Managing Redundancy

Your business might need to make redundancies but how do you handle it?

Furlough might have delayed the need to manage redundancy and the difficult decisions about the prospect of needing to let people go. But we’re already in the second quarter of the year and steadily heading towards September when the scheme ends. That means many businesses are approaching the time when they need to face up to the very upsetting possibility of having to make redundancies in their business. The need to manage redundancy correctly is key to minimising risk to your business.

It’s an emotional and unsettling prospect and can feel like quite an intimidating situation to be faced with. No one wants to have to tell people they are losing their job and no employer wants to make reductions.  It could mean the loss of valuable knowledge, skills and experience. But sometimes you might be at the point where it looks like compulsory redundancies are a necessary step for survival.

So where do you go from here?

Can you avoid compulsory redundancies?

While you might be fairly certain that you will need to make compulsory redundancies, you must devote time to thoroughly exploring whether in fact there are any other options available to you that will mean you can avoid or reduce the number of them. There are other ways that cost savings can be achieved, such as through overtime restrictions, or reducing hours or salaries with employees’ consent. When you manage redundancy, consider laying off employees where only a statutory guarantee payment will be due. Although employees might be able to claim redundancy pay if this situation runs beyond 4 consecutive weeks.

When managing redundancy, it’s worth being open to requests for voluntary redundancy and early retirement too. While that might not completely solve the problem, and there will need to be careful balancing depending on the skills the company needs to retain, it can help reduce the number of compulsory redundancies you might need to make.

It looks like it’s a genuine compulsory redundancy situation – what next?

That step should make it apparent that there is a clear business case that justifies the need to make compulsory redundancies from your perspective.

You will then need to identify where the reductions are likely to come from and what the number of redundancies are expected to be at this stage. In some cases it will be very clear cut. Perhaps there is a cost-saving opportunity from outsourcing a very specific activity and removing an in-house department. But in other cases it may be less defined. So you must work through a process based on clear business reasons about where the reductions will need to be made.

This will help you identify the redundancy selection pool – but keep in mind that a selection pool is not automatically confined to people doing those particular roles at that point in time. At this stage you are deciding which roles are affected – not which people. There may be others capable of doing that work, and the people doing the roles that are affected might be able to do other roles too. This all needs to be taken into consideration. Of course, the reverse might apply; if a highly specialised role is likely to be made redundant there may be very few people in the pool.

Check for any specific requirements and agreements relating to any aspect of the redundancy process that may be set out in a redundancy policy or an employee’s terms and conditions of employment. Failing to take these into account could mean you put your company at risk of an employment tribunal.

How long should you consult for when managing redundancy?

The number of anticipated redundancies will determine consultation periods and the nature of the consultation – no notices can be issued until this stage is completed.

If you are expecting to make 19 redundancies or less, it can be done on an individual basis with no minimum length of consultation period – but consultation still needs to happen and it must be done in a fair way that leaves enough time for the individuals to respond and to have their thoughts taken into account. We generally advise a period of approximately 2 weeks for less than 20 or more proposed redundancies from the announcement to the point of serving notice.

If 20 or more jobs are at risk then collective consultation rules apply and the consultation period must be for a minimum of 30 days. If 100 or more jobs are at risk, that increases to 45 days. You’ll need to notify the Redundancy Payments Service if collective consultation rules apply, and may need to conduct the consultation with union or elected employee representatives too. If you’ve made other redundancies in the 90 days prior to this round of proposed redundancies, they need to be factored into these numbers. You can’t carry out a consecutive series of smaller scale redundancies to avoid collective rules.

While it’s generally better to conduct consultations face to face, there isn’t a legal obligation to do so. And in current circumstances, it might be safer not to if both parties are happy to conduct discussions remotely.

Communicate, communicate, communicate

Managing redundancy requires communication and it’s vital that as soon as you are able to do so, you start to communicate with employees. Make sure they are updated regularly on an ongoing basis. They need to know the reasons for potential redundancies, what is expected to be the impact on the business, who will be affected, and how these processes will be applied in the selection stage, including timescales and the nature of support available as these details are decided.

Keep an open mind when managing redundancy

Although you will have done a lot of work up to this stage to determine the numbers at risk, remember that nothing is set in stone. A proper consultation requires a mindset that is completely open to the possibility that alternative solutions could be identified during the consultation stage. You might end up revisiting ideas you had at the very start that didn’t seem viable then – but it could be that through the process of talking to others, new ideas and approaches are found.

Going through the redundancy selection process

Be objective when identifying the redundancy selection criteria that will form the basis of the redundancy selection matrix. Criteria must be carefully thought through and be justifiable as a basis for identifying who to make redundant from the pool. Make sure these criteria are agreed upon in the consultation and shared with employees and then applied fairly and consistently. Be very careful – it is essential to avoid any form of discrimination throughout this step.

Once selections are made, notify affected employees. This will need to be done in writing along with the issuing of redundancy notices. But best practice is to also talk to employees about the decision that’s been reached. Make sure employees are given the correct amount of notice relating to the length of their employment and confirm to them when their last working day will be. You will also need to calculate and let them know the redundancy pay they will be entitled to (if any depending on their length of service) and pay in lieu of notice if applicable – make sure you fulfil your statutory obligations along with any other enhanced entitlements set out in company specific agreements.

While there is no statutory right of appeal, again, check whether any such provision is made in your redundancy policy and employee terms & conditions of employment. You might decide that it’s something you want to do as part of this process anyway and have outlined that at the start. And of course, if an employee believes that there has been an unfair selection, they can raise an appeal or grievance on this basis too. Make sure that you keep detailed and accurate records all the way through, including all correspondence between you and those who leave as a result of the process.

Redundancy processes can be a minefield

While this article has aimed to give you a general overview, the reality is that there are a huge number of variables at play when dealing with redundancy. And if you fail to conduct any part of the process correctly, you could leave your company exposed to claims of unfair dismissal and discrimination and end up in an employment tribunal potentially facing unlimited awards.

You’ll find more thoughts about handling redundancy during a pandemic in this blog. But in these features, we can only cover the basics. So, if you’re in a situation where you think you might need to consider making redundancies, talk to us. We work with small and medium companies around the Leicestershire and Midlands area, offering HR advice and expertise to companies with around 20 to 150 employees. When it comes to redundancy there is a lot to think through and keep track of which is why it can be invaluable to have that expert help – so please do get in touch with us to find out more.

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