Redundancy Planning – Top Tips

The Background

Some employers have already had to make redundancies.

As the Furlough scheme winds down many more employers will be faced with the same difficult decision.

Most employers are good people who will make redundancies only as a last resort and will want to deal with them as sensitively and compassionately as possible.

However, we mustn’t forget that many businesses have been badly affected by the pandemic and their first priority will be to make sure that the business can survive and rebuild as the economy starts to reopen.

In this short piece we set out some guidance for employers on how to plan for and implement redundancies.

What are the numbers?

If you are making 20 or more redundancies at one establishment you have to engage in “collective consultations” with representatives of affected employees, before you can start individual consultations and then move on to dismissals.

What is one “establishment”?

Normally, one site or one location. But, it could be a number of sites, aggregated together. If, for example, we have a number of sites under central management and control they might, together, be treated as one establishment.

Normally employers will try to avoid aggregating sites if possible because, if they can limit numbers at each site to less than 20, they can avoid collective consultations.

What are collective consultations?

An additional layer of consultations before we can start individual consultations.

Who do we consult with?

Representatives of affected employees, if affected employees are unionised, we consult with the trade union. If affected employees are not unionised, we consult with any “Employee Forum” with standing to represent employees in this situation.

Or, if neither of those situations applies, we consult with elected representatives of the affected employees. This is the most common situation. In this situation we have to give affected employees the opportunity to elect representatives. Often, employees are happy to informally nominate representatives and are not bothered about an election. Once we have representatives to consult with, we will send a detailed letter to them.

This is a fairly standard letter, which we can amend and add to depending on the particular circumstances. Normally, we will give a copy first to all affected employees, to inform them and explain about elections and the process. We will also need to complete and file form HR1 and provide a copy to the representatives.

We can then hold our first consultation meeting with the representatives and continue discussions until we decide that collective consultations have ended. However, we must try to reach agreement.

We cannot terminate the employment of any affected employee within 30 days of starting consultations if we are making less than 100 people redundant – 45 days if making 100 or more redundant. Once collectives have finished we can then move on to individual consultations.

If we get any steps wrong we could face a financial penalty of up to 3 months’ pay for each employee. Often, employers do get something wrong because, for example, we are on a tight timetable imposed by Head Office and we rush things or miss something.

If we can avoid collective consultations by limiting the numbers or separating out sites we should try to do that.

Is there or is there likely to be a redundancy situation?

If we are looking at a smaller number of redundancies the next thing we should do is work out whether a redundancy situation actually exists or will exist.

What are we actually doing here?

Are we reducing the number of employees?

Or, are we just changing some of their duties?

Sometimes, we put everyone at risk and ask them to apply for new jobs

Maybe we want to remove some jobs from the current structure and create some new jobs, but the new jobs are not very different from the jobs being removed

If we are doing something like that then it probably isn’t redundancy

It might be better to just to talk to the affected employees and get them to agree to the changes

If they refuse we can look at termination because they refuse to agree and changes are necessary

The point, really, is that we need to be clear about what we are doing

Making redundancies?

Or, asking people to change their jobs – duties – and dismissing them if they cannot or will not do it?

Why does it matter?

If we make someone redundant but the Employment Tribunal finds it wasn’t in fact a redundancy situation the dismissals could be unfair.

For example, we haven’t followed the proper process and/or we should have given them an opportunity to agree to changes to their roles

One final point

Are we outsourcing the work they do?

Is that the reason why their jobs are going?

If so, there may be TUPE issues

Redundancy Policy?

Do you have a redundancy policy and is it binding?

If you do, and it is, it might tie your hands as regards things like selection criteria or oblige you to pay enhanced redundancy payments.

Redundancy policies are a bad idea.  If you don’t have one, don’t introduce one.

Should we invite volunteers for redundancy?

Unless you are bound by a redundancy policy, it may not be a good idea.

Think carefully before asking for volunteers.

You may get volunteers who you do not want to lose or who will cost you a lot in notice and redundancy pay.

But, in some situations, it can reduce the number of compulsory redundancies – e.g. if employees have indicated previously or at the start of this particular process that they would be interested in leaving on agreed terms.

Do we need a Pool?

If we need to make some compulsory redundancies, do we need to create one or more pools and then select the required number of redundancies from the pools?

We will not need a pool if all employees at risk are in unique roles. We can move straight on to consultations.

We may need a pool if we need to make a number of redundancies and some or all of the affected employees are doing the same or similar work.

It maybe, therefore, that we cannot avoid a selection for some employees

But, we do have flexibility as regards keeping some people out of the pool and safe from selection.

E.g.  People who have certain skills or experience, or a relationship with particular customers, or certain technical knowledge, which we cannot afford to lose from the business.

Selection criteria

If we have a pool we need to devise criteria against which we will score each employee in the pool.

These days it isn’t necessary to have objective criteria – such as discipline; attendance; productivity.

Those criteria were appropriate in a different era – industrial era – where components of the job could be measured objectively.

We may want to use more nuanced criteria which accurately assess employees’ ability to perform key functions of their roles.

To help ensure impartiality, if our criteria are subjective, and involve managers making judgments, we should use two assessors/scorers.

Consultations

Once we have done our provisional scoring/selecting we then need to get on with actually implementing the redundancies.

We need to consult with individual employees.

If we have a pool we don’t need to consult with everyone in the pool – just those selected.

As a general rule, consultations should be for a minimum of a week or two – unless an employee wants to short cut it.

Termination

We will confirm termination in writing, offer an appeal, and set out financial entitlements including notice and statutory redundancy pay.

Settlement Agreement?

At the first meeting we could offer an enhanced redundancy payment – in the event they are made redundant – provided they sign a Settlement Agreement.

We can include this in the initial letter.

We aren’t prejudging the consultation process, just offering something extra in case they end up being made redundant.

Most people will want to accept the extra money and cut short the process.  This saves us time and ensures there isn’t a claim at the Employment Tribunal.

Alternative Employment

We have an obligation, in relation to employees selected for redundancy, to look for any available vacancies within their skills and capabilities, in the company and any associated companies.

We may have to do some interviewing if the number of redundancies exceeds vacancies.

Trial Periods

Where we offer suitable alternative employment and the employee accepts, they have a 4 week statutory trial period in that job.  If it doesn’t work out either party can end the trial and the employee will receive their redundancy payment.

Planning

The key to success in making redundancies is careful planning.

Choreograph the whole process and prepare draft letters and meeting scripts before we speak to the first employee.

Help and Advice

If you have to make redundancies as a result of Covid 19 or otherwise please give us a call or send us an email and we can have an initial chat with you, without any charge, to talk through what you have in mind and how we can help.