Redundancy.

Redundancy is the use of words or data that could be omitted without loss of meaning or function; repetition or superfluity of information. Today at Humba-HR-Consultants we are looking at this topic in depth and what can be expected when this unfortunate process is initiated in your organisation.

Redundancy is one of the most traumatic events an employee may experience, but the negative effects can be reduced by sensitive handling of redundant employees and those remaining. You’ll find here information on termination of employment, voluntary redundancy; redundancy pay; redundancy counselling; out placement; selection for redundancy; downsizing and redeployment.

What is redundancy?

An employee is regarded as redundant where a dismissal is wholly or mainly attributable to:

• Move of place of business
• This is where an employer moves, or intends to move, the place of business from the place where the employee was employed. 
• The test here is where the employee worked, not where they could be required to work under their contract of employment. 
• Whether the move is sufficient to warrant a redundancy situation is based on the distance between the old and new premises, and the level of inconvenience to the employee.

Cessation of business

This is where an employer has ceased, or intends to cease, to carry on the business for the purpose for which the employee was employed. It also applies if the part of the business where the employee works is closed, but the rest of the business continues.

Surplus labour ;

This is where an employer requires fewer employees to carry out existing work, or there is less work for existing employees. An Employment Tribunal will not simply look at the actual work the employee was doing at the time of dismissal, but also the work they could be required to perform under the contract of employment. Redundancies can arise out of a work re-organisation where fewer workers are needed because of the introduction of labour-saving devices or where different skills are required.

An employee would not be regarded as redundant where a dismissal is wholly or mainly attributable to:

• Transferring night-workers to day-workers;  
  
• Changes to a shift system to promote efficient working;
• Reduction of Overtime.
• When it comes to redundancy, it is vital to follow the correct procedure, including the correct redundancy consultation process.
• A genuine redundancy situation can result in a finding of unfair dismissal at Employment Tribunal if you do not adhere to the correct processes.
• To ensure you follow the correct procedures it is advisable to take legal advice from specialist redundancy solicitors when considering making any employee redundant.

While the right to claim unfair dismissal only arises after one complete year of service, including the statutory notice entitlement not the contractual period, selection for a discriminatory reason can result in a claim from the onset of the employment relationship. We therefore strongly advise a best practice approach for all employees.

When a redundancy situation arises, the following steps should be followed.

Advanced warning:

Make sure you give employees sufficient advance warning of the impending redundancy situation and the fact that it may affect them. It is advisable for this to be confirmed in writing in the form of an ‘at risk’ letter. Ensure employees who are absent for whatever reason, including maternity and disability reasons, are also contacted.

Fair selection: a selection pool:   

In some instances, there will only be one employee potentially affected by redundancy and therefore there will be no need to identify a pool for selection. For example, a local office may be closing where only one employee works. In all other cases, you should identify a pool of employees from which to select those who are potentially redundant. The type of work the employees do will be important and the pool of employees must relate to the reason for the proposed redundancy. For example, it would be inappropriate to include canteen or administrative staff in the pool if you needed to reduce the number of shop-floor workers.

You are entitled to determine the makeup of the pool. However, it may be advisable to consult with employees beforehand and reach an agreement on its correct membership. You can create a number of pools to reflect redundancies being made in different parts of the business and at different levels.

Redundancy selection criteria:

Once the pool has been agreed, you should determine how employees will be selected from that pool. A list of criteria should be drawn up to reflect the employer’s business priorities in order to retain the best employees.

Criteria must not be discriminatory and must be capable of objective assessment or measurement. In particular, attention should be paid to avoid indirect discrimination. For instance, could your criteria have a disproportionately adverse effect on an ethnic group, gender group or disabled person? For example, criteria based on flexibility in working hours might adversely affect single parents – a greater proportion of which are women – and this may constitute indirect sex discrimination.

A dismissal will be automatically unfair if the employee has been selected for an inadmissible reason, for example, because the employee is pregnant. No qualifying period of continuous employment is needed for an employee to bring a claim where it is alleged that they have been selected for an automatically unfair reason.

Last in first out, or ‘LIFO’ has previously been a popular sole selection criterion. While this method is both simple and, on the face of it, fair, it may not produce the desired result for the employer. By using this method, you may lose the employees best able to drive the business forward. It may also indirectly discriminate against younger employees. Length of service should therefore only be used as one of a number of potential criteria which can be weighted according to priority. LIFO should not be given the greatest weight.

It is advisable to consult with employees as to the criteria to be used, explaining:

• How the proposed system will work;
• Why the criteria have been chosen;
• Why some criteria, if any, are weighted.
• Give employees time to consider the proposals and comment on them.
• You should carefully consider employees’ responses and act accordingly (for example, amend the criteria, or explain why the criteria are not to be amended).

One commonly used system is point scoring. There will usually be several criteria, including:

• Skills needed to take the business forward;
• Performance;
• Flexibility;
• Disciplinary record;
• Sickness record (discounting any periods of absence for disability- or pregnancy-related reasons);
• Length of Service.
• These should be applied to all employees in the pool, and scores allocated for each employee. 
• Criteria may be weighted to reflect those values which hold the most value to you. 
• Totals can then be added up and compared. 
• Avoid potentially subjective criteria if these cannot be assessed on the basis of existing records such as appraisals.

Redundancy consultation process:

You must enter into meaningful and proper consultation process for redundancy with employees selected for potential redundancy. A meaningful redundancy consultation process means more than simply informing the employee(s) of a decision already made. You need a two-way dialogue with the objective of finding ways of avoiding the dismissal if at all possible; for example, job sharing, sabbaticals and a reduction in hours. At least two individual consultation meetings are recommended. Employees are entitled to know why they have been selected for redundancy and to see their selection scores.

Alternative employment

The employer must make genuine efforts to ascertain whether suitable alternative employment exists within the employing entity of any associated company. Suitable alternative employment, if available, should be offered during the course of the redundancy consultation process.

Before dismissing on grounds of redundancy

You should not give the employee notice until the consultation process has been completed. And any contractual redundancy procedure must be followed in addition to the above.

Before effecting any dismissal it is important that in addition to the above you send a written statement to the employee setting out the reasons they have been selected for redundancy. The employee must be invited to attend a meeting with the employer, where they are entitled to be accompanied by a chosen representative. This is usually a work colleague or trade union representative. After the meeting you must inform the employee of your decision and notify them of their right to appeal the decision.

Key points

Good communications and consultation between management and employees can help an organisation get through the redundancy process.

Employees have the right not to be unfairly selected for redundancy.

Employees may be entitled to a statutory redundancy payment and notice.

Redundancies can happen when employees are dismissed because their job no longer exists, for example when:

• new technology makes a job unnecessary
• an employer needs to cut costs and reduce the number of staff
• the employer needs to close the business.

Although, an employee will need 2 years service for a redundancy payment, dismissal due to redundancy can happen at any point, the fairness of a dismissal may be challenged if an employee has at least one year's continuous service for employees in employment before 6th April 2012 or two years for employees starting employment on or after 6th April 2012, however if the redundancy dismissal was due to asserting a statutory right e.g. requesting flexible working, then no fixed length of service is required.

Collective Redundancies

Where an employer is proposing to dismiss as redundant 20 or more employees at one establishment within a period of 90 days or less, they must follow a collective information and redundancy consultation process in addition to the redundancy procedures above.

The law requires employers to consult about the dismissals with all ‘appropriate representatives’ of those who may be affected by the proposed dismissals. The redundancy consultation process should cover and seek to reach agreement about ways to:

Avoid the dismissals;

Reduce the numbers of employees to be dismissed;

Mitigate the consequences of the dismissals.

In addition, employers should disclose in writing to the representatives:

Reasons for their proposals;

Numbers and descriptions of employees they are proposing to dismiss as redundant at each and every establishment;

Proposed method of selecting the employees who may be dismissed;

Proposed method of carrying out the dismissals including the period over which they will take affect;

Proposed method for calculating any redundancy payments.

Where special circumstances render it not reasonably practicable for the employer to comply with these requirements, they need to take all reasonably practicable steps in the circumstances. The failure of an employer to follow collective redundancy consultation obligations leads to additional awards known as ‘protective awards’.

Compromise Agreements

There are some situations where you might want to consider offering a Compromise Agreement to employees you are making redundant. For example, where you and your employee agree that this is the best way to end the employment relationship but neither of you want to go through the process, which usually takes about a month. You may also want to repeat post termination restrictive covenants contained in your employee’s contract to ensure they do not contravene them.

A Compromise Agreement ensures those dismissed by reason of redundancy do not bring claims against you for unfair selection/dismissal. This may require you to pay a contribution towards their legal costs as a Compromise Agreement must be ‘signed off’ by an appropriate legal adviser.

It is usual to offer an ex-gratia payment over and above their statutory redundancy payment as an incentive for them to waive their rights to bring a claim over and above their statutory and contractual rights. Although we all think and wish that redundancy never comes to us its bound to happen to either you or someone very close to you. So we urge employees to fully know the concept, if not for you then your loved ones so that it will not destroy them emotionally.