Redundancy – How to conduct a fair process

The Coronavirus Job Retention Scheme has protected more than 11 million jobs since its inception last March and with the news of the Chancellor’s recent extension, will continue to do so until October this year.

But is this enough?

Many businesses are facing the stark realisation that in order to neutralise or indeed marginally lessen the economic effect of Covid-19, jobs simply need to be cut.

Redundancy can be a very challenging time for both employers and employees and employers need to ensure that they follow the correct procedures and apply them fairly.

Employees who are dismissed by reason of redundancy may be entitled to a statutory redundancy payment and they may be able to challenge the termination of their employment as an unfair dismissal.

Employees have a number of rights in a redundancy situation and it is crucial for Employers to understand what these are.

Is there a genuine “redundancy” situation?

The statutory definition of “redundancy” encompasses three types of situation: business closure, workplace closure and reduction of workforce.

The dismissal of an employee will be by reason of redundancy if it is “wholly or mainly attributable to” the employer:

Ceasing or intending to cease to carry on the business for the purposes of which the employee was employed by it.
Ceasing or intending to cease to carry on that business in the place where the employee was so employed.
Having a reduced requirement for employees to carry out work of a particular kind or to do so at the place where the employee was employed to work.

When must an employer inform and consult collectively about redundancy?

Where 20 or more employees are being made redundant (over a period of 90 days or less) an employer has a duty to inform and consult appropriate employee representatives and notify the Secretary of State.

Where there are fewer than 20 redundancies planned, there are no set rules to follow but it is good practice to fully consult employees and their representatives and to give those impacted some advanced notice to process the information and consider their options.

How to minimise claims for unfair dismissal

An employee who has sufficient qualifying service is entitled not to be unfairly dismissed.

Even if a dismissal is genuinely on grounds of redundancy, whether it is fair or unfair to dismiss for that reason normally depends on the application of the general test of fairness and whether the employer has acted reasonably in dismissing the employee in all the circumstances.

A redundancy dismissal is likely to be unfair unless the employer:

Identifies an appropriate pool for selection.
Consults with individuals in the pool.
Applies objective selection criteria to those in the pool.
Considers suitable alternative employment where appropriate, subject to a trial period.

The alternatives to redundancy

At the outset of a fair redundancy procedure (and throughout the consultation process), an employer should consider whether it can avoid making compulsory redundancies or reduce the number of compulsory redundancies. Alternatives may include a ban on overtime, reduced hours or even temporary lay-offs.

How to determine an employee’s entitlement to a statutory or contractual redundancypayment

Employees with a least two years’ continuous employment at the relevant date are entitled to a statutory redundancy payment if they are dismissed by reason of redundancy.

Statutory redundancy pay is calculated according to a formula based on age, length of service and pay.

In addition to a statutory redundancy payment, an employee may also be entitled to an enhanced contractual redundancy payment. This entitlement may be either express or implied within their contract of employment.

If you have any employment law queries or would like to discuss this article further, please contact Jodie Care, Associate Solicitor – jodiecare@meadowsryan.com.