With continuing challenges in the economy we are being regularly approached by business owners concerned to trim costs so as to protect the business for the long term. Unfortunately this often involves exploring staffing costs as these are usually the highest cost to the business. But what is a redundancy and what needs to be done to ensure that it is legally compliant?
What is Redundancy?
A genuine redundancy occurs in three situations:
- Where a business closes down.
- Where the place of work closes down.
- Where the business requires fewer employees to carry out work of a particular kind.
Of these the most common is the third redundancy situation but this requires that the role being made redundant will no longer exist following the redundancy being effective. It is not therefore a process by which low performing employees can be replaced by higher performers.
What is the business need going forward?
Whilst redundancy is often used to identify certain individuals the employer wants to let go, this is the wrong place to start. The critical question is – what does the business need going forward? From the answer to that question all subsequent steps flow.
Are there any alternatives to making redundancies?
The reality is that redundancies are expensive, both from a cash perspective but also in sapping morale within the business, the loss of knowledge and experience and the possible future cost of having to recruit again when things pick up. It is important that employers consider all other avenues before resorting to redundancies, such as:
- Early retirement
- Voluntary redundancy
- Limit/stop overtime
- A change or reduction in working hours
- Recruitment freeze
If any of these can be implemented and agreed with the employee, then they are likely to be more cost effective and less damaging than a large round of redundancies.
How should we inform staff about redundancies?
If redundancies are likely, employers must provide certain information to employees including why there is a potential redundancy situation, how many roles are likely to be affected and what options have been considered to avoid compulsory redundancies.
If there are plans to make more than 20 people redundant, the company must engage in ‘collective consultation’, which involves trade unions or employee representatives. The consultation process must take a minimum of 30 days (45 days if over 100 are being made redundant).
In addition to any collective consultation requirements, individual consultation should take place with affected employees to discuss their particular circumstances. For example where an employee lives may make a difference if you are looking to relocate them to new premises, if they live part way between your current and new premises the move is likely to be more reasonable than if they live in the opposite direction.
Holding genuine and meaningful consultation and being transparent about plans and reasons for redundancy from the outset, can help avoid staff jumping to their own conclusions. It also though takes time, which employers are often reluctant to give.
How do we decide?
Once a consultation is completed it will be necessary to decide which employees are to be made redundant. This will often be by way of a selection criteria which the employer has more or less full discretion over. This is why the initial consideration of what the business needs are is so critical, as only knowing that can you make a good decision as to who has (and who does not have) the skills and experience you need going forward.
Is there a right of appeal?
Unlike a disciplinary or grievance process there is no legal right of appeal in a redundancy process. Whilst it may be helpful to offer an appeal, once redundancies have been confirmed employers will invariably seek to reassure those remaining that they are no longer at risk. Appeals would undermine these efforts and so normally will not be offered.
What payments are employees entitled to on redundancy termination?
Employees who have worked continuously for at least two years are entitled to a statutory redundancy payment. Some employers offer a more generous termination package. Employees are also entitled to notice pay and payment for accrued but untaken holiday.
How can we help you?
Our Employment Team have extensive experience in planning, running and completing redundancy processes for employers. From our lawyers helping you set out your vision for your businesses future requirements and planning the steps needed to give shape to that vision to our HR Consultants helping you consult with your staff and preparing all necessary paperwork.
If your business is considering restructuring please give our team a call on 0345 646 0406 or fill in our online enquiry form and a member of our Team will be in touch.