Redundancy remains a topic that can leave employers not knowing how best to approach it. In this article, we consider what is required at the planning stage of a redundancy programme that is critical for making the process run smoothly, fairly, and most importantly, legally compliant.
One of the most important aspects of managing redundancy is the preparation and planning. Preparation is vital in ensuring that a legally fair process is carried out, and as the saying goes “failing to prepare, is preparing to fail”.
Risks of getting it wrong
Getting the redundancy process wrong or failing to follow a thorough and fair process brings risk to the business. Not only can an employer face claims of unfair dismissal, but can also face claims of discrimination, perhaps where an unfair selection process has been used. It can even lead to claims of a breach of contract, where for example, notice hasn’t been correctly served.
There have been some very public displays of what can happen when a business handles redundancies wrong. P&O Ferries became a case study on how not to manage redundancy dismissals, following the way in which they dismissed 786 employees back in March 2022.
The company paid all 786 employees a settlement pay-off payment and then recruited agency staff to replace the employees but paid under the UK national minimum wage, causing an online frenzy and an extremely damaging time for the company.
What is a fair dismissal?
To be able to successfully defend an unfair dismissal, there are two hurdles an employer must get over. The first being that the reason for the dismissal was for one of the recognised fair reasons.
The second hurdle, and perhaps the most difficult to defend, is whether the dismissal was reasonable. Consideration would be given to whether a proper procedure was followed and if so, was the decision to dismiss within a band of reasonable responses. Only if it were beyond what a reasonable employer would have done, can a tribunal conclude that a dismissal was unfair.
Each dismissal is going to have its own set of circumstances. What is reasonable for one employer, may not be reasonable for another. Reasonableness is not defined in law; it is only for a tribunal to conclude what is.
Costs associated with tribunal claims
It is costly for any employer to be faced with an employment tribunal claim, and in addition to the potential award, there are other costs involved:
- Damaged reputation and bad publicity for the company.
- Social media can be instrumental with how news is cascaded into the community. Any negative content can deter potential future employees from wanting to join your business.
- Costs associated to defending a claim.
- Cost of lost management time and effort in preparing for and attending the tribunal. It is not unusual for several members of the business to be in attendance, whether in the capacity as a witness, or there to represent the business and support employees who are.
The business case
With redundancy, it is very rare for a tribunal to involve itself in assessing whether the business case for the redundancy was correct and appropriate. An employer is entitled to assess and determine whether a proposed redundancy process is vital to the ongoing operation of the business.
However, a good solid business case can have a significant impact not just on how employees react to the news – if they can understand and appreciate the reasons, they are more likely to support the business.
In the absence of a good business case employees may not be convinced of the genuine reasons for redundancies being considered and are much likely to challenge the process at all stages. They focus on the process that is undertaken in response to the business circumstances.
At the early stages of reviewing your organisation structure and planning proposed steps it is a good idea to plan for how you will carry out the process. There are several legal steps that must be covered and having a plan of action and anticipated timescales helps the process to run smoothly and be legally compliant.
An unfair process can lead to an unfair dismissal and significant costs even if the business rationale is sound.
Guide to mitigate against the risk of an unfair redundancy dismissal
Here are just some of the ways in which an employer can mitigate the risk from an unfair dismissal claim when handling redundancy. It would be impossible to have one definitive list since each case is going to have its own set of circumstances.
The items here are very much process related, however, where you will also need to be reasonable is around the questions and discussions that arise from the consultation process and not just what your response is, but how you reach that response.
- Always follow your own redundancy policy; if you do not have one, consider how you have handled redundancies previously especially in terms of pay.
- Establish the business case.
- Write to those affected explaining the business rationale, the anticipated numbers, the pool being drawn (where there must be a reduction in numbers), the proposed selection criteria, the process you intend to follow along with the timetable.
- Ensure you comply with the statutory consultation timescales.
- Where you have less than 20 roles at risk of redundancy can you demonstrate that you have “meaningfully consulted”?
- Through consultation, explore whether you can seek volunteers.
- Consider whether there are ways of avoiding redundancies.
- Consider alternative employment (including suitable alternatives, which is a role of comparable terms).
- There is an obligation on employers to offer suitable alternative employment to an employee whose job becomes redundant whilst on maternity leave. The priority for those on maternity leave is the one area of discrimination law where employees receive additional legal protection.
- Ensure there is a fair selection process free from discrimination.
- The decision on who is redundant must only be made once consultation has closed.
One of the most important aspects of managing redundancy is the preparation. Preparation is vital in ensuring that a legally fair process is carried out.
This month, we hosted a webinar which considered what is required at the planning stage of a redundancy programme to make the process run smoothly, fairly and within the law.
If you would like to watch this webinar on demand, you can do so here.
Join us next month for our webinar: Working with Trade Unions.
Following the pandemic, we have seen an increase in Trade Union membership and we expect this to continue given the cost of living crisis and the threat of a global recession.
It is understood that in the latest released figures, that 40% of trade union members work in the private sector.
Join us in this webinar as we look at how an employer can effectively work with a Trade Union, including how to deal with a request for recognition, what is meant by collective bargaining and how to manage the relationship between both parties.
Sign up for this webinar here.