Redundancy is one of the fair reasons for dismissal but it must fall within the statutory definition (in s.339 of the Employment Rights Act 1996 (ERA)) and the selection of employees for redundancy must follow a fair procedure.
There are a number of legal pitfalls for the employer in the redundancy process. These are highlighted below.
- Ensure that it is a proper reason for redundancy.
Two major reasons that can give rise to the need to make redundancies:
- closure of a business and/or workplace — where a business comes to an end and/or the place of work closes
- decrease in the need for employees — where there is no longer the need for employees who do a particular kind of work or the need for employees is expected to diminish. In other words, a need for fewer employees to carry out work of a particular kind.
- Consider alternatives to redundancy
- Draw up a plan.
Draw up a draft plan of what is to be done and in what order, including briefings with the staff and consultation. An accompanying flowchart can show the timing of the consultation meetings and when those staff eventually chosen for redundancy will receive their redundancy payment and notice pay.
You must not make final decisions about which employees are to be made redundant at an early stage — always refer to them as being “at risk” until the notice of termination is served — see below.
Ensure that all staff, including those absent (for whatever reason, but particularly those on maternity leave) are informed in good time of the impending redundancy situation and how it will affect them.
- Selection pool.
Identify a fair selection pool for redundancy. You can choose the pool but staff may challenge it.
- Selection criteria.
Determine the redundancy selection criteria. You must use “Objective Criteria” to select employees who are potentially “at risk” of redundancy — for example, length of service, conduct and disciplinary record and skills for the future.
As only five or six employees are “at risk” of being made redundant, the collective redundancies consultation procedure (where 20 or more employees are to be made redundant in a period of 45 days or less) is not engaged in this situation.
However, you must embark on meaningful individual consultation, where you explain the need for a redundancy situation and that the employee’s job is at risk. This should be a two-way dialogue with the employee on a number of issues (see below) and aimed at finding ways of avoiding dismissal.
- Suitable alternative work.
You are required to explore with the employee the possibilities of alternative work within the organisation. This can be done during the consultation. If a suitable job is found, the employee must be offered the new contract of employment before the previous one comes to an end.
- Notices of dismissal.
You must not send out dismissal notices until the consultation has taken place. Remember that the affected employees have a right to appeal against selection for redundancy.
- Prepare for the future.
Redundancy is meant to help get the organisation/business back on track. The original plan (see above) should indicate how the business will operate after the redundant staff leave. The employer needs to communicate a vision for the future of the business to the staff that will be staying. This can boost morale at a difficult time.