Redundancy

Redundancy Situations

In redundancy situations employers need to ensure that they follow correct procedures and are aware of employees’ rights in order that employees are unable to challenge the fairness of their dismissal in an employment tribunal.

Redundancy can occur in three types of situation:

• Where the employer ceases carrying out the business in which the employee is employed (business closure).
• Where the employer does not close down the business but closes down the employee’s particular place of work (workplace closure).
• Where there is no closure at all but the employer has a reduced requirement for a specific type of employee (reduced requirement for employees).

Collective Consultation

Where 20 or more employees are to be made redundant over a period of 90 days or less an employer has a duty to inform and consult with employee representatives and notify the Secretary of State.  An employment tribunal may award up to 90 days’ pay in respect of each employee where there has been a breach of the information and consultation duty and the employer may be fined for failing to notify the Secretary of State.  

Where 100 or more redundancies are proposed, consultation must begin at least 45 days before the first dismissal takes effect. For between 20 and 100 redundancies, the minimum period which must elapse is 30 days.

Unfair Dismissal

Employees with the necessary length of qualifying service are entitled not to be unfairly dismissed.  Even where a dismissal is genuinely on grounds of redundancy, whether it is fair or unfair will come down to whether the employer acted reasonably in dismissing the employee in all the circumstances.

A redundancy dismissal is likely to be unfair unless the employer:

• Identifies an appropriate selection pool of employees at risk of redundancy.
• Consults with individuals in the pool.
• Applies objective selection criteria to those in the pool.
• Considers suitable alternative employment where appropriate, subject to a trial period.

There are certain circumstances where selection of an employee for dismissal on grounds of genuine redundancy will be automatically unfair such as selecting an employee for a reason connected to pregnancy.

Identifying the appropriate selection pool

Before selecting employees for redundancy an employer must consider an appropriate selection pool or the dismissal is likely to be held as unfair.  That pool should extend to all employees doing the same, similar or interchangeable duties, from which candidates will be selected for redundancy. In some situations, a selection pool of one person may be appropriate where their role is genuinely standalone. You should take advice when deciding on pool choices.

Selection

Once a pool is established the employer will need to determine objective selection criteria in order to carry out a scoring exercise of all pooled employees in order to identify those provisionally selected for redundancy.  Again, this is an important step and advice should be sought before doing so.

Consultation

The redundancy exercise should be seen as a process rather than an event, characterised by a number of consultation meetings with the ‘at risk’ employees which cover the following:

• An opportunity for the employee to comment on the basis for selection, both in terms of the pool and selection criteria.
• An opportunity for the employee to challenge their scores under the selection criteria and to explain any factors that the employer may not have been aware.
• An opportunity for the employee to put forward suggestions for ways to avoid their redundancy.
• Consideration of alternative employment positions that may exist.
• An opportunity for the employee to address any other matter or concerns that they may have.

Alternatives to redundancy

From the outset an employer should consider ways in which it can avoid compulsory redundancies.  Before the exercise commences, the employer should consider temporarily laying off employees or reducing their hours and once the exercise is underway, the employer should consider inviting employees to volunteer for redundancy.  

Once staff have been provisionally selected for redundancy, the employer needs to have regard to any other vacancies that may exist elsewhere in the organisation and, if so, offer them to the displaced employees.  There is no requirement to create a new role, but a failure to make available suitable alternative employment to any potentially redundant employees would likely render the dismissal unfair.

Redundancy payments

Employees will be entitled to a statutory redundancy payments where they have at least two years’ continuous service at the date of redundancy.  Statutory redundancy pay is calculated according to a formula which is based on age, length of service and pay.

In addition employees may be entitled to an enhanced contractual redundancy payment.  The right may be expressly set out in the employee’s contract of employment or it may be implied where a set of redundancy terms are regularly applied in a particular trade or industry by a particular employer.