Is Redundancy the Only Option for Struggling Businesses?

This article has been written by Arch Risk Management, part of Health & Safety Click. To find out more, visit archriskmanagement.co.uk 

Introduction

When Reduncancy Is the Only Option

Despite redundancy being a difficult route to take, it is a potentially fair reason for dismissal. 

There are three main redundancy situations for most businesses: 

• Total closure of a whole business. 
• Closure of a particular workplace location, affecting employees due to geography. 
• Reduction in the size of the workplace in general. 

It’s worth noting that an employee cannot challenge whether an employer acted reasonably in creating the redundancy situation, and an Employment Tribunal cannot investigate the commercial and economic reasons which prompted a closure or look into the rights and wrong of the employer’s decision. 

However, an Employment Tribunal is entitled to investigate whether the redundancy situation was genuine, and whether the process was fair. 

Getting the redundancy process right is essential and the key areas to ensure fairness is achieved are: 

•  Selection
•  Consultation
•  Consideration of Suitable Alternative Employment

Selection

If an organisation is looking to make redundancies, then they must follow a transparent selection process.  

Any employees under risk of redundancy would usually be placed into selection ‘pools’, with each selection pool of employees including roles that are the same or very similar. Certain roles may be unique and only comprise one employee. 

The criteria for selection should be fact-driven rather than opinion-based. Common examples of the selection criteria include standard of work performance, attendance, skills, experience, qualifications and disciplinary records. Any characteristics based on subjective opinion could result in a discrimination claim. Redundancy criteria based on  age, sex, pregnancy, mobility etc., must be avoided completely. 

Consultation

Consultation requires the employer to carry out “meaningful” discussions with those affected. This should include considering options which avoid employee redundancy, be that early retirement, seeking volunteers, alternative employment, lay off and short-time working. 

Businesses should ensure that any specific redundancy policy  in place is adhered to, as well as checking if they have a collective agreement with a Trade Union on what must be done in these instances. 

There’s no time limit for how long the period of consultation should be. However, there are minimum periods of consultation required before redundancies can take place where 20 or more employees are to be made redundant within a 90-day period. 

This minimum period is 30 days where 20-99 employs are involved and 45 days where there are 100 or more employees affected. When proposing to make 100 or more employees redundant at an establishment within a period of 90 days, notice must also be given to the Secretary of State at least 90 days before.

Collective Consultation

Collective Consultation (20 or more employees affected) is covered by the following specific rules: 

• An employer is only able to carry out collective redundancies after completing the consultation procedure. 
• The consultation should occur between the employer and a trade union representative or an elected employee representative. 
• The employees who are to be dismissed should not be notified prior to the consultation taking place. 

Collective consultations must cover: 

• The reasons for redundancies. 
• Ways to avoid redundancies. 
• How to keep the number of dismissals to a minimum. 
• How to limit the effects for employees involved, e.g., by offering retraining. 

Failing to collectively consult, regarding proposed redundancies, can prove costly including a fine of up to 90 days’ full pay for each affected employee. 

Alternatives to Redundancy

Demonstrating that all possible alternatives to redundancy have been considered is paramount, as an Employment Tribunal will want to see evidence that this has been done. 

Options can include: 

•  Reducing numbers of agency and temporary workers if by doing so this saves the jobs of permanent workers.  
•  Also consider freezing recruitment and overtime.  Although recruitment and overtime may well be justified where this is in areas of the business not affected by reduced needs.  
•  Lay off and/or short time working may well reduce the need for redundancies and the impact upon employees may be considerably less if work picks up within a short period. 
•  Flexible working; agreed changes to working hours; job shares; unpaid sabbatical or career breaks, returning if business increases. 

If the above alternatives don’t prove to be effective enough, then starting any redundancy process by looking for volunteers to begin with would be usual. 

The Right of Appeal

Although there is no obligation in law to allow employees the right of appeal against a redundancy decision, it is nevertheless good practice and is recommended by ACAS. 

Allowing an appeal may serve to fend off any claims for unfairness, given that a reiteration of the reasons behind the decision can be made on appeal. 

Doing It Right

A process that is poorly handled will not only adversely affect the employees concerned but is also a risk to employers. The potential for conflict, unfair dismissal claims, low morale of retained employees and damaged employer reputation can be high. 

It is recommended that businesses seek HR support if unsure of employee rights, or are concerned about an employee making a claim. 

For any further advice and expertise, please speak with your Arch contact about Arch Risk Management services.