As businesses are being forced to make tough decisions in the wake of the pandemic, redundancy will be the only option for some. With circumstances already difficult, avoiding employment law claims for failing to follow the proper redundancy procedure is essential.
If an employee is made redundant without the correct process being implemented, the most common legal claim would be for unfair dismissal. However, a redundancy exercise may give rise to many different claims, including discrimination, whistleblowing and unauthorised deductions from wages.
To avoid legal claims, businesses need to go through the stages of planning, selecting and consulting with employees before a redundancy can be finalised. This will especially be the case where the employees concerned have more than two years of employment when they leave, as they will have unfair dismissal rights.
Redundancy law is complex and drawn from both legislation and case law. Each case will differ. However, the basic process should include the following steps:
The planning stage
Before starting the process to make an employee redundant, a business should consider whether there are any other options available to save people’s jobs. This could include retraining, moving to a different department, reduced hours, stopping overtime or offering early retirement.
It is important not to breach legislation or employment contract terms when considering alternatives however, and it is wise to seek advice before speaking to employees.
Using fair criteria to select people for redundancy
An employer has a duty to act fairly and select a pool of people to be considered for redundancy. The pool should include those doing similar work to the jobs that are no longer needed as well as those doing the same job but on different shifts or even at other sites.
If a single unique position within the business is no longer needed, then the employer still needs to consider whether the individual has to go. This involves examining whether that person’s job is interchangeable with another one and, if so, a pool may be necessary.
Criteria that can be used in selecting candidates for redundancy include skills, experience, standard of work, aptitude for the job, attendance and disciplinary record. The criteria used must be seen to have been applied objectively and consistently.
Businesses should be aware that in some instances, a criterion may be inadvertently discriminatory. For example, ruling out part-time workers or those who are flexible could discriminate against women because part-time workers or those with limited flexibility are mostly female. As another example, making a choice based on attendance could discriminate against someone with a disability who has been unable to work because of this.
Avoiding preferential treatment
Those involved in the selection process should be made aware of the risk of preferential treatment. This could arise inadvertently, for instance, if the selection process is not adjusted to take account of a disability.
Employees can be made redundant while on maternity leave, but they must still be consulted and go through a fair selection process. They may be entitled to preferential treatment in the event that an alternative suitable job is available, with the right to be offered the position first, ahead of other staff members.
For more information, see our article Maternity leave and redundancy.
Asking for volunteers
There is no legal requirement to ask for volunteers and if you believe that the wrong employees will offer to go, you may wish to avoid this step. If you do ask for volunteers but then decide to choose someone else, people may be resentful.
If you are prepared to accept volunteers however, the selection process can be avoided or the number being chosen reduced, which can help with morale.
Entering into a consultation process with employees
Employment law states that for the redundancy to be fair, an employer must consult with individual employees, so this must be done where the employee has been employed for more than 2 years and so has unfair dismissal rights.
The consultation process must be meaningful and, if appropriate, carried out in accordance with the contract of employment or employee’s handbook.
Redundancy consultation procedure for less than 20 employees
Where less than 20 jobs are to go, employees should be notified of the proposal to make redundancies with reasons and offered a consultation meeting.
Redundancy consultation procedure for 20 or more employees
The rules are stricter when 20 or more employees are at risk. Collective consultation must take place with either a representative of a recognised trade union or an elected representative of those facing potential redundancy.
The collective consultation process must begin at least 30 days before the notification of redundancies for dismissals of 20-99 employees or at least 45 days before if 100 or more employees are affected.
Employees should be made aware of the selection process and criteria.
They must also be told the number of proposed redundancies, the type of jobs which are at risk, the reason these jobs are no longer needed, the procedure that will be followed by the employer in completing the redundancies and how redundancy payments will be calculated.
The process must be completed before notices of redundancy are issued.
Failure to conduct a meaningful collective consultation can result in the employer having to pay compensation of up to 90 days’ pay for each employee.
Considering whether suitable alternative employment is available
The employer must consider whether there another suitable job available for the employee. If so, the employee can have a trial period to decide whether the switch is viable. If the employee declines a suitable role, they may lose any entitlement to redundancy pay.
Making redundancy payments
Employees who have two years’ continuous service are entitled to statutory redundancy pay as follows:
- Half a week’s pay for each year of employment up to the age of 22;
- One week’s pay for each year worked between the ages of 22 and 40;
- One and a half week’s pay for each year over the age of 41.
The maximum that will be taken into account is 20 years, with a statutory maximum limit of a week’s pay (currently £538 per week). The maximum statutory redundancy pay after 5 April 2020 is £16,140.
Redundancy rights, to include payment rights, are not affected by the furlough scheme. This means that if an employee is made redundant while on furlough, they will still be entitled to the statutory redundancy payment, to be calculated with reference to pre-furlough pay levels.
If an employer wishes to avoid the redundancy process, an alternative is to enter into a settlement agreement with an employee. The employee would agree to leave and in return the employer would pay them, usually a higher sum than that to which they are entitled under redundancy legislation.
They may also agree certain terms within the agreement, such as not to work for a competitor and to keep any information about their employer confidential.
To find out more, see our article, Settlement agreements – everything you need to know.
Legal advice from a specialist firm
Redundancy law is complicated and mistakes can be costly. It is always advisable to take legal advice before starting the process and also if you are contemplating settlement agreements.
At Springhouse Employment Solicitors we have extensive experience of dealing with redundancy and offer specialist legal advice for employers. If you would like to discuss your situation and how best to proceed to protect your rights and interests, our experienced employment law solicitors will be happy to help. Contact us today by ringing 0800 048 5888 or fill in our contact form. Our team is ready to give you clear, accurate advice.