Redundancy, Restructure & Re-organisation

In the current difficult economic climate more and more employers have to rationalise their overheads and this often means a reduction on head count.  Already advice help lines, such as ours, are seeing a vast increase in the numbers of calls on this subject.

Legislation and case law set out very clear requirements employers must follow is they are to avoid costly unfair dismissal claims for failures in handling redundancies.

Redundancies may be the result of the business (or a part of it) closing down, a reduction in the number of employees required for a particular type of task, where work is reorganised/reallocated or the business restructured.

Employers must submit form HR1 to the Secretary of State where they are proposing to dismiss as redundant 20 or more employees in any period of 90 days or less before redundancy notices are issued. Failure to do at the right time could lead to conviction and a fine of up to £5,000.

Employers must then begin a process of “meaningful consultation” with appropriate representatives of those employees potentially affected - note the use of the word potentially.  These obligations apply even where the actual number made redundant is mitigated by redeployment or falls short of the number anticipated.

Where an employer recognises a Trade Union for Collective Bargaining Rights the appropriate representative is an authorised official of that trade union, even where they are recognised for a particular group in the work force and not another.

Where no such recognition exists the employer must consult with either existing workplace representatives or facilitate free and fair elections for appropriate representatives elected for the task.

In such cases the employer must:

• Determine the appropriate number of representatives to be elected and the appropriate length of office of such officials ( usually until consultation is fully completed);
• Ensure that the candidates for election are part of the affected group at the point of the election and that no affected employee is unreasonably excluded from being able to stand for election;
• That affected employees are permitted and able to cast their votes in secret;
• That votes are counted accurately and results fair.

Elected representatives are entitled to time off with pay during normal working hours to:

• participate in the election process;
• for training for, and full participation in, the consultation process;
• reasonable access to both facilities and affected employees for the purpose of carrying out their duties.

The employer must disclose to the appropriate representatives (in writing):

• the reasons for the proposals;
• the number & description of employees likely to affected at any one establishment;
• the proposed method of selecting employees at risk;
• the proposed method of affecting redundancies;
• the proposed period over which redundancies will be carried out;
• the proposed method for calculating payments due to affected employees.

The length of the consultation period is determined by the number of proposed redundancies:

• 20-99  - at least 30 days;
• 99+ - at least 90 days.

Redundancy notices cannot be issued until the appropriate period has fully lapsed and consultation been fully completed. 

An employee who accepts an offer of redeployment is legally entitled to a trial period in the new post of four weeks.  This may be extended by written agreement between the employer and employee.  Employees who subsequently feel unable to fulfil the requirements of the new role may, within the trial period, elect to take their redundancy payment.

An employee who unreasonably refuses an offer of suitable alternative employment may lose the right to a redundancy payment.

An employee must have completed 2 continuous years of service with the employer to qualify for a redundancy payment, with any payment dependent upon age and length of service.  More info can be found here.

There are no deductions for tax or NI from a redundancy payment of up to £30,000.  The current limits on a weeks’ pay and redundancy can be found here.

Employers need to find a fair and justifiable manner for selecting those employees to be made redundant if they want to avoid costly litigation for unfair dismissal based on unfair selection (which would be deemed an automatically unfair dismissal).  Where the overall aim to reduce headcount rather than to close and entire unit/section employers will need to:

• Identify the appropriate pool for selection;
• Develop selection criteria and scoring system against which affected employees are assessed (by someone competent to do so).  Such a matrix must be objective, transparent, fair, non-discriminatory and applied consistently.

An alternative option may be to invite employees to volunteer for redundancy.  However, employers may need to offer enhanced payments to attract volunteers and there is no guarantee that volunteers will come from the desired part of the workforce.  Further, those not selected may react adversely

. 

Redundancy is one of the five fair reasons for dismissal. However, failure to follow the correct redundancy process can render any dismissal unfair.  Getting it wrong will cost time, effort and stress of defending any claim and preparing for time-consuming hearings; fees and compensation payments; damage to both workplace morale and the company’s reputation.

Finally, once an employee has been selected and issued with their redundancy notice they become entitled to reasonable paid time off for job hunting.  Quite often this means time off to attend interviews.  However, each case should be judged on its own merits.