Redundancy is one of the most traumatic events an employee may experience.
The announcement of redundancies will invariably have an adverse impact on morale, motivation and productivity.
PLANNING & COMMUNICATION - the watchwords of good redundancy
management.
What is Redundancy?
A person is dismissed by reason of redundancy if the dismissal is due to the fact that the employer :
– Is ceasing or intending to cease to carry on the business or
– Is ceasing or intends to cease to carry on the business in the place where the employee was employed or
– Has a reduced requirement for employees to carry out work of a particular kind.
The Legal Position
Both statute and case law determine redundancy obligations and rights. The main legislation governing redundancy includes:
• The Trade Union and Labour Relations (Consolidation) Act 1992
• The Collective Redundancies and Transfer of Undertakings (Protection of Employment) Regulations 1995 (SI 1995/2587)
• The Employment Rights Act 1996
• The Collective Redundancies and the Transfer of Undertakings (Protection of Employment) (Amendment) Regulations 1999 (SI 1999/1925)
• The Collective Redundancies (Amendment) Regulations 2006 (SI 2006/2387).
Managing a Redundancy
Planning and Communication - the watchwords of good
Redundancy management, taking into account all legal requirements
and consultations.
To effectively manage a redundancy process you need to:
• Plan ahead –set a timeline- train and support managers
• Communicate effectively
• consult employees
• Identify a selection pool and use objective selection criteria
• Consider suitable alternative employment for “at risk” employees
• Ensure a transparent and fair procedure is followed at all stages
• Provide counselling and support to “leavers”
• Look after the survivors
• Comply with all legal and “best practice” requirements
Planning -
• Establish formal procedure on redundancy
• Where you are using an external outplacement provider, get them involved early.
• Ensure that senior managers are committed to the change.
• Train Managers to handle redundancies with sympathy and clarity.
• A well-designed redundancy programme should enable employees to refresh their interview skills, redraft CVs and reply effectively to job advertisements.
• Keep everyone motivated throughout the uncertainty of change and help leavers to find new work while at the same time achieving re-engagement from disenchanted survivors.
• Plan ahead - Although the pressure to make quick job cuts may be intense, step back and think about how best to retain business critical skills and people, without generating unfair dismissal claims.
• Set a timeline -As far as possible, create a clear timetable of events and stick to it. The more clarity you can provide during this time of uncertainty, the less people will be prone to panic.
• Support managers - Brief line managers and supervisors ahead of making any announcements and help them to develop answers to any questions they anticipate being asked by employees.
Communications with staff-
• Provide reassurance
• Don't assume that those employees not directly affected by redundancy won't take fright and take flight. Encourage the senior management team to reassure critical people.
• Communication should be formal and regular, whether delivered via news bulletin or face-to-face. Even if you have little to say, say it.
• Any silence is likely to be interpreted as the worst-case scenario, impacting negatively on morale and productivity.
• Redundancy involving more than 20 employees - the employer must complete form HR1 and send it to the Department for Business, Energy & Industrial Strategy (BEIS)
Breaking the News
• Explaining the process
• When announcing redundancies, create a clear and consistent message to relay to staff and bear in mind that the reaction of most people will be to panic and assume it will affect them.
• Clearly explain the business reasons behind the decision to make the redundancies, the selection criteria to be used, the timelines involved and severance arrangements
Seeking volunteers
Once need for redundancies has been identified and careful planning has taken place, offer a voluntary redundancy package – this may avoid compulsory redundancies altogether.
Consulting employees
Collective consultations with recognized trade unions or elected representatives - at least 90 days beforehand for dismissals of 100 or more employees and at least 30 days before notification of redundancies for 20 –99 employees.
Consultation must be full, genuine and meaningful.
Collective consultation must be completed before notice of dismissal is given to any of the employees concerned.
Failure can lead to Employment Tribunal award of up to 90 days' pay.
Information to be given to representatives:
• the reason for the redundancy dismissals
• the number of proposed redundancies and their job types
• the total number of employees affected
• the proposed methods of selection
• the procedure to be followed in dealing with the redundancies
• the method of calculating redundancy payment.
Employers are also required to consult individual employees and give them reasonable warning of impending redundancy.
Selection Pool:
· Always identify the selection pool carefully.
• Will usually consist of those who undertake a similar type of work in a particular department, who work at a relevant location, or whose work has ceased or diminished or is expected to do so.
• Owing to age discrimination legislation, ‘last in, first out’ (LIFO) now a risky selection method.
• Case law has held that LIFO may still be relevant as part of a wider range of selection criteria but must not be used as a sole method of selection.
• Selection procedures based on a points system which scores each employee against the relevant criteria can be used.
• Be careful in the choice and application of the criteria to avoid factors which may be discriminatory on any grounds- consider equality impact assessment.
• Criteria should be objective wherever possible.
• Scoring should, if possible, be carried out independently by two managers who know all employees in the selection pool. The marks from the two assessors should then be added together to give a total score for each employee.
• Automatically unfair to select employees for redundancy for a number of reasons including:
trade union membership (or non-membership)
part-time status
pregnancy or maternity-related reasons
sex, sexual orientation, marital status, disability, race or religion.
Dismissals:
• Once consultation and selection is complete, notify individuals selected for redundancy in writing.
• Invite “at risk” individuals to a meeting. An employee is entitled to be accompanied at all individual consultation meetings by a trade union representative or colleague.
• Follow this up with at least one further consultation meeting.
• Actual number of meetings will depend on what the employee has to say.
• Employer must be seen to consider any argument that the employee puts forward.
• If employee to be made redundant, notify employee in writing and explain about redundancy payment.
Redundancy payment
• Dismissed employees with two or more years’ service are entitled to a minimum redundancy payment based on a formula similar to the basic award for unfair dismissal.
• Maximum statutory payment but employers may pay more than the law prescribes.
Suitable alternative employment
• Employers must consider offering “at risk” employees suitable alternative work
• The law removes entitlement to a statutory redundancy payment if an employee unreasonably refuses a suitable alternative.
Employee entitled to a four-week trial period in a new role. If the employer and employee then agree that the role is not a suitable alternative, the employee reverts to being made redundant.
Key Points:
• Clumsy redundancy handling - bad for employer’s business and reputation.
• A demoralized workforce - not likely to display commitment, enthusiasm and initiative.
• In any redundancy situation - immediate priority is the fair and sensitive treatment of employees who are losing their jobs. Once this has been achieved the organization’s ongoing effectiveness is largely dependent on the morale of the survivors.
• Senior management should ensure that managers have, or develop, the necessary personal skills and attitude to operate effectively during periods of traumatic change.
• Employees must be given notice of their redundancy – statutory notice or contractual notice, whichever is greater.
• Manage redundancies legally and in a way that minimizes the inevitable adverse impact on both those who lose their jobs and the ‘survivors’ .
• Always allow employee to appeal against the decision to make him/her redundant.
• implement communication strategies to ensure that everyone in the organization has the correct information about the reasons for redundancies.
• Giving notice is unpleasant and can be badly handled. Employees can be badly affected by redundancy and need support to accept reality and mount an effective job search.
• Where possible, outplacement advice should be offered to employees leaving the organization to maintain their morale and help them find alternative employment.
• To prevent a major dip in customer service and productivity, try and make anyone selected feel like it's an opportunity to move onto better things - not the end of their world.
• Providing a budget for career counselling, to help individuals think about and plan their future, will prove a sound investment.
Don’t forget the Survivors:
• Ways to ensure you keep your talented and pivotal ‘survivors’ comes down again, to good communication and management.
• Engage survivors - Maintain regular communication with employees across the business after the exercise is complete, to address concerns about their role and the future of the business.
• Tangible incentives such as financial ones can be used, but sometimes it is as simple as managers and the business listening to and acknowledging their concerns.
• A sustained and well-timed exit programme will create a more controlled approach to new career options to the individuals affected,
• Keep the business running and establish networks with the outside.
• It will also send a very positive message to remaining employees should they fear redundancy in the future.
Changing the Culture:
• The unsettling effects of redundancies can have long-term effects on a business if not dealt with in the early stages.
• Don’t stop communicating with staff or allow the grapevine to go unchecked with rumours - they need to be regularly informed of changes.
• Regular briefings will ensure that new visions and values are embedded early on to take the business forward in the right direction.
• A development plan for staff demonstrates to them that they are essential to the future of the business, as well as allowing them to acquire key skills that are vital to its success.
• The training budget can be an easy target for cuts in these troubled times but it's also a great way to boost engagement levels and get everyone behind the new forward-thinking business.
• Introducing lower cost methods of development and knowledge transfer can help maintain standards without cutting corners
If working with the Unions:
• Normal reaction of the unions will be to resist any proposed redundancies and challenge the selection criteria.
• You need to recognise that union representatives are just as, if not more, likely to be approached by employees seeking reassurance about their future.
• Therefore, you must involve the unions in the briefing process and provide them with the same information and support to answer employees concerns and worries as managers.
• By giving union representatives an opportunity to access information and become a part of the support process, you will help them to help address any employee concerns or worries.
We are taking calls daily from clients in these uncertain times.
If you need advice on re-organisation and redundancies, how this may affect your business or if you need assistance with reviewing your contracts of employment or preparing letters or other communications to your staff, call our Coronavirus Helpline on 01234 938089 or e-mail us at enquiries@purebusinesslaw.co.uk and one of our Helpline team member will be in touch.
We are specialist Employment Solicitors based in Bedford and operate nationally.
Pure Business Law is regulated by the Solicitors Regulation Authority and is a licensed member of the Law Society of England & Wales.
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