Given the current economic climate, many employers are reformulating their businesses or are aiming to cut costs, which may give rise to more cases of proposed redundancies. We discuss how affected employees can best navigate these uncertain times.
A redundancy situation is rarely welcomed by both employers and employees; they can represent financial hardship, both for employers struggling with profitability, and the inevitable direct impact on individual employees and their families. A redundancy scenario can arise when some or all of the business’s operations are proposed to cease; when a particular site is closed; or if the requirement for employees to perform certain types of work diminishes or ceases altogether. For more information regarding when a redundancy scenario arises, please see: What is and what isn't a redundancy situation.
Employers who propose to make some of their employees redundant must do so fairly to minimise the likelihood of receiving unfair dismissal claims from employees with 2 years’ service or more. Although a redundancy situation is considered a potentially fair reason for dismissal within the unfair dismissal framework, employers will want to minimise any potential liability from the outset. They can do so by following a fair process, properly consulting either collectively or individually with affected employees, and by considering other options, including but not limited to offering voluntary redundancy with the possibility of an enhanced package.
A fair process
Employers have an obligation to conduct a fair process for selecting employees for redundancy and for conducting the redundancy procedure according to fair and appropriate timescales, dependent on the number of redundancies they feel it is necessary to make. As such, the business must consider what type of change it is proposing and how many employees will be put at risk of redundancy. If less than 20 employees are being put at risk over a period of 90 days or less, the employer will need to individually consult them as to the impact on their current job and alternative work that may be available within the wider company or group of companies. If 20 or more employees are being put at risk, their employer must collectively consult via employee representatives, who can be existing trade union representatives or elected from the employee population. This collective consultation will be in addition to individual consultation. Individuals should also be selected fairly, based on an appropriate selection criteria; this should not be based on personal opinion and in selecting the affected employees, the business must fully evaluate their roles in comparison to those of others in the business. Care must also be taken not to apply selection criteria that could have a discriminatory impact, as this could give rise to discrimination claims.
The need to properly consult
Employees must receive notification that their jobs are at risk; in an individual redundancy situation, this could be via a meeting with the manager and individual, possibly also involving a member of the Human Resources department, which is followed up by confirmation in writing. In a collective redundancy situation, the business must make an announcement to affected employees to notify them of their risk of redundancy and must give certain specified information to the representatives ahead of the consultation process starting. This gives employees the chance to prepare for the proposed termination of their employment, whether this is by discussing their options internally or seeking alternative employment.
Affected employees should be invited to a series of individual consultation meetings; in the first of which they should be advised of the business’s proposals which have led to placing their job at risk, why that employee has been placed at risk, and any thoughts or ideas sought about ways they believe could avoid the proposed redundancy situation. A short consultation period is unlikely to be fair and is therefore a high risk to the employer. The Company should discuss the timescales which they propose to work to, and give the employee an indication of the redundancy package they are likely to receive if their employment is terminated. The business should then aim to consult the affected employee via at least two further meetings, to discuss the possibility of alternative employment within the Company or Group, and answer questions from the employee and discuss any counter-proposals that they may bring. The employer must make the employee aware of any suitable vacancies within the Company, as well as within the wider group of companies, should this be applicable. The business should be in constant communication with the employee throughout this period, confirming what has been said in the consultation meeting and inviting them to as many meetings as is required to properly consult with them. If there are no viable alternatives of employment and there are no outstanding queries to answer, the business can supply the employee with details of their termination date, their redundancy payment and any other remuneration owed, and their right of appeal.
Voluntary redundancy and settlement
An employee could reach settlement via two mechanisms. An employer may choose to circumvent the process entirely and offer voluntary redundancy from the outset. Alternatively, an employer may choose to offer voluntary redundancy during the consultation stage. An enhanced redundancy payment would usually be offered in excess of the statutory redundancy payment. Should an employee opt for voluntary redundancy at this stage, they may bypass the rest of the consultation procedure and likely enter into a mutual agreement to record their exit from the business.
For any settlement agreement to be enforceable, the employee is obliged to secure the terms in writing and seek independent legal advice from a local, reputable solicitor or firm of solicitors. By doing so, the employee agrees to waive their right to bringing any claims in exchange for an enhanced sum, as well as any payments owed to them, such as payment in lieu of notice, for any accrued but untaken holiday and/or any other benefits. This can often be a satisfactory solution to employees who can anticipate that they will leave the business anyway, and seek an enhanced payment to tide them over until new employment is found, or to add to their retirement fund.
It is therefore recommended that specialist legal advice be sought by both employers and employees in the event that such a redundancy situation arises and/or the option of voluntary redundancy via a settlement agreement is available.