Key steps in redundancy

Alison Bell of Bell HR Consulting provides an overview of the key steps in the redundancy process.

Article

7 min read

The impact of COVID-19 has seen even the most profitable businesses having to make some tough decisions in relation to their staff to try and ensure the business remains viable. Whilst this process is never easy to navigate, business owners will hope to be able to minimise any legal risks whilst also maintaining positive relationships with employees who have been impacted by this process.

In this article, Alison Bell of Bell HR Consulting provides an overview of the key steps in the redundancy process and she also focuses on the actions employers should take to ensure employees are treated fairly during this process.

When does a redundancy situation exist?

This question can cause some confusion, it is important to recognise that a redundancy dismissal occurs when there is a reduction in work. If a business owner is considering dismissing an employee due to their individual conduct, performance or attendance this is not a redundancy dismissal.

The law states, a redundancy dismissal will be applicable when an employer has to reduce the size of its workforce. A redundancy situation will occur if:

  • The employer has ceased, or intends to cease, continuing the business; or
  • The requirements for employees to perform work of a specific type, or conduct it at the location in which they are employed, has ceased or diminished, or is expected to.

Whilst the first bullet point is very clear the second bullet point can cause some confusion. It is important that business owners consider this definition carefully before they commence a redundancy process to ensure that the planned dismissals are linked to a reduction in work or a reduction in work at a specific location.

Once a redundancy situation has been identified the business owner should define the business reasons for this situation, the proposed new structure and they should be clear on the business benefits that will be achieved as a result of the exercise before they commence communication with employees.

What factors should an employer consider before they commence the redundancy process?

A redundancy process is more likely to run smoothly if the business owner has taken time to plan it before communications with the team commence. The key areas that any business owner should consider at this stage are:

1) Is there any action that can be taken to avoid redundancy?

For example reducing hours, negotiating a reduction in pay, stopping any planned recruitment, accessing government support schemes.

2) Would it be appropriate to offer voluntary redundancy to the team?

This is not an essential step, but it can be helpful in avoiding compulsory redundancy.

3) What is the revised structure and who is affected by the proposed changes?

At this point it will become clear if a redundancy pool and a selection process is necessary. This is discussed in more detail later in this article.

4) How many staff are expected to be dismissed as a result of the redundancy process?

If this is 20 or more within a 90-day period, then collective consultation rules will apply, and business owners should take advice on how to manage this process.

5) What are the costs associated with the redundancy?

The business owner should estimate the cost of statutory redundancy payments and notice payments at the planning stage and factor this into their budgets.

6) When is the right time to commence communication regarding redundancy?

This decision will very much depend on the individual situation but as a minimum individual consultation will normally take 2 weeks.

How does the employer start communication in relation to a redundancy situation?

The approach to initial communication will vary according to the size of the business and the number of employees affected by the proposals. If the proposals may lead to 20 or more dismissals in a 90-day period there are set collective consultation rules to follow. These rules are complex and will not be covered in this article, however, further detail on collective consultation can be found on the ACAS website.

Assuming the redundancy exercise will result in less than 20 dismissals over a 90 day period the business owner can start the process by communicating the proposals to all employees at the same time. Before COVID-19 restrictions were in place this may have been carried out in a “town hall” style meeting with everyone in the company. Now it is unlikely that employers will be able to do this so communication can take place using video calls or with smaller groups. Initial communication will be followed up with specific communication in relation to the impact for that individual employee. Those who are facing possible redundancy should be sent a letter to confirm their post is “at risk of redundancy”.

Although there are set processes to follow in relation to communication it is also important to consider how individual employees will be feeling about the process. Good clear communication is critical in making sure that employees feel that they have been treated fairly throughout the process. Only communicating via email or letters may be legally fine but is unlikely reduce stress and build loyalty from the workforce.

Is there a set timescale for the consultation process with employees?

Collective consultation rules apply when more than 20 dismissals are anticipated in a 90-day period and there are set timescales for this consultation.

If there are less than 20 dismissals in a 90-day period, then individual consultation should take place. This consultation must be meaningful consultation. This means that employees should be given relevant information, they should be given the opportunity to express their views on the proposals and make suggestions on how redundancies can be avoided.

The employer must take onboard feedback from employees and give it genuine consideration. The consultation process is likely to include group communication and also individual consultation meetings. It is important that employees who are not at work are included in the consultation process. Employers should agree with them how the communication will take place.

Whilst there is no set timescale for individual consultation it is likely that this will take at least 2 weeks. During this time, it is important that no final decision is made on the outcome of the process.

How does an employer choose who will be made redundant?

At the planning stage the employer should consider which jobs are affected by the proposed changes. If this is the closure of a full department then everyone in that department will be put at risk of redundancy and consultation with them will take place and if no alternatives can be found, everyone in the team will be served a notice of redundancy.

This process will become more complex where there is a reduction in work in a specific team but there will be some work remaining.

For example, a company employs a team of 10 administration staff who all do the same job. There has been a reduced demand in the company and there is now only enough work for 7 administration staff. In this case all 10 should be placed in what is known as a “redundancy pool” everyone in the team will be “at risk of redundancy” and a selection process will need to be applied to determine who from the team of 10 has been provisionally selected for redundancy. Those who have been provisionally selected for redundancy will then enter into the individual consultation process.

To determine which 3 people from the team of 10 administration staff the company can use a variety of selection methods. This can be a desktop scoring matrix linked to specific criteria such as skills, experience and past performance or an interview. The criteria in the redundancy selection process should be shared with those who are at risk of redundancy. It is also important to ensure that the criteria the employer chooses to adopt can be backed up with evidence to support any score.

An employee’s scores should be shared with them. If an employee can see evidence to back up scores rather than subjective assessments made by managers they are more likely to feel that the process has been fair. Where possible more than one manager should be involved in the allocation of scores or participation in interviews.

What obligations do employers have in relation to finding alternative employment?

Employers must take reasonable steps to find alternative employment for employees who are at risk of redundancy. In a small business this is likely to be a fairly simple process as business owners will know if there are vacancies and these should be discussed and as part of the consultation process.

This process may become more complex in a larger organisation, but processes should be put in place to ensure those at risk of redundancy are fully aware of opportunities for alternative employment.

One area that is important to note is in relation to those on maternity leave, adoption leave or shared parental leave who are at risk of redundancy. In these cases, the law states that the employer must offer the employee any suitable alternative vacancy that exists. To go back to the example of the administration team. If one of the 10 administration team is on maternity leave when they are placed at risk of redundancy they must be offered one of the remaining 7 posts.

Can redundancy consultation take place during furlough leave?

At the time of writing this article the Furlough scheme is due to come to an end on 31 October 2020. An employer can commence redundancy consultation with employee’s on furlough leave and serve a notice of redundancy when an employee is on furlough leave. It is important to note that redundancy pay is calculated based on normal wages not furlough wages.

For more advice on redundancy or restructuring please speak to your nearest Business Gateway office or contact the Partnership Action for Continuing Employment (PACE) service.

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