Ask the Expert: How to Manage Redundancies

It’s a difficult pill to swallow after the turbulent economic times that we all thought were behind us: but many businesses are still having to turn to redundancies in order to keep the company afloat.

Although, it’s not just failure to make profits that are the reason that businesses look to make cutbacks; John Lewis announced last month that due to back-end functions becoming increasingly automated, there would be 400 fewer staff within the business.

And the retail giant is not the only business that is turning to redundancies, the latest ONS statistics show that redundancies have increased slightly over the last 12 months from 3.7 per 1,000 employees to 4.3 per 1,000 employees.

There are a number of reasons why an organisation might have to make staff redundant; falling upon tough times when cutbacks have to be made, reorganisation, technological advances, relocating, a change of direction for the business or in some cases, ceasing to trade completely. Regardless of the reason, it’s imperative to keep at the forefront of your mind, that no matter how large or small the redundancies are, they involve individuals and should be handled sensitively, and fairly by someone who is experienced in the matter. You don’t want the team that stays with you to be demotivated.

Redundancies are not an opportunity for employers to dismiss staff that are not performing well within a role, for a redundancy to be genuine, the business must demonstrate that the employee’s job will no longer exist or will change significantly for economic, technical or organisation reasons.

There are two types of redundancies; small scale is where fewer than 20 employees will be made redundant, and large scale where more than 20 employees are made redundant. For 20 to 99 employees a 30-day consultation period is required, for 100 and over employees, a 45-day consultation is required.

It is natural in these instances for staff to ask a number of questions, such as why it is happening, the expected timeframe and sequence of events. It is critical that you understand that each question is an opportunity for misunderstandings to happen and therefore each question should be answered clearly and comprehensively; if you are not confident in answering any questions that have arisen, it’s best practice not to answer until you have all the correct information to pass on. This is best dealt with prior to the consultation period, in the planning stage, so as to avoid any nasty surprises.

 

Collective Consultations

Prior to consulting with employees, employers are required to consult with representatives of independent trade unions or other elected employees if no trade union is recognised within the business when there are over 20 employees being made redundant.

Employee representatives can be elected for the purpose of the redundancy consultation, or they could belong to an existing consultative body. If the latter, they must have a remit that enables them to discuss the issues. It is also required that employers consult with representatives of all employees that will be affected – whether this is directly (by being made redundant) or indirectly (if a team will be required to take on further work due to the redundancies).

The initial stage of the process is the consultation; for less than 20 employees there is no stipulated time to consult but you must give time to carry out a fair consultation. If between 20 and 99 employees are being made redundant, consultation must take place at least 30 days before the first redundancy takes effect. If more than 100 employees are being made redundant, consultations must begin 45 days prior to the first dismissal.

The reason that the consultations are required to take place is to ensure that it is ‘meaningful’; both employees and employee representatives must be allowed the opportunity to play a constructive part in the discussions as they progress. Delivering a deal that is already set in stone, does not allow for this to happen.

Some employers take an extremely proactive approach and arrange consultations several months before redundancies take place; this enables employees to plan and arrange their future career and enable the business to introduce the changes in a way that is more rational.

The downside of planning far in advance is that it can create prolonged uncertainty – inevitably impact on staff morale and productivity.

However far in advance, a business decides to plan consultations, the fact remains that they may have to take extra steps to ensure that employee engagement and morale remains high.

The length of the consultation period will vary depending on the circumstances; on how many people are involved, the process can be lengthy.

In some cases, the parties involved will not reach a unanimous agreement, in these instances, the consultation can still be classed as complete. As long as the employer can demonstrate that they have listened to all views and suggestions that have been raised, they have responded to these and that it has been meaningful, the employer can end the consultation.

The consultation must cover how dismissals can be avoided, reduced and how the effects can be mitigated; to avoid compulsory redundancies, a company can seek those employees who would like to apply for voluntary redundancy or early retirement, seek employees that would like to work flexibly, stop using freelancers, contractors and casual labour, stop overtime and restrict recruitment, filling vacancies with existing staff.

 

What information should be provided?

In many instances, employers are uncertain about the information and level of detail that they are required to provide.

It’s a fine balance to strike – as previously mentioned, too little information can cause mistrust and providing a great deal of detailed information often requires the member of staff undertaking the process to go through specialist training. Many employers often want to protect any information being leaked back to competitors.

It is best practice to be as transparent as possible to employees and representatives; withholding information can prevent the process from moving forward, or in some cases, the consultations will be considered invalid.

The information that employers must disclose to the representatives in writing includes:

 

  • The reason for the proposal
  • The number and descriptions of employees proposed to be made redundant
  • The total number of employees of the description employed at the establishment
  • The way employees will be selected for redundancy
  • How the redundancy dismissals will be carried out, including the timeframe
  • How the redundancy payments will be calculated
  • If any agency workers are used, the type of work that they carry out and where they work.

 

Individual Consultations

There is no hard and fast rule when it comes to arranging individual consultations. Some employers choose to carry out the collective process before carrying out direct conversations with those employees at risk of redundancy, but there may be occasions whereby running the two processes alongside each other may be advantageous.

For instance, if redundancies are being carried out in stages, there may be individual consultations carried out with one group while collective consultations are just beginning with another. Or if there are still on-going discussions with employee representatives regarding redundancy pay, but other matters have been agreed.

Of course, before the individual consultation, you need to have identified the group of employees that are at risk of redundancy. By creating a set of criteria that is clearly defined, you can demonstrate your fair reasoning to employees. The criteria often include but is not limited to; record of attendance, standard of work performance, skills and experience and disciplinary record. By creating a selection matrix, you can avoid risking employees being discriminated against unfairly.

Naturally, employees will have concerns and to ensure that all employees are provided with a fair chance to speak up about their concerns, you should implement an appeals procedure.

There is set criteria that are deemed ‘automatically unfair’, and employees must not be selected for reasons that include:

 

  • Pregnancy and family leave
  • Acting as an employee or union representative,
  • Being fixed-term or part-time
  • Age, sex, sexual orientation, race or disability

Employers are required, where possible, to find suitable alternative employment for those employees that they are proposing to make redundant.

Employees who are under notice of redundancy and have been in continuous employment for a minimum of two years qualify for statutory entitlement to a reasonable amount of time off to look for their next position or arrange training. Although employers are only legally obliged to extend this entitlement to those who meet the criteria, they are encouraged to extend it to all staff who are facing redundancy.

If you have selected an employee for redundancy, you can still offer them alternative work within the company. An offer must be unconditional and in writing, must be made before employment ends, should state how the new offer differs from their current role and the new job must start within four weeks of their old one ending.

If the employee accepts the offer of alternative work, they are entitled to a four-week trial period in the role; if within, or after the trial period, it is agreed that the role isn’t suitable, the employee can still claim redundancy pay.

 

Employee Dismissal

Redundancy notices cannot be issued until all of the collective and individual consultations have been completed.

Employee dismissal cannot take effect until the individual notice periods have been observed. The date that a dismissal takes place is the date that the notice expires, not the date that it was given to the employee.

If the employee agrees to take payment in lieu of notice, the employment can be terminated before the end of the notice period.

Employers are legally required to provide employees with the minimum statutory notice period;

 

  • If the employee has been employed by the business continuously for more than one month but less than two years, they must be given one week’s notice.

 

  • If the employee has been employed by the business continuously for more than two years then they are entitled to one weeks’ notice for every year worked up to a maximum of twelve weeks. For instance, if they have been employed continuously for seven years, they are entitled to seven weeks’ notice.

Although this is the minimum notice period, a longer notice period can be agreed between the employer and employee.

 

Redundancy Pay

Redundancy pay is calculated based on the age, weekly pay and number of complete years that the business has continuously employed an individual. An employee only qualifies for statutory redundancy pay if they have been with the employer for two years or more.

The amount is calculated as follows:

 

  • Half a week’s pay for each year of employment up until the age of 22
  • One week’s pay for each year of employment between the age of 22-40
  • One and a half weeks pay for each year of employment over the age of 41
  • A maximum of 20 years’ employment can be considered
  • There is a statutory maximum limit to a week’s pay, set annually and currently stands at £489 per week.

 

You can find a redundancy pay calculator on the Gov.uk website.

 

There may, of course, be special cases such as when the ownership of a business is being transferred or insolvency – this is somewhat more complicated and we urge employers to seek help from HR professionals in these instances.

 

Ultimately, if you manage the practice both sensitively and fairly, with a view to minimising the number of redundancies, you can effectively manage the negative impact that the process has on the business. While of course, a business’s bottom line is always taken into account, in the case of redundancies your people should be considered when making any decisions.

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