Redundancy situations occur where work of a particular sort or in a particular place diminishes to an extent that one or more roles are no longer viable. It is a fair reason for dismissal as long as it is genuine and follows a fair process.

In this article we look at the key things to be aware of in terms of redundancy and restructuring:

Restructures

Where a company spreads the work from one role to several roles or outsources it to adapt to changing circumstances, this can also lead to the need for redundancies.

There are times when, such as now, extremely difficult financial circumstances arise, the economy falters and as well as the risks faced by your company, there is an opportunity of making some important decisions to restructure, remodel or refocus what you do, and even where you do it.

Strictly speaking, whilst this sort of dismissal may be referred to as a “redundancy”, it may amount to a dismissal for “some other substantial reason (SOSR)”. SOSR is one of the potentially fair reasons for dismissal. It is a “catch all” reason that allows an employers to dismiss an employee when none of the other potentially fair reasons apply. Some employers may use it as a reason to avoid paying a statutory redundancy payment, but due care and legal advice should be taken into consideration.

Essential principles

Whether your organisation is large or small, fairness and reasonableness are key to ensuring that the process does not result in disputes. A sound business plan is extremely useful to show that the redundancy is genuine, and the sharing of information, consulting and giving the employee the opportunity of being heard are all key. Larger and more well-resourced organisations would be expected to have a more practised and well-defined process.

Redundancy Pools

If the number of people who carry out the same or similar work in your organisation is being reduced, then you need to establish a fair way of grouping the affected employees so that you can compare each to the other to decide who will be dismissed and who will stay. This process of grouping is also known as “pooling”.

An unfair pool is often the starting point for a dispute. You can pool employees who are doing different or similar functions as well as those who are doing exactly the same functions.

It is extremely important, however, that you have thought carefully about putting employees into the same pool and this should be because of some business reason such as making processes of production more efficient. Ultimately, the law expects your decision as to how you are pooling employees to be reasonable. You can also pick out an employee who has a unique role and make him/her redundant without pooling with others, if their work has reduced to an unviable level or can be done in a different way rather than by that person.

Similarly, in these days of remote working, you will be open to challenge as to why you have not looked at the business as a whole and pooled together all the employees doing the same functions even if they are at different sites.

Information and Consultation

Treat your employees with respect, and use your most skilled managers to build relationships with employees or their representatives. This will assist in diffusing bad feeling. From the outset when you first consider redundancy, be open and transparent about the company’s position, provide as much information as you can and then enter into a dialogue with your employees.

The more you can show that you have consulted and listened to employees, the safer the procedure. Consultation is not a box ticking exercise and you must be open to good and innovative ideas as to how to avoid dismissing employees.

Timescale

Do not put pressure on yourselves or seek to rush the consultation, such that employees do not have enough time to consider the information you give them, or their options. That would be judged to be unfair. Currently, the CJRS (furlough scheme) provides some funding for notice periods, so that may be a factor for employers to push ahead with redundancies. If it is, you may need to consider using financial incentives to encourage voluntary redundancies.

Some timescales are of course non-negotiable, e.g. if you are proposing to dismiss more than 20 employees within a period of 90 days or less, you are required by law to conduct a consultation that starts at least 30 days prior to the first dismissal. If it is more than 100 employees, this starts at least 45 days in advance. In both cases, you must also forewarn the Department for Business Energy and Industrial Strategy (BEIS) of the proposal to dismiss those employees using from HR1 which is a Government specified form, again taking into account the same timescales.

NB: these redundancies need a great deal of care, as elections for employee representatives will need to be held and you should carefully prepare a timetable for consultation and the entire process.

Criteria

How you choose the employees to be dismissed by way of redundancy is another pinch point for disputes. Selection criteria are not restricted to objective measures such as attendance records, length of service or qualifications but can also be personal opinions such as flexibility, enthusiasm and helpfulness. NB: those subjective measures almost always provoke disputes if they are not supported by evidenced instances of each of those criteria.

Objective measures are easily evidenced and difficult to dispute. Most employers, however, are easily able to identify their most helpful, adaptable and useful staff. The skill in ensuring that you do not lose these staff lies in articulating the selection criteria, and this in turn must be driven by the needs of the business.

What NOT to do with redundancy

A contrived selection process will stand out like a sore thumb and almost certainly risks a claim.

As Employment lawyers we often see horrors in terms of selecting someone returning from maternity leave in order to keep the person who was covering their maternity leave, selecting someone with a disability because the adjustments needed are considered too much hassle, and also skewing procedures to retain someone who is a “good bloke”/drinking buddy/rugby fan.

Equally, we see people being dismissed for complaining about health and safety issues or their employers failing to comply with the law or legal obligations. These employees are protected under whistleblowing legislation and their dismissals are automatically unfair. Trying to disguise them as a redundancy is likely to be a serious and costly mistake.

Dismissing a group of employees because of a takeover (due to a TUPE transfer), may also result in awards of up to 13 weeks salary to each dismissed employee in addition to their other unfair dismissal award.

Alternative Employment

Employers have a duty to make reasonable efforts to avoid redundancies if they can redeploy employees. You are not expected to create a role just to do so, but it may be the business needs justify redeploying somebody rather than dismissing them.

You will need to disclose any current vacancies that exist as well as ones that are likely to exist in the near future. Remember that employees on maternity leave have preference in these vacancies. In cases where you have more employees than vacancies, or where new roles are created, you can carry out a selection process for the best candidate.

Redundancy Procedures

No single procedure has been stipulated by law. You are expected to comply with the principles set out above and be reasonable. A fair process would include writing to employees at the outset and notifying them of the situation facing the company and putting the relevant employees on notice that they are at risk of redundancy.

Steps for best practice include:

  • Pooling the employees and carrying out a scoring process;
  • Inviting employees who are selected for redundancy on the basis of the scoring exercise to a meeting;
  • Allowing them to bring a companion who is either a trade union representative or work colleague to said meeting;
  • Offering the employee sufficient information and an opportunity to provide you with their views as to how to avoid redundancy;
  • Engaging in a proper consultation with the employees who are at risk and notifying employees of the decision in writing; and
  • Offering an appeal, whilst not obligatory in law, is also best practice.

For more information on how to make redundancy procedures as ethical as possible, please see our previous article. We also have more tips on how to handle the process here.

In setting out the above, I have covered principles from case law and legislation, which I hope I have done in a non-legalistic and user friendly way. My aim is to provide guidance to keep you clear of the main pitfalls. There is however, no substitute for expert legal advice.

How we can help

We understand how important it is to get redundancy right. These are matters involving the livelihoods of people who have often spent years working for an organisation. Even experienced lawyers are challenged by differences in pools and circumstances on many occasions. Employees can access help easily and have nothing to lose in challenging redundancies. Employers should access expert help to ensure fairness and to avoid the risks of Tribunal awards for unfair dismissals.

Our team are experts in this field and can help make the process smooth and fair for both sides.

To discuss redundancy and restructure, please get in touch.