Managing Redundancies in the Right Way

Posted: 10 Sep, 2020

Managing redundancies is not an easy process and is stressful for everyone involved. Even more so when the process is hampered by distance and face-to-face meetings are difficult. But last month, the OECD predicted that unemployment in the UK could rise to 11.7% by the end of the year, or 14.8% if the country suffers from a second wave of infections.

Some of the UK’s biggest businesses including BP, Rolls Royce, HSBC, Boots, John Lewis and most airlines have announced extensive job cuts and more are likely to follow.

The furlough scheme, which has been propping up 9.3 million jobs, is already easing off in the run up to its end in October and those businesses that have been hard hit by the pandemic are assessing whether or not they can afford to keep all their employees beyond October.

For those that decide they can’t afford to keep all their staff, redundancies will have to be made, and the process must be managed in the right way. To avoid unfair dismissal claims and employment tribunals it is vital that redundancies are handled carefully and follow the correct procedures. While large companies will have a dedicated HR department to ensure correct processes are followed, many SMEs will not so here is an overview of a fair redundancy process:

 

Adopt fair selection criteria

It is key that leaders focus on roles and not people since it is the roles that can no longer be justified. First, managers should categorise the roles and assess the number of people in each role that need to be retained. Then they must decide on the selection criteria that will be used for assessing individuals. The criteria used should be objective and fairly applied and may take into account skills, length of service or simply be on a last in/first out basis.

When considering selection criteria, it is also important to be aware of the statutory requirements surrounding redundancies. Some of the key ones include:

• Notice Periods: If someone has been employed continuously for 2 years, at least one week’s notice is required, plus one week’s notice for each year of continuous employment up to a maximum of 12 weeks’ notice.

• Redundancy Payment: If employed continuously for 2 years, employees are also entitled to a statutory redundancy payment which is calculated based on length of service, age and a week's gross pay (subject to statutory caps).

• They also have unfair dismissal rights and can bring claims where the dismissal was unfair – which is why it is so important to conduct a fair dismissal process.

 

Consultation

Once the selection criteria have been decided on, employees must be provided with all relevant information and be given an opportunity to provide feedback and propose options such as salary reduction or part-time working. This consultation process, before making any final decisions, is the cornerstone of a fair redundancy process. For it to remain fair, it is important for the business leaders not to predetermine the outcome and to remain open to alternatives and suggestions that come up during the consultation. Business leaders might also suggest their own alternatives like a willingness to consider other forms of contract such as zero hours or flexible working.

The consultation process varies according to the number of employees planned for redundancy. Where an organisation plans to make 20 or more redundancies at a single establishment within 90 days, the consultation process must be on a collective basis. This means that the organisation must consult with the recognised trade union(s) or must consult with employee representatives that are elected by the employees. For between 20 and 99 proposed redundancies the consultation must begin 30 days before the first dismissal takes effect and for 100 or more proposed redundancies the period before the first dismissal takes effect must be 45 days. The organisation must also notify the Redundancy Payments Service (RPS) using an HR1-form (Advance Notification of Redundancies form).

If planning to make fewer than 20 redundancies in a 90-day period, there is no such need to notify RPS but good practice involves following the consultation process to ensure that it is centred around the principle of fairness. So, while there is no statutory requirement to follow a prescribed process business leaders should make the announcement that redundancies are needed to everyone at the same time to ensure that the message is the same for all. While this might be uncomfortable for many managers, it avoids an unfair challenge on the basis that individuals have been pre-selected for redundancy.

During Covid-19, this means that many businesses will have to communicate the message as part of a video meeting perhaps via Zoom or Teams. While everyone has become comfortable with video meetings over the last few months, having conversations about redundancy that aren’t face-to-face is extremely challenging. But never-the-less, an all team video meeting to communicate the need for redundancies to everyone, at the same time, is important.

Then, employees need to be consulted on an individual basis to communicate and discuss the employer’s proposals and consider alternatives. In this consultation, the company would usually explain the business reasons for redundancy, possible ways of avoiding redundancies, the proposed pools of at-risk employees and the selection criteria.

 

Make a decision

Having fully considered any alternatives and feedback that came up during consultation, the decisions about who to make redundant must be made. In order to ensure a fair process, they must strictly follow the selection criteria and scoring process. If not, employees with at least 2 years of continuous employment can make a claim for unfair dismissal. As with many matters that could end up being scrutinised, the criteria, meetings and decisions must be documented so there is evidence of having followed a clear and fair process.

 

Communicate the decision

Finally, once the decisions have been made, business leaders meet with each employee to go through the decision and to provide information about any ongoing support that the business might provide. This meeting is never easy and will be even more difficult if it has to be conducted over video. But ultimately, if the business has followed a fair process, it shouldn’t come as a surprise to the employees affected.

 

For more information on the correct way to handle redundancies, and the laws governing them, find the Government’s advice here. And if you’re being made redundant, make sure you know your rights.

 

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