Although the term “redundancy” is often used to describe most terminations of employment, it does in fact have a very specific legal meaning. Broadly speaking, a dismissal for redundancy is where a business no longer requires a particular employee. This could be because the particular workplace is closing or it may be because the company is reorganising and as a result of that reorganisation, jobs will disappear.
Dismissal on the grounds of redundancy is fair and a defence to any claim for unfair dismissal. It may be that the redundant employees consider that with a different corporate strategy, the redundancies could be avoided. Employment Tribunals consider that it is management’s job to manage and will not interfere in this process. The law does, however, recognise that whilst the reason for dismissal may be fair, the manner in which the dismissal is carried out may be unfair. It is therefore very important for employers to ensure that the correct procedure is adopted when considering and making redundancies.
The law expects that where an employer has decided that there is a redundancy situation which will involve selecting some employees for redundancy and retaining others, there must be a consultation process before a decision is made and termination notices issued. Before consultation starts, the employer must decide on the pool from which the selection is going to be made. Where there is, for example, an assembly line of ten packers and due to falling orders, only six packers are needed, the selection pool with whom the employer must consult will be the ten packers. It would not be a fair consultation for the employer to decide beforehand the four employees to be made redundant and only consult with them.
Purpose of consultation
The employer has to show that it has selected the employees for redundancy fairly. The purpose of the consultation is :-
- To assist the employer in being able to decide the criteria on which to base its selection
- Discuss ways to avoid the dismissals
- Reduce the number of employees to be dismissed, or
- To mitigate the consequences of the dismissals
Often employers have in mind the employees that they would like to retain and those who they wish to make redundant. Cherry picking in this way without formal selection criteria would be unfair.
The employer is not bound to agree with matters raised by the employees during the consultation but must be able to show that such matters were considered to rebut any suggestion that the consultation process was a sham. The company then has to decide the criteria on which to base its selection (which must be reasonable) and then apply such criteria consistently. The actual selection criteria can vary from company to company but it is better if the criteria adopted can be objectively measured.
Failure to consult
Failure to consult with employees means that the employee has a claim against the employer before an Employment Tribunal for unfair dismissal. It may be difficult for the employer to be able to prove that consultation would have made no difference and so if there is a finding of unfair dismissal, the employee would be able to claim by way of compensation loss of wages to the statutory maximum.
Offering suitable alternative employment
It is also incumbent upon the employer to see if an offer of suitable alternative employment can be made. If any such offer is accepted by the employee, there is no redundancy and the employment is deemed to be continuous, even if a termination notice has already been served. The employee is entitled to a four week trial period in the new job commencing from the start of the new contract and if during such trial period either the employer or the employee gives notice to terminate, the employee will be treated as having been dismissed on the grounds of redundancy.
An employee to be made redundant is entitled to his/her notice period to be calculated either by reference to the contract of employment or by statute, whichever is the greater. Obviously, the employer may either request the employee to work out the notice or else leave earlier and pay salary in lieu. In addition, there is a statutory redundancy payment which must be made by an employer calculated by reference to the age of the employee and the length of service. For example, an employee aged 35 with 6 years completed service is entitled to 6 weeks statutory redundancy payment. Please click here for the redundancy ready reckoner which provides an easy calculation of redundancy payments. The weekly statutory redundancy payment changes on 1st February each year.
The Acas Code of Practice on Disciplinary and Grievance Procedures
Interestingly this Code applies to most circumstances where dismissal is contemplated, but not to redundancy. However this does not mean that employers are exonerated from following any procedure at all – they must still follow a fair and transparent, genuine, consultation process.
Where a company is planning to make 100 or more employees redundant within a period of 90 days or less, the company must consult with “appropriate representatives” about those redundancies at least 90 days before the first of the dismissals is due to take effect. If planning 20 or more (but fewer than 100) redundancies within a 90 day period, the consultation must begin at least 30 days before the first of those dismissals take place.
Meaning of “Appropriate Representatives”
The representatives may be either Trade Union appointed representatives or employee appointed. If there is no Trade Union representation, the employer must consult with employees who have been appointed or elected by the affected employees to represent their interests in the redundancy consultation process. In advance of the consultation deadline, the employer must set aside sufficient time to enable the affected employees to elect or select appropriate representatives and whilst the employer may specify the number of representatives to be elected/selected, it must not otherwise interfere with the process. Once the representatives have been appointed, the employer must disclose to them the following information in writing : –
- Why the redundancies are considered necessary
- The number and descriptions of employees to be made redundant with the total number of employees
- The criteria proposed for selecting the employees who are to be made redundant
- How the dismissals are to be carried out and over what period
- The method to be used for calculating redundancy or severance payments
Both before and during consultations, the appropriate representatives must be permitted a reasonable amount of time off during their normal working hours to obtain the views of the affected employees and report back to them on progress.
Whilst there is nothing legally to prevent an employer issuing redundancy termination notices while consultations are taking place on the basis that these can always be withdrawn before the notice period has expired, such practice could be seen as divisive and damaging to industrial relations.
The employer is still obliged to consult individually with the affected employees notwithstanding collective consultation.
Failure to consult
Failure to consult individually with employees can result in the employee bringing a claim for unfair dismissal before an Employment Tribunal. Failure to consult where there are collective redundancies can result in an Employment Tribunal making a protective award ordering the employer to pay the affected employees their normal remuneration for a period of up to 90 days starting with the date on which the first of the dismissals took effect, although any contractual monies paid in respect of that same period will be deducted.
Informing the Secretary of State for Trade and Industry
An employer proposing to make collective redundancies must complete and file form HR1 at least 90 days before the first of those dismissals is due to take effect for 100 plus employees, or 30 days for up to 20 employees.