When it comes to making staff redundant, companies of any size need to consider certain legal issues before taking action. Employers can legally make employees redundant if they choose to do so, but by the same token, employees do not have to accept that they are redundant just because their employer says so.
Here are some simple dos and don’ts when it comes to making staff redundancies:
1. What is a redundancy dismissal or what can give rise to a redundancy dismissal?
- The closure of the business in whole or in part
- The employee will no longer be required to do their job due to an economic downturn and/or business restructure
- The place of work was closed where an employee is employed by the employer
- A diminishing requirement for an employee to carry out work of a particular kind at the place where they are employed
2. What needs to be done for redundancy?
- A staff meeting with employees to introduce the employer’s intentions
- First individual consultation meetings with employees
- Seek volunteers for redundancy and for employees to put forward their suggestions to avoid redundancy
- A fair selection process, including what is called pooling of employees, where it is made clear that it's not the employee who is redundant, but his/her job. Consideration must be given to all employees who could be affected by redundancy to decide which one should be made redundant in any particular case, if at all. The selection process can often be dealt with by a proper scoring process
- Inform employees affected of their provisional selection for redundancy
- Second individual consultation meetings with employees
- Consideration of suitable alternative employment for affected employees
- Additional individual consultation meetings if required
- Written confirmation of the redundancy decision
- Give the employee a right of appeal against the employer’s decision to dismiss on the grounds of redundancy
All these decisions and the process leading up to them should be properly considered and documented. Consultation is key, as it gives the employer the chance to solicit ideas from the employee on possible ways to avoid the redundancy, and also to explain the redundancy process clearly.
Not following the proper procedures is the most common mistake when making redundancies. By far and away, the most likely basis for a claim by an employee against an employer in such a situation is that the employer has failed to demonstrate a proper decision-making and execution process in making staff redundant.
Another common question involves redundancy payment: how much does it cost/how much does the employee get? Although some employers pay more than the statutory amount, the statutory sum – which is the sum that employers must pay – is made up of a simple algebraic formula: number of years of service (i.e. completed years of service to a maximum of 20) multiplied by the gross weekly wage (maximum £350 as of the 1st February 2009) x 1, or, in the case of years of service over 41, x 1.5.
In addition, the employee is entitled to all his/her benefits under their contract which would apply under a notice period.
Redundancy is not a pleasant topic, either for employers or their employees. But it is a fact of economic life. As in all such circumstances, matters have to be dealt with on an individual basis – yet there is no reason why the process cannot be completed in a proper legal and efficient manner, if the company deals with it appropriately.
Julian Goulding is the founding partner of Cheyney Goulding LLP, a firm of solicitors based in Guildford, Surrey and London, with specific ‘City’ caliber expertise in business law, dispute resolution, employment and property for companies, partnerships, charities and individuals. While retaining his role as senior partner, Julian continues to practice in specialised areas, including business acquisitions, sales and employment, and charity law (since the firm undertakes a considerable amount of charity legal work).