Redundancy – What does this mean for Business?

Redundancy – What does this mean for Business?

Embarking on the redundancy process can be a daunting process and it is crucial that your business follows the correct redundancy procedure and seeks legal advice where necessary. Failure to observe the rules can lead to your business being at risk of an Employment Tribunal claim, as well as reputational and financial damage.

Kerseys Solicitors Employment Law team briefly highlights, in this blog, the key considerations if your business is considering a redundancy exercise.

What is a redundancy?

Redundancy is a type of dismissal used when employers decide to reduce the number of employees within their workforce. This can be for reasons such as:

• A business closure;
• A workplace closure;
• A general downturn in the business’ financial situation; or
• A diminished requirement of the business for employees to do work of a particular kind.

It is essential that the reason for the redundancy is communicated clearly to employees and they are provided with all relevant information in a timely manner. Redundancy can already be a costly exercise for your business, so it is important to evidence, with a clear paper trail, the reason why each employee’s job role is at risk of redundancy.

Who can be made redundant?

Employers must fairly identify which employees will be identified as being “at risk” of redundancy. Those people will then be notified that they are “in the pool’ of those who may be selected for redundancy.

There should, then, be fair and transparent application of objective selection criteria to employees in the pool. Employers must apply objective selection criteria and ensure a fair and reasonable procedure is followed.

Adopting a fair and objective two-stage basis on which to select for redundancy is crucial to limit any risk of an Employment Tribunal claim.

What is the process for redundancy?

Consultation

Depending on how many employees are being made redundant, individual and collective consultations may need to be carried out at a formative stage.

If 20 or more employees are being made redundant over a period of 90 days or less, the employer has a duty to Inform and consult appropriate employee representatives.

This must begin at least 45 days before the first dismissal if 100 or more redundancies are proposed. If under 100 redundancies are being made, the same period is 30 days.

Throughout the consultation exercise, employers must remain open regarding issues and recommendations that arise during meetings with employees.

This is a collaborative exercise between the employer and employee(s) and there should be an explanation of:

• the reason for the redundancy exercise,
• the criteria applied for selection for the “at risk” pool
• the criteria applied to the pool to identify the redundancies;
• the proposed redundancy package (financial);
• the timetable for employees to challenge their redundancy selection and to put forward alternative solutions to avoid being made redundant; and
• details of suitable alternative employment and given the opportunity to apply for these vacancies.
• opportunities available for training to move to suitable alternative posts.

Applying objective selection criteria to those in the pool

Points to consider may reasonably include:

• Performance and ability;
• Length of service;
• Attendance records; and
• Disciplinary records.

Making reasonable steps to seek alternative employment for an employee/employees.

Dismissal on the grounds of redundancy is likely to be unfair (for Qualifying Employees) if, at the time of dismissal, an employer does not consider whether suitable alternative employment existed within the organisation.

Confirmation of the outcome

If it has been concluded that an employee is going to be made redundant, a final meeting should be arranged to confirm the decision. Employers should confirm:

• The redundancy package for Qualifying Employees; and
• The right to appeal against the decision.

Payments

Employees with a minimum of two years’ continuous employment, at the date of Termination (“Qualifying Employees”), are entitled to a statutory redundancy payment.

An employee may apply to the Secretary of State for a redundancy payment out of the National Insurance Fund if an employer:

• Refuses to make a redundancy payment;
• Makes part-payment;
• Is declared insolvent; or
• Is not formally insolvent but cannot afford to pay.

Employees may be entitled to an enhanced contractual redundancy payment if this is an express or implied term in their contract of employment.

Unfair dismissal in redundancy cases

Employees with less than two full years of continuous service are not Qualifying Employees and so do not qualify for a statutory redundancy payment. They cannot make a claim for unfair dismissal unless they have been made redundant because they have a Protected Characteristic.

However, if the Employment Tribunal finds, after a claim has been brought to final hearing, that a Qualifying Employee or an employee with a Protected Characteristic has been unfairly dismissed by reason of redundancy, the employer will usually be ordered to pay the employee a compensation payment.

Recent legislative changes

From the 6 April 2024, The Protection from Redundancy (Pregnancy and Family Leave) Act 2023 (the Act) came into force. The Act has extended the existing legal protection from redundancy for pregnant staff. You can find out more information here.

A checklist for employers

The key steps for ensuring your companies redundancy process are carried out correctly include:

• Establishing a genuine redundancy situation
• Warn and consult affected employees
• Use a fair selection process
• Consider alternative employment/ upskilling for those in the ‘pool’
• Follow a fair procedure

Contact us

At Kerseys Solicitors, we are committed to helping businesses and individuals during challenging times. Our Employment Law team provides HR support to ensure you follow the correct processes.

If you require assistance, please contact Annalie King, Partner and Head of Employment law team or Rosie Brighty at Kerseys Solicitors in Ipswich on 01473 213311, Kerseys Solicitors in Felixstowe on 01394 834557 or Kerseys Solicitors in Colchester on 01206 584584, alternatively can email us at [email protected] or visit our website and click “Call Me Back”.

You are not alone; Kerseys Solicitors HR Services & Employment Law Team are just a click away visit our website and click “Call Me Back” and a member of our Employment Law team will be happy to contact you at a time that is convenient to you.