Why the consultation period matters when making redundancies

Running a business can be challenging, and never more so than when decisions need to be made that potentially affect the lives and livelihoods of employees.

Sadly, however, it is part and parcel of the day job, and most business owners and decision makers will grapple with the prospects of having to let people go, and the subsequent redundancy process, at some point during their career.

While the decision itself might be tough, it’s absolutely vital that the process is handled correctly, or employers could find themselves facing legal action.

Here Katie Ash, Head of Employment Law at Banner Jones Solicitors, explains what the correct process is when proposing job losses, as well as the importance of factoring in a thorough consultation period before any final decisions are made and notices are given.

 

What is redundancy?

Redundancy is a potentially fair reason for dismissal; and it arises when a role is no longer needed. This could be because part or all of your organisation is:

• closing
• changing the types or number of roles needed to do certain work
• changing location

If you have concerns about an employee’s conduct or performance, this is not a redundancy situation, and you need to follow a disciplinary or capability procedure instead.

 

What’s the first thing an employer needs to do when considering redundancies?

In the UK, employment law protects employees from unfair redundancy selection.

Firstly, when considering redundancies, it’s important to stress that it is the job or role itself that is redundant, and not the person. That is an important point.

There must be a genuine reason behind why an employee is being made redundant too, not simply because a business wants to get rid of a troublesome employee.

A proper and meaningful redundancy process also needs to be planned. Sufficient time should be given to communicating the proposals to those at risk of redundancy before commencing the redundancy consultation process. Consultation needs to start in good time and whilst the proposals are at a formative stage. If you are planning a redundancy situation and 20 or more employees are at risk of redundancy within a 90 days period, then you must notify the Redundancy Payments Service (RPS) by filling out an HR1 form before the consultation starts. As well as any claims by the employees for failing to take this step, failure to alert the RPS could result in a criminal conviction and fine too!

Before even starting a redundancy process, you should ensure that you have considered all available options to reduce or avoid redundancies.

For example, you could see if you can:

• offer voluntary redundancy
• change working hours
• move employees into other roles
• let go of temporary or contract workers
• limit or stop overtime
• not hire any new employees

 

What is the Consultation Process?

Consultation is simply when you talk and listen to affected employees about your proposals before making any decisions. You must do this before finalising any redundancies. Case law makes it clear that employers must give “conscientious consideration” to any matters raised by an employee and their representative during redundancy consultation. Getting consultation right is key to ensuring that employees feel supported and listened to. If you do not hold genuine and meaningful consultation before making redundancies, employees could claim to an employment tribunal for unfair dismissal. You might also face claims for protective awards where collective consultation obligations apply.

The purpose of the consultation stage is to encourage a discussion with the employee about why changes are required, what you plan to do, how the redundancies can be avoided or their impact mitigated, and how you can support and arrange time off for affected employees.

An employee may have suggestions on how to avoid redundancies altogether, and these should be taken seriously as they may be helpful to the process.

A good place to start when planning a consultation process is to check your workplace handbook or policies which relate to redundancy. It is also important to set out the pooling and scoring criteria at an early stage of the redundancy process so that employees (or their representatives) are involved in the discussions.

 

What is Collective Redundancy Consultation?

It’s crucial to consider the overall number of employees who might be at risk of redundancy at an early stage. Where 20 or more redundancies are planned at a particular workplace, collective consultation is required, meaning you must consult with any recognised trade union or employee representative about the proposed redundancies.

If you don’t have a recognised trade union for all staff affected, then you will need to hold elections for employee representatives and won’t be able to start consultation until they are in place.

In addition, where collective consultation is required, the RPS must be notified of the proposed redundancies on form HR.

Don’t forget that even in a collective consultation situation, individual consultation about proposed redundancies with an employee about the proposals and how they impact on them is vitally important and should be undertaken too.

 

Why does the Consultation Period matter when making redundancies?

There is no time limit on how long redundancy consultations last, but there is a minimum period before you can dismiss any employees. Where 20 or more redundancies are proposed within a 90-day period from a single establishment, it is a legal requirement that the consultation period must be at least 30 days before the first dismissal can take effect. This increases to 45 days for large scale redundancies where 100 or more redundancies are proposed.

 

What happens if an employer doesn’t provide a meaningful consultation process?

Following the correct redundancy process  is important for a number of reasons.

Firstly, because it is the law. If an employer fails to meet consultation requirements, employees can make a claim to an employment tribunal for unfair dismissal. Where collective consultation obligations exist, they can also make a claim for a protective award. If the claim is successful, the employer may have to pay up to 90 days’ full pay for each affected employee.

Secondly, a fair consultation process allows employers and employees to discuss other options that could avoid redundancy entirely, whilst also giving workers time to prepare and begin searching for alternative employment. What’s often forgotten is that the whole purpose of a redundancy consultation process is to try and reduce/negate the need for redundancies; or to try to mitigate their impact. Redundancy notices should only be issued once consultation is complete.

It’s important to remember that when making an employee redundant is not a fast and easy way to solve problems within your business. Without a genuine reason of redundancy, businesses could face legal proceedings for unfair dismissal, which not only costs money, but your reputation too.

 

Employment Rights Bill changes

The government are looking to make changes in the redundancy and collective consultation area of employment law in the Employment Rights Bill (ERB). The ERB will remove the need for employees to have 2 years’ service to bring an unfair dismissal claim. The government is looking to change the rules about the trigger point at which collective consultation obligations start to apply. They are also looking to increase the level of compensation available for protective awards from 90 days pay per employee to 180 days!

 

If you would like further information on what information you need to provide to those staff during a redundancy consultation meeting or require legal advice on the redundancy process itself, please contact us here or email employment@bannerjones.co.uk