No business owner likes to think about the things that can go wrong when running a company, but it is just as important to plan for such eventualities, as it is to plan for when things are going well. Arguably more so.
Redundancy is one such challenge that many organisations have to face at one point or another, but getting it wrong could cause more issues than had been anticipated, including potential employment tribunal proceedings.
Here, we speak to Head of Employment Law at Banner Jones Solicitors, Katie Ash, who discusses what steps employers must take to make sure they manage the redundancy process properly and avoid potential legal action further down the line.
Making staff redundant
Firstly, it’s really important to clarify that when a business is making a redundancy, it is not making a ‘person’ that is being made redundant, but rather a position.
To that end, as an employer you must be able to clearly show that the employee’s job will no longer exist, which means it cannot in any way be performance related, or down to a clash of personalities. This is an area where many business owners come unstuck, so it’s an important point to address upfront.
Secondly, employers should be aware that they must follow a fair redundancy process regardless of the employee’s length of service, but they are ONLY entitled to a redundancy payment after they have been employed for two years or more.
The amount that they receive as a redundancy payment under employment law will be based on the employee’s weekly gross pay, age and length of service.
If you have reached the point where compulsory redundancies are necessary – be that due to the relocation of the business, a reduction in work required, or the closure of certain departments or divisions – you are no doubt already under substantial pressure, and it can be easy to make mistakes which could leave you vulnerable from a legal perspective.
To protect your business, it is vital that a fair process is followed, and this includes telling staff at an early stage that redundancies may have to take place. This ensures that they have plenty of warning that they could be made redundant and gives them an opportunity to put forward any suggestions that they may have. Employers shouldn’t forget to notify those staff members who are absent from the workplace, for example because of sickness or maternity leave.
Next, it’s important to ensure that the correct selection pool is identified and objective and measurable selection criteria are put in place. This consists of compiling a list of roles which could be affected based on the areas of your business that you are reducing, and then agreeing a system by which you identify and log the skills required for the business going forward; and ultimately how you will select who will made redundant.
This may seem impersonal, but as the main objective is to remain impartial and non-discriminatory that is actually a good thing during the redundancy process.
Once you have started the redundancy process, you will need to enter into what is known as a consultation period with the employees. This consists of setting up a two-way dialogue with you and the employees who carry out the roles that you have selected for potential redundancy.
This is an opportunity to look at possible ways of avoiding the redundancy – perhaps by reallocating the employee to a different role or relocating - and would usually consist of at least two meetings.
At the first meeting you will explain why they have been selected for redundancy and invite them to discuss their options. For example, they could be willing to job share in order to keep working at the company.
If no alternative to redundancy can be identified, then you will be usually be required to have a second meeting with the employee to discuss your decision and what happens next, including any entitlements the employee has.
Finally, formal notice of the redundancy must be sent in writing to the employee and they should be offered the right to appeal the decision. Although if the process has been followed correctly, there may be little grounds for them to do so.
It can be a tough process for all concerned – with redundancies inevitably causing some upset amongst the workforce, and a wider sense of uncertainty across the business.
In an ideal world, you would look to avoid the scenario altogether by considering other options – such as seeking applicants for voluntary redundancy / early retirement; offering existing staff reduced hours of flexible working; reducing or putting a halt on overtime hours; retraining or redeploying existing employees to carry out new or different roles.
However, if you have explored every other avenue and are left with little choice but to make redundancies, having the correct processes and policies in place before push comes to shove can help to ensure that you are compliant and protected from potential claims.
Just remember, making someone redundant is not a quick and easy way of getting rid of a problematic employee. If you cannot demonstrate that the role itself is redundant, you could find yourself facing legal proceedings for unfair dismissal which can be costly, time consuming and reputationally damaging.