Managing Redundancy | An Essential Guide for Employers
COVID-19 has had a severe impact on all kinds of businesses large and small. While the Coronavirus Job Retention Scheme (CJRS) has helped, it is likely that a significant number of companies may need to reduce headcount to make their company viable long term. It’s essential that employers are prepared and have effective processes in place for managing redundancy. It’s important to avoid any pitfalls, redundancy is a dismissal and therefore opens up risk of unfair dismissal claims and as ever employers also need to be wary of any claims for discrimination.
What is Redundancy?
To start with it is important to understand the definition of redundancy. The statutory definition of “redundancy” set out in the Employment Rights Act 1996, an employee’s dismissal must be “wholly or mainly attributable to”:
- Business Closure (closure of business altogether)
- Workplace Closure (one of several sites, or relocation to new site)
- Reduction of work of a particular kind
Managing Redundancy Processes
Once a potential redundancy situation has been identified, the required process can differ depending on varying factors, to start with the most important consideration is how many dismissals could be made, as if there are likely to be 20 or more in one establishment then there is a statutory requirement to enter into a Collective consultation period.
Collective consultation is required when an employer is considering 20 or more redundancies in a 90 day period. Minimum consultation periods are required;
- 20 – 99 possible redundancies will require minimum 30 day consultation period
- 100+ possible redundancies will require a minimum 45 day consultation period.
A HR1 form will need to be completed and sent to The Redundancy Payments Service (RPS), acting on behalf of the Secretary of State for Business, Innovation and Skills either 30 days or 45 days before the first dismissal takes place and before you issue any individual notices of dismissal.
Appropriate Representatives will also need to be elected. If the employer recognises a Trade Union then the union should be notified. If an employer does not recognise a trade union, or no previous employee representatives are in place, then they must invite the employees to elect representatives.
Redundancy for Under 20 Employees
Where the number of redundancies will be under 20, there is no statutory consultation period, however the employer will still need to show they have meaningfully consulted with the affected employees and it is recommended that the consultation period last around the 2 week mark.
To Pool or not to Pool
Before putting any employees at risk of redundancy an employer should consider if there is a requirement to pool employees. A pool redundancy is where more than one person carries out the role/s being considered for redundancy and only a selection of these will be made redundant. Therefore requires a formal process of selection to be used. Where the role being considered for redundancy is carried out by one person only or all those doing the role are to go, then you should use the Stand Alone Redundancy Procedure.
If a selection criteria is required, consideration should be given to the proposed selection criteria before you commence the redundancy process. The criteria used to select employees for redundancy should be fair, relevant and as objective as possible.
When managing redundancy whatever the length or format of the consultation, it is common to have at least 3 consultation meetings and it is key that the employees are fully aware they are at risk of redundancy and reasoning why. Part of the consultation will be to consider if there are any alternatives to avoid dismissal, if there are not, then it should be clear that the employer has considered all options before dismissal is confirmed.
Employees with Less than 2 Years’ Service
If the employee or employees at risk of redundancy all have under 2 years’ service and the number of dismissals would be less than 20, then a shorter process could be considered, however as always the employer should be aware of any possible discrimination issues.
If an employer is considering redundancies it is always important to seek advice, the above is only summary and each process can vary, in addition to this an employer will need to ensure the correct paperwork is used, whether this be an at risk letter, invite to a final meeting or dismissal letter. It is always important to remember that redundancy is a dismissal and getting it wrong could lead to claims of unfair dismissal, discrimination and/or claims for Protective awards for failure to consult.
Need specific redundancy advice and guidance for your business? Speak to our expert Employment Law team today. We also recommend that you have a look at further guidance on our online COVID-19 Back to Business Advice page.