Covid-19 Cost Saving and Redundancy
Posted on: 03/11/2020
Heidi Skirrow from Absolute Works Dorset (Employment Law & HR experts) offers advice on getting the redundancy process right.
It has been a turbulent year and many businesses are understandably struggling in the current climate. As a result, many leaders are looking to reduce costs for the longevity of the business and facing some difficult decisions. An increasing number of businesses, including well-known names, are finding themselves in the unfortunate position of having to make or consider redundancies as a result. For some, considering redundancies now is the right thing to do, in order to continue trading and save as many jobs as possible in the long term.
Employers need to know that whilst making an individual redundant is a fair reason for dismissal, it is extremely important to get the process right. Failure to do so could see them in trouble in the Employment Tribunal. The employee may be successful in their claim and be awarded significant compensation. There is no financial cost to an employee/ex-employee to issue a claim in the Tribunal and with many facing the prospect of not being able to secure another job, many of them have nothing to lose by submitting a claim. This can however be a huge expense to the business in terms of defending the claim and seeking legal representation, but it can also cause a huge amount of stress and time for the business owners and management team involved.
Redundancy can be difficult, challenging and distressing for all involved and ensuring it is done correctly is vital. For employers it is often a fine balance between making sure that those selected for redundancy are treated fairly, whilst the productivity and morale of the retained staff remains high.
Redundancy legislation is far from straightforward, and an employer needs to know what their obligations are, including employees’ rights and the correct procedures to follow. We can therefore not stress enough how important it is to seek advice before an employer starts any process. Investment at the outset can save them a headache in the long run.
When is redundancy appropriate?
Redundancy generally occurs if there has already been, or is going to be, either: a business closure, or a workplace closure, or the organisation’s circumstances have changed and there is a reduction or proposed reduction in the need for employees.
What does a fair redundancy process look like?
A fair redundancy process involves four things. These can be summarised as follows:
- Reasonable selection pools
- Reasonable selection criteria and scoring
- Consideration of alternative employment
This involves an initial announcement to those that may be affected by the proposals of the business to make redundancies and will include the reasons for commencing the consultation process and the business case e.g. a downturn in work means that we need to look to reduce the workforce.
Following an announcement, the employer would then look to consult the affected employees on a one to one basis by inviting them to a meeting, giving the correct notice and citing the correct statutory rights.
This meeting should be conducted with an open mind and employers should genuinely listen to employees who may come up with alternatives to redundancy which had not been considered. This consultation process is extremely important.
Unless the employer is planning to make more than 20 people redundant, there is no legal timetable for consultation although, the proposed timescales for redundancies of 19 or less should be completed within a timeframe that allows for a ‘meaningful consultation’ rather than a rushed process. Consultations should take place at an early stage and allow employees enough time to make suggestions and present ideas on why they should not be dismissed. Ideally, at least two meetings should take place before the decision to terminate employment is confirmed.
Finally, employers should not forget to consult with all those affected, including those on maternity or other parental leave or on long term sick leave.
Redundancy is a time of great uncertainty and fear and it is important to ensure that communication with employees is clear and that they fully understand the process and the implications.
Reasonable selection pools.
Unless employers are looking to remove one specific role which is unique or a whole team, they will need to identify a pool of people from which individuals for redundancy are selected. Employers have a choice about how narrow or wide the pool is, and tribunals rarely interfere with this choice provided that the employer can show that they are not motivated by trying to achieve a predetermined outcome. One word of warning though, do not choose a selection pool based on Job title or Job description alone, look at the roles that the employees actually perform.
Reasonable selection criteria and scoring.
Employers will need to create fair and objective criteria to apply to those in the pool, to select the employees who will be made redundant. Typical selection criteria include attendance, disciplinary record, performance, skills, qualifications, and length of service. Employers can also apply a weighting to each category so that some categories carry more weight than others in the selection. Sometimes employers may need different criteria for different groups of employees. An obvious example: using sales figures would only be appropriate for sales staff.
It is also important not to use criteria which may discriminate on the grounds of disability or pregnancy, for example. Thus, absence relating to pregnancy or other types of family leave should not be included. Ideally, two managers should assess and score, with an average taken or there should be some moderation of different manager’s scores. This is to avoid allegations of bias from individuals selected.
Each employee should see only their individual score, not that of others. However, employers can give an average score of the pool, explain the cut off score (so they can see how close they came to meeting or not meeting the grade) or show the complete scoring matrix but anonymise the individuals.
Considering alternative employment.
The employer must take reasonable steps to establish whether there are any other suitable positions that a potentially redundant employee could be placed into, either within the immediate business or elsewhere if it is part of a large group. This applies, even if such positions are considered to be less senior to the person selected for redundancy. The opportunity should still be made available for the employee to accept or decline.
Finally, although an employee does not have a statutory right to appeal a redundancy, many employers will offer an appeal, and it is very much encouraged. It allows the employer an opportunity to review the decision, make sure it is correct and fair, understand the employee’s objection and what they want to resolve the matter. The employer will be able to evaluate any risks associated with the decision made or the process involved and provides the ideal opportunity, where necessary or appropriate, to negotiate or settle any dispute to prevent the matter proceeding to an Employment Tribunal. However, we always recommend seeking expert advice before entering into any settlement discussions.
With the job market looking bleak for many industries and the chances of finding new employment for many employees who have been made redundant being lower than normal, there is sure to be an increase in the numbers of employees instigating an Employment Tribunal claim. There is no financial cost to the employee in submitting a claim to the Employment Tribunal so many will think they really have nothing to lose. This makes it even more important to ensure that from an employers’ point of view there is a sound and well documented case for the necessity of the redundancy and a clear and fairly conducted process.
We can provide advice throughout every step of the way to any employer considering making redundancies. For a no obligation chat on this or any other employment matter please contact Heidi at Absolute Works Dorset on 07730 732124 / 01202 241763.
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