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Tough Trading Conditions May Mean Tough Decisions

Fergal Dowling Birmingham Post Employment Law supplement


Reports continue about falling recruitment levels and employers looking at redundancies. Some commentary may over-state the case, however organisations may need to review their policies and procedures on redundancy to ensure compliance.

Common factors behind redundancy include:

  • Pressure to reduce overheads including staff head count
  • Investment in new systems/technology renders a role unnecessary
  • The role expires
  • Relocation or closure of the business

Employers may only invoke the redundancy process where the function performed by an employee has truly ceased or fewer employees are required to perform it. Where possible, employers should consider options other than redundancy, possibly along the lines of flexible working, restricted overtime, re-training or the offer of a different position. Alternative strategies may be developed during consultation with employees, who could contribute ideas concerning achieving efficiencies from their experiences at the 'coal face'.

An employer, however, may have no choice but to move forward with either compulsory or non-compulsory redundancy which, as the latter name suggests, calls for employees to come forward to accept voluntary redundancy or take early retirement.

Both approaches can impact upon business as they tend to appeal more to longer serving employees whose wealth of experience and length of service can be costly in terms of either their redundancy payment or the funding of their pension. In addition, bosses may need to examine the profiles of volunteers and consider if the skills of those remaining on the payroll will support business performance going forward.

Morale among the remaining workforce may be stronger than if colleagues had been forced to leave due to compulsory redundancy. Here, employers must ensure complete fairness in selecting candidates for redundancy. It may be that a factory or branch office has to close, which creates an understanding of whom and why employees at that location are being made redundant.

Whatever the benchmark, it must be fair and seen to be fair to avoid charges of discrimination. It can therefore be sensible to apply a breadth of factors to arrive at those employees who may be made redundant. The process may include appraisal reports, attendance, skill sets etc. Some means of selection however, immediately render any redundancy dismissal unfair, including:

  • Pregnancy, maternity
  • Being a member of a trade union
  • Part-time worker status

In addition, if management do not hold consultations with employees and any of their representatives, this would be likely to lead to a ruling that the redundancy was unfair.

Structuring of the consultation process is time related. An organisation that finds it has to make from twenty to ninety nine workers at one location redundant within a period of 90 days must consult with employees and/or their representatives at least thirty days before the first redundancy is due to take effect. That timeframe increases to ninety days prior if the intention is to make one hundred or more people redundant. The statutory minimum dismissal procedures apply where less than twenty are being made redundant. Irrespective of the number of redundancies, employers have a duty to also consult with individual employees or risk any redundancy being ruled to be unfair.

Information regarding proposed redundancies must be provided, in writing, at the start of the consultation process. This must advise of a number of areas such as:

  • the reasons behind proposing redundancies
  • the numbers of employees in danger of redundancy and the rationale behind how they will be selected
  • how redundancy payments will be calculated

Employees who have been with a business for a minimum of two years' employment are entitled to receive a statutory redundancy payment, which is worked out in relation to the employee's age, weekly pay and length of continuous employment.

Bosses should also remember that they have a duty to offer alternative employment if appropriate and that the employee is entitled to a trial period in the new role without impacting upon their statutory redundancy. Workers are also allowed time to seek employment with other companies. Budgets permitting, employers may want to support efforts to secure gainful employment, such as funding third party guidance and training for personnel to ease the transition to new employment or setting up on their own or, in the worst case scenario, potentially unemployed status.

The prospect of redundancies appeals to neither employer nor employee. Legislation is in place, however, to make the process as fair as possible and maintain good relations among bosses, those employees who continue with the business and those made redundant, some of whom may well be re-employed should conditions allow.