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Ask the expert: How do I handle potential redundancies?

Question: Unfortunately, due to current pressures caused by the coronavirus, I need to reduce my staff costs. How should I handle potential redundancies?

Answer: Catherine Kerr, Partner and Head of Employment
Primas responds:

“Given all that is going on at the moment, with the world facing unprecedented changes due to the coronavirus outbreak, businesses are struggling financially. As a direct result of this, there may be a requirement to reduce headcount and this could potentially mean making redundancies in your place of work, whether now or in the months to come.

“However, the Government is encouraging all employers to make use of its Coronavirus Job Retention Scheme and consider the option of a “furlough employee”. Meaning that an employee who is at risk of redundancy due to the COVID-19 crisis is sent home with no work on an unpaid basis but retained as an employee on your payroll. The Government is offering to pay up to 80% of the wages of a furloughed employee for a period of 3 months from 1 March 2020 subject to a monthly wage cap of £2,500.

“Arguably, the scheme to furlough staff is a measure to avoid redundancy and if an employer unreasonably refuses to furlough; and dismisses staff on the grounds of redundancy; the redundancy dismissal could potentially be deemed unreasonable and unfair. Redundancy is meant to be a last resort.

“If redundancy is your only option, as an employer, it is very important to ensure you follow the correct procedure to protect both yourself and your employees.

Ensure there are good grounds for making a redundancy

“When considering making a position redundant, it is important to fully assess the matter to make sure you can justify the grounds on which you as the employer have decided to terminate a contract. This will help to avoid claims of unfair dismissal in the future. In simple terms, an employee may be redundant if their place of business no longer exists (or is about to no longer exist) or if their role within the business no longer exists.

Have a selection criteria in place

“Making decisions about redundancies is never easy, and so having a process to refer to simplifies things – both when making and justifying certain decisions. Criteria for this should be objective and consistent.

“Examples of this could include;

  • Attendance/disciplinary history
  • Skills and experience
  • Standard of work and aptitude for work

“However, it is important to ensure that the criteria by which you determine redundancies is not misconstrued as being discriminative. For example, younger employees could feel discriminated against as they have less experience, so a length of service selection criteria is probably best avoided if possible.

Give the option of voluntary redundancies, where possible

“If it is possible, giving employees the option of taking voluntary redundancy should always be offered as a measure to avoid compulsory redundancy. For some, the potential of a redundancy package may be attractive, and this will also help reduce the disruptive effect redundancies can have on your workforce.

“If there are multiple volunteers, the employer can select using a fair and reasonable selection criteria.

“Be mindful, however, that this can cause further potential difficulties, as those volunteers may be some of your more highly skilled and experienced staff, and you could end up losing staff you’d like to keep hold of. That’s why not all businesses invite volunteers for redundancy.

Suitable Alternative Roles

“Before an employee is made redundant, it is important to consider whether there are any suitable alternative roles within the business that the employee could apply for as an alternative to redundancy. There is no obligation on an employer to create new alternative roles. It only applies to any roles that may exist during redundancy consultation.

Have a fair procedure in place

“Ensure that you follow a fair and reasonable redundancy consultation and selection process as well as a fair dismissal process. Otherwise, the money you save by making redundancies could quickly become tied up in employment tribunal litigation.

“This includes:

  • A general meeting with all staff to inform them that the business will be engaging in redundancy consultation with affected members of staff and explain the business’ reasons for the decision.
  • Depending upon the number of employees that may be dismissed, an employer will need to engage in redundancy consultation either individually or with elected employee representatives.
  • Objective redundancy selection criteria should be applied to help fairly select employees for redundancy. If there are any suitable alternative roles within the business, then an employer should conduct interviews.
  • Employees should be informed of their right to be accompanied to the final redundancy consultation meeting by a colleague or trade union representative and advised that a potential outcome of the meeting could be their dismissal on the grounds of redundancy. It is also sensible to set-out what their redundancy package would look like e.g. statutory redundancy pay or contractual redundancy pay (if the employer offers an enhanced package).
  • An employee that is dismissed should be given the right to appeal the dismissal and the appeal should be managed by a manager not previously involved in the redundancy process.
  • Remember to detail all invitations to redundancy consultation meetings in writing and detail the outcome of the meeting also in writing.

“Redundancies are never an easy decision to make for any employer, but it is really important to follow a fair and reasonable process so that people know where they stand, should the situation arise.

“At such uncertain times, businesses should consider the above approaches and ultimately make decisions based on what is essential for the continuation of their business.”

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