1 Oct 2008
In the latest column for VBJ on personnel issues in practice, GILLIAN DOWLING looks at the delicate subject of handling redundancy in practice
IN RECENT MONTHS, employers have had to consider making cutbacks, with some business sectors being affected more than others. Making employees redundant is frequently on the employment agenda, but this has its own risks and may not necessarily be the financial solution you hoped for.
Employers who are unused to HR practices may end up carrying out redundancies that are potentially unfair, resulting in unfair dismissal claims being brought by employees at the Employment Tribunal. This is because employers often do not know of the fair procedures that have to be followed in making employees redundant. There are also risks of discrimination claims (such as on grounds of age or sex) and protective awards being made against employers at Employment Tribunals. These awards are made if you make 20 or more employees redundant and fail to consult trade union representatives or elected employee representatives in a non-unionised environment.
Even if you have a small number of employees (or just one person) to make redundant, you still have to follow the correct procedures. It is a common misunderstanding that a redundancy is not a dismissal, perhaps because “being made redundant” does not sound as harsh as “getting the sack”.
To carry out a fair dismissal, the situation in your firm or organisation has to fit within the statutory definition in section 139 of the Employment Rights Act, which, in summary, states that there has to be a diminution or a cessation of work or a relocation. In other words, is the work dropping off? Do you need fewer employees to do the work? It is the post or job that needs to disappear, even if some of the work might be divided up among remaining staff later on.
If you have several employees who all do the same work and you need to select one or two of them for redundancy, you will need to be able to demonstrate the criteria by which you have arrived at your selection. This might include quality of work, time keeping, experience, qualifications and performance.
You must have one-to-one meetings with the employees that you have identified as being at risk of redundancy and be clear as to how you reached your conclusions. It is recommended that employers put together paperwork to back up their reasons for selection and you should obtain further information on how to deal with this so that it is relevant for your organisation. You may wish to refer to appraisal records or disciplinary warnings to ensure that your assessment mirrors earlier evaluations.
If there are opportunities to offer alternative work, you should bring all potential vacancies to the employees’ attention. These stages, including early warning, collective consultation or talking to employee representatives1, the selection process and individual meetings, can take several weeks, if not months – depending on the numbers affected – so patience and procedure are the keys.
Protective awards for the failure to consult elected employee representatives or trade union representatives in large-scale redundancies affecting 20 or more employees are based on 90 days’ gross pay maximum for each employee affected.
Recent average awards quoted have been around £8,000 for unfair dismissal and £10,000 to £15,000 for discrimination2, but there is no cap on the award for discrimination, so a high-earning employee claiming discrimination could potentially have a high level of future losses making up the damages award.
On top of these awards you have to factor in the time spent on, and the costs of, litigation. It is really worth taking advice so that you know how to follow through a recognised redundancy procedure that fits your set of circumstances.
There is no doubt that many employers are getting tripped up by these procedures. Newly released figures by the UK Tribunals Service highlight a 42 per cent rise in claims over the past 12 months3. Although some of these claims can be attributed to multiple equal pay claims being heard by the tribunals, there is a definite increase in the numbers of claims made over redundancy issues. Croner has seen a 50 per cent rise in the claims it handles on behalf of employers over the past three months.
2. Employment Tribunals Service Annual Statistics 2006-7 www.employmenttribunals.gov.uk
3. Tribunals Service Annual Report 2007-8 www.tribunals.gov.uk