December 2020

Making staff redundant – a best practice guide

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By Nick Hine, Principal, Hine Legal Employment Solicitors

For businesses, one of the biggest impacts of the coronavirus pandemic is the reduction in work.

Nearly all businesses have seen a decline in the type of work they do, or a drop in work at certain locations. As a result, several companies have had to consider making staff redundant.

Although the government has announced it will be providing additional support through the Job Support Scheme, businesses are likely to face tough decisions over the coming months.

Redundancy errors could have serious repercussions

For any business considering redundancies, it’s important to not only establish that there is a genuine redundancy situation, but also to get the process right. Failure to do so could have many negative implications, including:

  • Claims being made for unfair dismissal. All employees with two years’ service have protection from unfair dismissal, but a claim can still be made by an employee with less than two years’ service if the dismissal is automatically unfair. An example of this would be if the decision was made for discriminatory reasons, such as making an employee redundant because they are pregnant.
  • If a claim for unfair dismissal is successful, an employee may be entitled to compensation of up to 12 months’ salary, unless the employee is earning more than  £88,519, in which case it is capped at this amount.
  • Even if an employer is successfully able to defend a claim, it’s unlikely that any costs they incur will be recovered because the Employment Tribunal rarely awards costs to the winning party. This means defending a claim can be an expensive exercise, even when successful.
  • If a claim is made and goes to trial, Employment Tribunal Judgements are publicly available online. Naturally, employers will want to avoid this kind of negative publicity because of the damage it may cause to their reputation.

How to implement the correct redundancy process

For these reasons, it’s important to seek legal advice to ensure the correct procedure is implemented.

The first step is to establish whether there is a genuine redundancy situation. This will usually be because of a reduction in work of a particular kind, or reduction in work at a particular location.

If you’re proposing to make employees who perform the same role redundant, you must come up with selection criteria that enable you to score employees and decide who may be at risk of redundancy. It’s important to ensure these criteria are as objective as possible. If the employee is in a unique role, selection criteria would not be required.

If you’re proposing to make more than 20 employees redundant in a 90-day period, this would require a collective consultation exercise which has additional steps and stricter timescales. 

Once you’ve established the selection criteria (if required), you must then arrange the first meeting with the relevant employees to inform them that they are at risk of redundancy. Following this, a letter must be sent to employees confirming the same in writing. If you’re using selection criteria, the employees should be informed of this and given the opportunity to comment.

Once selection criteria have been confirmed following consultation with the employees, you’ll need to score them. Ideally, this will be by a manager who has worked alongside them and understands the requirements of the role.

You’ll then need to hold the first individual meetings with the employees. Following this, a further letter will be sent to the employee confirming what was discussed at the meeting and the next steps in the consultation process. This letter will also include an invite to a second meeting.

Consider alternative vacancies

As part of the redundancy process, it’s important to consider whether there are any suitable alternative vacancies. The employee may also suggest alternatives to redundancy, such as working reduced hours, and these should be considered before any final decision is made.

Employees on maternity leave have enhanced protection in respect of alternative vacancies. This should be factored into the consultation process because a failure to do so could result in an automatic unfair dismissal.

Before the second meeting, the employer should follow up on any points raised by the employee at the first meeting so they can then be discussed. If at the second meeting no alternative to redundancy has been established, the employer will need to confirm the redundancy and follow up with a formal dismissal letter.

The employee then has the right to appeal their dismissal. If they choose to appeal, an appeal meeting should take place. Following this, the employer will need to confirm to the employee whether the redundancy is being upheld or if an alternative can be found.

Getting the redundancy rationale and process right is extremely important to avoid the consequences set out above.

Get in touch

If you require any help with the redundancy process, please do not hesitate to contact us. We provide detailed redundancy guides and prepare all the necessary documentation to ensure a smooth process with minimum legal risks.

Email nhine@hinelegal.com, visit our website at www.hinelegal.com or call 079313609372.