Employers Beware: Top 5 Redundancy Pitfalls
21 August 2020
Not a day goes by without yet more announcements of job losses. It is estimated that some 175,000 people have already been made redundant this summer, with one in three firms expected to make redundancies by the end of September. Whether your requirement for a certain kind of work has diminished or you simply cannot afford to continue with a part of your business, cost-cutting is often achieved with a cut in headcount.
The redundancy process requires adequate resourcing, not just in terms of paying staff their contractual and redundancy pay entitlements, but also in terms of the time required to carry out a process that can be quite involved. This is more relevant than ever as the furlough scheme is beginning to wind down.
Making mistakes early on can prove expensive, and negatively impact staff morale and even the business’ reputation. So, here are five key areas to watch out for where employers tend to get things wrong:
1. Absence of a genuine redundancy situation
The economic downturn should not be seen as an opportunity to disguise the dismissal of underperforming employees as a redundancy situation. If you cannot show that a genuine redundancy situation exists, you could end up facing expensive legal claims for unfair dismissal.
If you have a genuine redundancy situation, you should still ask yourself: are there any viable alternatives? Rushing into a redundancy process could mean the business loses valuable, highly skilled staff. Could you instead reduce other overheads, suspend recruitment or suspend overtime opportunities?
2. Incorrectly selecting those at risk of redundancy and improper pooling
Many employers stumble at one of the first procedural steps, i.e. deciding who should be placed ‘at risk’ of redundancy.
Fairly selecting who should be dismissed involves the fair application of objective selection criteria to a pool of ‘at risk’ employees - that is, the group of employees from which the business will select those who may be made redundant.
There are no fixed rules about how a pool should be defined, but:
i. Avoid defining the redundancy pool too narrowly or limiting the pool to employees doing the same or similar work. Check if you have employees doing similar jobs, (maybe even at other sites) and think about what employees actually do and whether their skills are inter-changeable.
ii. Make sure the selection criteria are non-discriminatory and don’t result in discriminatory outcomes. Do not select on the basis of pregnancy or age, for example.
Failing to act reasonably at the ‘pool’ stage could lead to complex legal claims for discrimination or unfair dismissal.
As soon as you have decided your pool, make it known: you must give staff as much warning as possible.
3. Failing to offer suitable alternative employment
There is a legal duty on employers to identify suitable alternative employment, not only in the same company but also in any associated company including ones based overseas.
Discuss any roles that might be available even if they involve a reduction in pay or responsibility, or re-training.
Do not assume the individual will not be interested – always bring these vacancies to their attention.
Remember: this duty begins from as soon as you are aware there may need to be redundancies, all the way through to when the employee actually leaves.
4. Failing to collectively consult
Collective consultation is mandatory where the proposal is to dismiss 20 or more employees at one workplace.
There are minimum consultation period requirements: 30 days where the employer is proposing to dismiss 20 to 99 employees within a 90-day period; and 45 days where there are 100 or more employees.
The employer must notify the Secretary of State of its intention to make redundancies of 20+ employees. Failure to do so is a criminal offence and can result in a conviction and an unlimited fine.
5. Not genuinely consulting
Make sure you have not pre-determined that the redundancy will go ahead “no matter what”, otherwise there could be a real risk of unfair dismissal claims.
Have an open mind, do not approach consultation with a “it won’t make any difference to the result” attitude: this could land you straight in an employment tribunal.
Consult at a stage when the proposals are at a formative stage – employees may know the business very well and have good ideas on how to achieve cost efficiencies, or generate new business, which managers may not have thought of.
Finally, the importance of sensitive and timely communication cannot be overstated. Make sure your employees hear the news in the correct manner and through the right channels!
We are ready to advise and support your business. Please contact your usual 3CS contact for more information.
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