to carry out work of a particular kind.
What does a fair process look like?
A business is expected to take reasonable steps to avoid or minimise the need for compulsory redundancies. In practice, this means that before any final decision to dismiss is made, the business would need to fairly select employees, warn and consult with affected staff, and take reasonable steps to find them suitable alternative employment within the business.
Carrying out a proper selection process is crucial if unfair dismissals are to be avoided. When selecting employees for redundancy, employers should ensure that:
- The ‘pool’ for selection is identified correctly – employees carrying out the same, similar, or interchangeable work; and
- The selection criteria used are objective and fairly applied.
If the pool of employees at risk is not properly considered, or is improperly defined, it is likely to render any subsequent dismissals unfair.
It is good practice for more than one person to be involved in the selection process to reduce to risk of perceived bias or discrimination. If an employer’s selection criteria discriminate against any protected characteristic listed in the Discrimination (Jersey) Law 2013, the employer will potentially face discrimination and unfair dismissal claims. You also need to be careful not to discriminate against part-time or fixed-term employees.
Both individual and collective redundancy issues may arise. Employers need to bear in mind that:
- A failure to warn and consult individually with an employee about their proposed redundancy could result in an unfair dismissal claim; and
- Collective consultation obligations are triggered when you are proposing to make 12 or more employees redundant at a single establishment over a period of 30 days or less. Failure to comply can result in a protective award of up to 90 days’ pay for each affected employee. Collective consultation must begin ‘in good time’ and in any event, at least 30 days before the first dismissal takes effect.
Individual consultation with employees must be undertaken, even where collective consultation is required. If you do not carry out such consultation, any subsequent dismissal will almost certainly be unfair.
Consultation involves explaining to each employee why redundancies might arise, the basis on which they have been provisionally selected, and giving them the opportunity to express their views, raise any questions, and to discuss or identify any alternatives to redundancy they may have. All of this must occur before any final decision is made.
Reasonable steps must be taken to find alternative employment for staff who may be dismissed by way of redundancy, as failure to do so could make any dismissal unfair. Defining ‘reasonable’ is a matter only a tribunal can decide but will almost always include identifying possible vacancies within the company and inviting the employee to consider them.
You should not assume an employee would not be interested in an alternative position just because it would involve a reduction in salary, relocation, or loss of status. The employee may be interested in a lower position if the only alternative is redundancy.
If an employee accepts an offer of suitable alternative employment, or unreasonably refuses an offer of suitable alternative employment, then you will not be liable to pay the employee a statutory redundancy payment. It is the employer’s responsibility to show that the job offer was ‘suitable’, and the employee’s refusal was ‘unreasonable’.
A tribunal will objectively assess the suitability, taking into account factors such as location, remuneration, and status. However, the offer must have been made and communicated to the employee prior to the end of their old contract, and the alternative job must start no later than four weeks after the end of the old contract.
If the terms and conditions of the new job differ from those of the old job, the employee is entitled to a four-week statutory trial period. The purpose of the trial period is to give the employee the chance to decide whether or not the new job is suitable.
Notice, Redundancy Pay, and Appeal
All employees are entitled to a certain period of notice for termination, no matter how they are being dismissed. Refer to the staff member’s employment contract for their specified notice period.
Any employee terminated through redundancy is entitled to redundancy pay. If an employee has been employed for at least two years, the statutory minimum pay is one week per full year of service. Although there is no upper limit on the years of service, the weekly pay amount is capped at £780, but this does increase yearly.
Don’t forget to offer the right of appeal!
Getting it Wrong
Redundancy is not dissimilar to any other termination; you need to have a fair reason and you must follow a process. This process can be slightly short tracked by a voluntary redundancy, in which a settlement agreement is entered into, but an employee might not elect to take a voluntary redundancy and it cannot be forced upon them.
Getting redundancy wrong can be extremely costly for an employer. Nothing can prevent an employee making a claim at the end of the process, which your company would then have to defend. Undertaking a fair process reduces the risk of an unfair dismissal claim. Such a claim, if successful, could result in huge pay-outs for the employee.
Employers can expect to pay up to 26 weeks salary on top of any redundancy payments due, and any other contractual payments. There are also costs associated with redundancy consultation exercises including: the time involved handling the case, which can take up to 5 weeks to complete, the time entailed in any subsequent appeal cases, and the disruption to staff morale for those affected or observing.
There are also awards paid to employees an employer’s failure to consult collectively when required. Staff also have the right to be represented at any meeting that could result in the termination of employment as well as the right to appeal.
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HR Business Manager