Redundancy – An Overview

By Rachel Davis

Principal Associate

As a result of the Coronavirus (COVID-19) pandemic, many businesses are experiencing a serious decline in revenue and are being forced to reconsider their spending, with the emphasis on reducing costs in the short to medium term.

One major cost in most businesses is the cost of employees. Although the furlough scheme, which was introduced to avoid redundancies, may be extended to run beyond June, it cannot be indefinite, and businesses now need to start planning a transition towards a ‘new normal’ as the lockdown is eased.

The last resort that an employer will consider for managing a short-term impact on its business will be dismissal on the grounds of redundancy. The need to reduce the workforce as a result of COVID-19 is, regrettably, likely to cause a genuine redundancy situation for most businesses.

Employees with two years’ continuous service or more have protection from unfair dismissal. Providing there is a genuine redundancy situation and employers follow a fair dismissal process, claims for unfair dismissal can be avoided.

Although employees with less than two years’ service do not have protection from unfair dismissal, and are not entitled to statutory redundancy pay, they do have certain rights from day one, including protection from discrimination and whistle-blowing (making a protected disclosure).

The key elements of a fair redundancy process are warning employees of redundancies, creating and applying a fair and non-discriminatory selection criteria, consulting with employees and considering suitable alternative employment options.

There are different procedures for smaller-scale and larger-scale redundancies.

Fewer Than 20 Redundancies

Roles to be Placed at Risk of Redundancy

To start a redundancy process, you should first determine which roles will be placed at risk of redundancy and the cost of this. If several people perform the same or similar job within the area of the business where changes need to be made, these individuals should be included within a ‘pool’ of people ‘at risk’ of redundancy.

The ‘pool’ of people should then be notified that they are at risk of redundancy. A letter should be sent to each individual confirming that they are at risk of redundancy and explaining the reasons for the proposed redundancies.

Selection Criteria

You should determine the criteria to ‘score’ employees against in order to decide who will be made redundant. This should be drafted according to the skills and qualifications required going forward and criteria should include things such as absences, lateness and disciplinary outcomes. Each employee in the pool at risk of redundancy should be scored against the selection criteria. The scoring should be as objective as possible and, if possible, completed separately by at least two managers to ensure objectivity.

Consultation

Consultation is a key part of the redundancy process as it gives employees the opportunity to comment on and influence the proposed changes before they take effect.

Individual meetings should be held with each employee to personally discuss their situation. Individuals should be given the opportunity to comment on the selection criteria, ask questions, challenge plans and suggest alternative options. You should consider and respond to any comments and suggestions. A second consultation meeting may be held where employees are told how they have scored and given the opportunity to respond.

Considering Alternatives

At all stages of the redundancy process, you should consider alternatives to redundancy. A suitable alternative role must be similar in regards to the skills required and terms and conditions.

Redundancy Dismissal

Once all alternatives have been considered, those employees who have scored the lowest will be selected for redundancy. These employees should be informed in writing that their role has been selected for redundancy, confirming their leaving arrangements and redundancy terms. They should also be given the right to appeal.

Appeal

If an employee appeals the decision, an appeal meeting should ideally be held by a different person more senior to the person who carried out the redundancy process and the outcome confirmed in writing.

Redundancy Pay

Employees who are made redundant are entitled to the following payments:

  • Salary to date of dismissal
  • Notice pay
  • Payment for accrued but untaken holiday
  • Redundancy pay based on age, salary and length of service (for employees with more than two years’ service)
  • Any additional payment due under the employment contract

Managing Redundancies on a Large Scale

If the company is proposing to make 20 redundancies or more, within a 90-day period or less, there are some additional procedural requirements to follow.

You must notify the Secretary of State for Business, Innovation and Skills. Notice must be given at least 30 days before the first dismissal for 20-99 proposed redundancies and at least 45 days before the first dismissal for 100 or more proposed redundancies. Failure to do this is a criminal offence.

You should also carry out collective consultation with all those employees affected by the proposals. Collective consultation should be done with appropriate employee representatives including recognised trade union representatives or elected representatives.

If you have any queries or concerns regarding redundancy please contact Rachel Davis on 01279 712582 or via email rd@nockolds.co.uk.