The right way to handle redundancy

Redundancy is commonly associated with financial downturn and employee upset so unsurprisingly is never a popular topic among businesses.

However, there can also be redundancies during company reorganisations if companies take a change in tack in their business model, introduce time-saving technology or when departments are being streamlined to make the business more efficient.

Employees are the most valuable resource in your business, requiring significant investment of time and money, so most companies try to avoid redundancies at all costs.

We have discussed alternatives to compulsory redundancies previously, but what should you do when redundancies cannot be avoided? In this blog, we will cover the key things you should consider when commencing the redundancy selection process.

The most important thing to remember is that the entire selection process should be carried out in as fair and transparent manner as possible.

The more reasonable and open you are with your employees about the reasons for redundancy – how you have set the parameters for the selection pools, and what selection criteria will be used – the smoother the process is likely to run.

A fair and consistent approach is also less likely to lead to a claim of unfair dismissal.

1. What is your commitment to your employees?

   Check for previously agreed procedures and policies. Are there are any company redundancy policies or relevant trade union agreements in place?

   These may set out the formal process to follow, including any selection criteria to be considered.

   Failure to follow a previously agreed process could result in a finding by an Employment Tribunal that the dismissals were unfair.

2. Individual or collective consultation? Or both?

   How many employees are you proposing to make redundant and over what period? Large-scale redundancies require collective consultations.

   The number of redundancies will determine your course of action:

   • 20 or more employees: You will need to provide information and hold collective consultations with the employees’ representatives. This needs to take place at least 30 days before the first dismissal takes effect.
   • 100 or more employees: The consultations period must begin at least 45 days before.
   NOTE: You must notify the Department for Business, Energy and Industrial Strategy (BEIS) of the proposed redundancies. And you should still have individual consultations as well as the collective consultation.

   Most employers will use the full time periods above to conduct the consultations.

   For smaller scale redundancies (i.e. where fewer than 20 redundancies are proposed), there is no legally required period over which individual consultations should take place.

   However, it is important to allow enough time to provide every affected employee an opportunity to discuss their situation and to suggest alternatives.

3. Are your managers prepared?

   The redundancy process can be very stressful, both for you and your employees.

   Emotions are likely to run high on both sides.

   Preparing your managers with adequate training can go a long way towards guaranteeing you have a robust process, improving the experience as far as possible, and ensuring that employees feel that their concerns are being heard and that the ultimate outcome has not been predetermined.

4. Effective and meaningful consultation

   The purpose of the consultation process is to discuss with employees the reasons for redundancy, any selection pools, criteria, or scoring and reducing the number of employees to be dismissed.

   A fair and meaningful consultation is a two-way process. It is really important to listen.

   The Tribunal has made it clear that consultation should occur at a formative stage when the affected employees can actively contribute to the proposal and the process.

   The later in the redundancy process the consultation occurs, the more likely it is to come back to haunt you.

   It is best practice to allow employees to bring a companion to the consultation meetings if they wish.

   It is vital that consultations are held even if you envision that only one employee will be made redundant from a selection pool of one.

   In the consultation, if the employee is in a selection pool of one, they should be clearly informed that this is the case to ensure they have all the necessary information to properly assess and respond to the situation.

5. Focus on type of work, not job role

   When starting the redundancy process, you may already have an idea of the type of work for which there is diminished need and therefore what roles that affects. It is important that any pools are re-evaluated following the employee consultations to incorporate any input from them.

   As an employer, you have wide discretion as to the choice of your pool. You need to show that you have given adequate consideration as to the formation of the pool. It must fall within the range of reasonable responses.

   When selecting individual employees to be placed into the pool, it is best practice to look at both the formal job description as well as the day-to-day activities carried out. Consider whether there are other employees within the company doing similar work and whether any job roles are interchangeable.

6. Do the selection criteria fit your business?

   Ensure your selection criteria fit your business. Are they relevant? Are they fair and objective, measurable and capable of independent verification? Any subjective elements must be balanced out by objective ones.

   Potentially fair selection criteria include:

   • Performance (broken down into sub-categories, each assessed separately)
   • Length of service
   • Attendance
   • Disciplinary records
   NOTE: Attendance records may be particularly problematic as there is the potential of discrimination on the grounds of pregnancy, maternity, or disability. Any absences related to pregnancy, maternity, or disability should be disregarded.

   What matters most is that you are transparent in your decisions, and reasonably consider any input received from employees.

7. Apply selection criteria fairly

   The selection criteria you have chosen must also be applied fairly in assessing the employees. Inconsistency in approach, and bad faith can all lead to a finding that the application of the selection criteria was unfair.

   Reasons should be provided to show how each score was given and what information was used to inform decisions. This is particularly important for any subjective elements.

8. Be transparent with your employees

   Once you have conducted your scoring exercise, the decisions should be communicated to each employee. You should provide information as to the selection criteria applied, the information used to inform the decision, and how the score was calculated.

   The more transparent you are with how the decision was reached, the more you'll reduce the likelihood that the employee will appeal or later bring a claim for unfair dismissal.

   That said, all employees should be allowed to challenge their score and, once a final decision has been made as to whether they are to be made redundant, given the right to appeal.

   Are you considering making redundancies and want to manage your risk? Let us help! Our team of employment experts can assist by auditing your existing processes, preparing a suite of tailored redundancy process documents, providing bespoke training for your managers, or generally advising throughout.

Further reading

• 12 solutions that are better than compulsory redundancy | Law 365
• Poole v Typestart Limited ET/3312844/2020