Redundancy situations can 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 if you are contemplating making redundancies within your organisation.
Restructuring and Outsourcing
A company may, for any number of reasons, make a decision to spread the work from one role to several roles or outsource some work so that it can adapt to changing circumstances.
There are times when, such as now, extremely difficult financial circumstances arise, the economy falters and as well as the risks faced by your organisation, there is an opportunity to reflect and make some important decisions to restructure, remodel or refocus what you do, and even where you do it.
Whilst these actions may fall within the scope of a redundancy, there are strict legal tests to be met and a restructure may fall short of satisfying them. A dismissal in this scenario 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 tribunals will be live to the use of SOSR to avoid legal obligations. Due care and legal advice should therefore be taken into consideration.
When it comes to outsourcing, if you are looking at transferring certain services to a third party, you may fall within the scope of the Transfer of Undertakings (Protection of Employment) (TUPE) laws. TUPE imposes specific obligations on employers, with significant penalties potentially arising for a failure to comply, so again, specific legal advice should be taken to make sure you don’t fall foul of them.
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.
If the number of people who carry out the same or similar work in your organisation is being reduced (but not eliminated entirely), 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 and provided you can demonstrate a fair rationale for your decision, a tribunal will generally be reluctant to interfere with how an employer has devised its selection.
Note that if you are looking at making an employee who genuinely has a unique role redundant, you would not need to look at pooling that individual with others.
Do bear in mind that employees at risk of redundancy will be looking to make the pool as wide as possible, to reduce their chances of being selected. Particular in these days of remote working, you may 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.
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.
In smaller scale redundancies, you will have greater freedom over how long consultation lasts but you should certainly expect to allow at least a week, probably two. Some timescales are of course non-negotiable. 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, consultation must start 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 form HR1 which is a Government specified form, again taking into account the same timescales.
Collective redundancies like these need a great deal of care, as there are also requirements around employee representatives (who may need to be elected) and you should carefully prepare a timetable for consultation and the entire process.
How you choose the employees to be dismissed by way of redundancy is another pinch point for disputes. It is generally best to ensure that your selection criteria are based on objective measures such as attendance records, length of service or qualifications. However, more subjective criteria can be included such as flexibility, enthusiasm and helpfulness. Do bear in mind that the use of these more subjective criteria almost always provokes challenge from ‘at risk’ employees if they are not supported by documented evidence.
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 specific pieces of 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 in the context of 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.
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 you may need to look at whether you could redeploy somebody rather than dismissing them.
Generally speaking, and unless you have an internal policy that requires otherwise, you do not need to ring-fence roles for employees at risk of redundancy. However, you will need to disclose any current vacancies that exist as well as ones that are likely to exist in the near future. Be wary of manipulating the timing of your redundancy process to avoid having to disclose a vacancy. Women on maternity leave already have a prior right to be offered any suitable alternative employment which may be available where a redundancy situation exists. The Protection from Redundancy (Pregnancy and Family Leave) Act 2023 extends that protection to start at the point at which a woman notifies her employer of her pregnancy through to six months following the end of her maternity leave. Though the underlying regulations are not yet in force, you can read more about these coming changes here.
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.
For redundancy exercises affecting fewer than 20 roles, no single procedure has been stipulated by law. You are expected to comply with the principles set out above and be reasonable.
Steps for ensuring a fair process include:
- Putting together a business case setting out why the potential need for redundancies has arisen;
- Being open and transparent with affected employees about the situation facing the company;
- 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;
- Exploring all reasonable options to avoid making redundancies, including the possibility of redeployment;
- 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, this would be best practice).
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 with our Employment Team and we would be happy to help.