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Restructuring & Redundancy

Restructuring & Insolvency - Frequently Asked Questions

If you need to restructure your business or make employees redundant, you need to plan ahead to make sure you can make the necessary changes without exposing your business to unnecessary risk. Our solicitors can help you minimise potential claims while still achieving your commercial aims.

We’ve answered some common questions that come up when employers need to make redundancies. If you have more questions or need legal advice related to your business and staff, contact our employment lawyers online or call 0808 271 2602 to find out more about how we can help.

When Can I Make Redundancies?

Before consulting with employees or dismissing for redundancy, you must be satisfied that there is a redundancy situation. You have a redundancy situation if:

  • The entire business is closing
  • One or more workplaces are closing or relocating to a new site
  • The business no longer needs as many employees to do a particular type of work.

If your situation doesn’t fall into one of these scenarios, the dismissals won’t be redundancy dismissals. You may still be able to dismiss employees for other fair reasons but it’s important that you get legal advice before deciding what to do – contact us to find out more.

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What Do I Need To Do Before Making Redundancies?

Before you can make employees redundant, you must consider:

  • Collective consultation
  • Individual consultation
  • The ‘pool’ of employees you’ll use to choose who to make redundant
  • Selection criteria
  • Alternative employment.

You’ll need to start collective consultation if you plan to make 20 or more employees redundant at one workplace organisation within a 90-day period.

If you recognise a trade union, this means giving information to, and consulting with trade union representatives. If you don’t recognise a trade union, you can consult with elected employee representatives instead of individual employees.

You’ll also need to file an HR1 form which informs the government about your redundancy plans so they can assist your redundant employees where possible.

There are strict legal requirements when carrying out collective consultation. If you don’t follow these, you may have to pay your employees up to 90 days’ gross pay (each) as a ‘protective award’.

Our specialist employment law team can identify if you need to organise collective consultation and help you follow the rules correctly.

Planning the consultation process

Whether you’re consulting individually or collectively, advance planning is essential for an efficient and effective consultation process. This will help you identify and pre-empt potential issues, and minimise the risk of potential tribunal claims.

You should ensure that:

  • Managers involved in the process understand their role and responsibilities
  • Relevant line managers are available to hold the meetings and support the employees at risk of redundancy
  • You’ve considered which employees are in the ‘pool’ and are at risk of redundancy
  • You can justify the number of employees who’re at risk
  • You have fair and objective criteria for deciding who to dismiss
  • There’s a clear timetable for the consultation process, including when you’re holding meetings and with whom
  • You’ve considered any other potential issues that you’ll need to address (for example, absent employees or those on long-term leave).

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Should I Include Absent Employees In Redundancy Consultation?

Yes, you should remember to include employees who are absent from the business, for example on long-term sick leave or maternity leave, in the redundancy consultation process.

You should keep them informed of the situation and give them the same information in writing as other employees. You should also keep them actively involved in the consultation process.

Ideally, you should still communicate face-to-face with them. You should try and accommodate requests for flexibility, such as meeting at the employee's home or having meetings outside office hours.

the employee can’t have face-to-face meetings, you should do your best to consult by other means. This could involve consulting by phone, email or letter. You risk claims of discrimination or unfair dismissal if you fail to consult with absent employees.

There are also specific rules for employees on maternity leave. You must offer them alternative employment before any other employees if their roles are redundant or potentially redundant and suitable alternative work is available.

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What If An Employee Refuses To Attend A Consultation?

If an employee refuses to attend consultation meetings, you should first try to find out why. Avoid jumping to a negative conclusion and try to have a meeting with them to discuss the situation if possible.

It may be appropriate to carry out the consultation another way, for example in writing. You should consider alternative methods of communication, particularly if an employee has a disability which affects their ability to attend face-to-face consultation meetings.

An employee may refuse to attend due to an alleged shortcoming in the consultation process. If so, you may need to consider addressing that allegation and then inviting the employee to a rearranged meeting.

If an employee continues to refuse to participate then, depending on the circumstances, you may decide to proceed with a meeting in the employee's absence. You should warn them that you’re going to go forward with the meeting, so they have chance to reconsider.

You should accurately record any meeting that goes ahead without the employee and send them a copy of the minutes as part of the on-going process.

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How Can I Avoid Giving An Employee Grounds For An Unfair Dismissal Claim?

To minimise the risk of an unfair dismissal claim, you must be seen to be acting reasonably and following a fair procedure. This involves:

  • Early warning - Try to give as much warning as possible of potential redundancies even though you’ll want to minimise the time that your staff are unsettled by the news.
  • Consultation - Consult meaningfully with individuals. This involves at least two individual consultation meetings before you make a final decision. Make sure all affected employees understand the process, including how you’ll select employees for dismissal.
  • Selection criteria – Make your selection criteria as objective as possible. If you use subjective criteria like performance and skills, get assessments from multiple people to make it as fair as possible.
  • Fair selection - Make your selection fairly according to your criteria and use more than one person to score each individual. Show individuals their scores and give them the opportunity to comment on them. Consider any objections that the union or employees raise.
  • Alternative employment - Tell individuals what roles you have available in your organisation or any group companies you may have. Give them a full list of vacancies and ask them to tell you which roles they’re interested in.

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What Is A Settlement Agreement?

A settlement agreement is a written agreement where an employee accepts financial compensation in return for agreeing not to bring any claims against you. It’s only valid if the employee receives legal advice on the agreement.

You can use a settlement agreement if you don’t want to go through a full dismissal process, or you want to avoid possible risks for dismissing someone. You may, for example, not want to go through a formal performance management process before dismissing on capability grounds.

Settlement agreements are also helpful if you’re making any ‘ex gratia’ payments to your employees above your contractual obligations. You can ask employees to sign an agreement when you dismiss them to avoid the risk of a claim later on.

Our team has advised on thousands of settlement agreements. We can help you write an agreement, check an existing one and negotiate the terms of an agreement.

Contact us online or call 0808 271 2602 today to discuss your situation with us.

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