The redundancy process

If you are considering redundancies or are an employee at risk of redundancy, Tina Chander from Wright Hassall has some advice about how the process should work.

Redundancy

 

As the likelihood of increasing redundancies grows, Tina Chander, partner and head of employment law at Wright Hassall explains in part one of a detailed guide the process for employers to follow concerning individual consultation. 

Dismissal by reason of redundancy is considered a legitimate reason for an employer to dismiss an employee. Therefore, in a genuine redundancy situation, employees will not be able to bring a successful claim for unfair dismissal providing the employer has followed a fair process leading to the decision to dismiss.

There is a specific procedure that should be followed by employers when they are making individual employees redundant. The law dictates a different, more complex, procedure when large scale redundancies take place.

This does not mean that the procedure for individual consultation for redundancies can be ignored. Once collective consultation has concluded, an employer must make sure that it still consults individually with all employees regarding their potential selection for redundancy. Individual consultation is still essential to ensure that the employer follows an overall fair process in line with employment law.

The individual consultation process

Stage one: Establish whether there is a genuine redundancy situation

For a redundancy to be considered a fair reason for dismissal, an employer must be able to demonstrate there is a genuine redundancy situation.

There will be a genuine redundancy situation where:

  • There is a closure of the business within which the employee was employed;
  • There is a closure of the place of business where the employee was employed to work; and/or
  • There is a reduced requirement for the employee to carry out work of a particular kind.

Stage two: Establish the number of employees at risk of redundancy

The employer needs to decide how many roles it is proposing to remove from its organisational structure.

If over 20 redundancies are being proposed, the employer will need to consider the collective consultation process.

Stage three: Look for alternatives to redundancy

A redundancy is more likely to be viewed as “fair” if an employer has considered alternatives to potential redundancies in advance of making a restructure proposal.

Alternatives to redundancies may be:

  • voluntary redundancies – employees volunteer to be made redundant as opposed to compulsory selection;
  • Reducing hours of work – this can involve short-time working or overtime bans;
  • Temporary stoppages of work – this can involve lay-offs or unpaid leave; and/or
  • Recruitment freeze – not taking on any more employees.

Stage four: Establish a proposal for restructure and its supporting rationale 

An employer needs to identify which “roles” it intends to remove and have a sound justification as to why. Roles can be either “standalone” roles, i.e. where only one role of that type exists in the organisation (e.g. vice-chancellor), or can form a “pool” of roles, i.e. where multiple roles of that type exist (e.g. law lecturer).

If an employer intends to remove a role from a pool of roles, the employer needs to ensure that it consults with all employees within the defined pool before making a selection as to which employee is to be made redundant potentially. If the employer does not add all the appropriate roles into this pool, it risks any redundancies being deemed to be unfair.

There are no fixed rules as to how the pool should be determined. It is up to the employer to decide which roles will make up the pool based on an assessment of which roles represent work of a similar kind.

However, an employer should remember that it should judge the situation objectively and not take personal views of the individuals occupying particular roles into account when creating the pool. Therefore, provided the employer genuinely applies its mind to those who should be in the pool, the Employment Tribunal is unlikely to question the employers’ discretion in this area.

Factors that may be taken into account when considering the pool include, but are not limited to:

  • What type of work is ceasing/diminishing;
  • The extent to which employees do similar work;
  • The extent to which employee roles are interchangeable; and
  • Whether the employer genuinely applied its mind to the composition of the pool.

Stage five: Initial mechanism of informing employees they are “at-risk” of redundancy

The employer can meet with all “at-risk” employees as a group and explain:

  • Why there is a potential redundancy situation;
  • The number of roles that are at risk; and
  • The alternatives to redundancy that the employer has considered (possibly asking for anyone to come forward if they wish to take voluntary redundancy).
  • While it is not imperative that an employer initially meets with employees to explain the situation before formal consultation, many employers do this out of courtesy and to ease the process by providing the employees with as much information as possible and being transparent and open from the beginning.

Regardless of whether or not an initial meeting is held, all employees at risk of redundancy should be informed via an “at-risk” letter to confirm that their role is at risk of redundancy, why this is the case and outlining the consultation process.

NOTE: It is essential that at the initial meeting, everything is presented as a proposal, and it is made clear that no decisions as to any redundancies have been made.

Stage six: Pool of roles

If the proposal concerns a pool of roles and there are more employees in the “pool” than the proposed redundancies (e.g. there are 5 law lecturers, and the employer is proposing to reduce this by 2), the employer must establish selection criteria to be used to decide on which employees will be selected for potential redundancy if the proposal goes ahead.

An employer needs to propose fair selection criteria that it is going to rely on to select those employees occupying roles within the pool that will be selected for redundancy if necessary. The selection criteria should be objective and not based on personal subjective opinion.

Potentially fair selection criteria may include, but is not limited to:

  • Performance and ability;
  • Attendance records; and
  • Disciplinary records,

A common criteria employers favour is the length of service, e.g. “last-in, first-out”. Employment Tribunals have not looked fondly on this as it can be discriminatory based on age. Therefore, if such a criterion is used, it should be used alongside other, more important, criteria or as a tie-break criterion where the scoring of two individuals is equal.

The collective consultation process should be undertaken here if necessary, i.e. where it is proposed that more than 20 roles are to be removed.

Stage seven: First consultation meeting 

Letter: All employees should be invited to attend an initial formal consultation meeting. This should be done in writing (usually as part of the “at-risk” letter), and it is recommended the employee is allowed to be accompanied to the meeting by a Trade Union representative or a colleague.

This letter should make clear that the proposal is subject to consultation and that no final decision has been made at this stage.

If selection criteria will be applied, the letter should also refer to this as this will form part of the consultation.

First meeting consultation: An employer should discuss the situation that has led to the proposal for possible redundancies.

If selection criteria are proposed, the employer should discuss this with the employee. This may result in the criteria being changed from the original criteria proposed.

The employer should ask the employee whether they have any counter-proposals to the overarching proposal and the proposed selection criteria, and if so, ask them to explain these.

The employer may also wish to go through any potential suitable alternative roles and the potential redundancy package with the employee so that, if the proposal is adopted, the employee is aware of their options.

Detailed notes should be taken at this meeting.

Follow-up: Following the meeting, an employer should write individually to the employees who were consulted. This letter should confirm what was discussed at the meeting and, if necessary, invite the employee to a further consultation meeting. A second consultation meeting will be required if counter-proposals were not addressed in the first meeting, and/or selection criteria are proposed.

It is advised that the notes from the meeting are sent alongside this letter to allow the employee to review these. The employer should ask for the employee to sign and return the notes to indicate they accept the minutes represent a true reflection of the meeting.

Stage eight:  If fair selection criteria have been used, the employees must be provisionally scored against these

Once the fair selection criteria have been decided, each employee in the pool must be rated against the criteria to provide them with an overall score. It is advised that this is done separately by two different managers so that the employer can demonstrate the scoring process was objective and fair.

Stage nine: Second consultation meeting

If a second consultation meeting is required, this should be requested via formal invite.

A second consultation meeting is not always necessary. However, the option should be given to employees to ensure that the employer can answer any questions the employee may have following the initial meeting/ the employer can provide answers to any counter-proposals raised.

If the employee forms part of a pool and selection criteria are proposed, a second consultation meeting will be required to discuss the final proposed selection criteria and the employees provisional scored against this. They must also be informed of the highest and lowest scores.

Detailed notes should be taken at this meeting.

Stage ten: Decision on proposal

If, following the individual consultation meetings, an employer believes its original proposal should still be adopted; they will need to inform those employees whose roles will be removed.

Out of courtesy, the employer may wish to meet with these employees to explain the situation and once again run through potential suitable alternative employment and the employee entitlements.

Regardless of whether or not a meeting takes places, the employer must write to the employees to confirm the decision to adopt the proposal and what this means for the individual employee. The letter should cover any potential suitable alternative employment and/or potential confirmation of termination by reason of redundancy.

If there are issues from the second consultation meeting which have not been fully addressed, this letter should also address these.

Importantly, the letter needs to provide the employee with the right to appeal the decision.

Stage eleven: appeal

If an employee appeals the employer’s decision, the employer will need to invite them to attend an appeal meeting, to be chaired by an impartial manager who has not been involved in the process to date. Once again, it is recommended that the employee is allowed to be accompanied to this meeting. Following the meeting, the employer must write to the employee to inform them of the outcome of the appeal. This letter should re-confirm the payments made to the employee if their appeal is unsuccessful.

*Tomorrow: what is suitable alternative employment and should you be offered it if you are at risk of redundancy? For full details on the redundancy process, click here.



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