The dos and don’ts of redundancies

Citation

Pitt, M. (2009), "The dos and don’ts of redundancies", Human Resource Management International Digest, Vol. 17 No. 7. https://doi.org/10.1108/hrmid.2009.04417gab.001

The dos and don’ts of redundancies

Article Type: Employment law outlook From: Human Resource Management International Digest, Volume 17, Issue 7

Redundancies are hard for everyone concerned, but the law in this area is designed to soften the blow as much as possible and to ensure that the process is carried out fairly.

Whether you are making a group or only one employee redundant, you need to operate within an objective, non-discriminatory process that you can apply consistently across the organization.

You must write to all employees affected by the potential redundancies, setting out the reasons for possible redundancy and inviting them to a meeting to discuss the proposed dismissals. Let them know that they are entitled to have a representative – a colleague or trade union representative – with them at the meeting.

You may need to identify a pool of candidates for possible redundancy. If so, you should consider the make-up of the pool carefully to ensure it covers all the relevant workers. A skills matrix or other carefully chosen criterion should be formulated to select potentially redundant candidates from the pool, and the criteria must be applied in an objective and reasonable fashion.

For 20 or more redundancies, you must notify the Department for Business, Innovation and Skills and consult workplace representatives. You must also carry out a collective redundancy consultation.

Whether the consultations are with individuals, or collective, they give people the right to respond to the redundancy risk and the selection methods used. They may even result in ideas for how jobs can be preserved, so you must not go in with your mind made up. Ensure you consider any alternative employment.

If you fail to find alternatives to redundancy, write again to the employees affected, confirming your decision to make their position redundant.

Ensure they are fully informed of the reasons for your decision, and of their right of appeal. Also confirm the amount of redundancy payment you owe and how you worked it out (the Department for Business has a free online tool for this). If you fail to make this payment, or offer the wrong amount, the employee can make a claim to an employment tribunal.

Do not expect to be able to dismiss employees immediately. You could walk into a minefield of costly and time-consuming problems if you fail to plan properly, in line with your legal obligations. Avoid the “last in first out” principle and be aware that part-time employees have the same statutory rights and protection as full-timers.

Finally, make sure you look after the employees who are staying, as well as those who are leaving. Avoid the drip-drip effect of bad news and be as positive with them as you reasonably can about the security of their own jobs.

Meanwhile, employers increasingly risk straying outside the law when trying to cut employee costs in order to survive the recession.

Take the case of the organization that tried to withdraw its senior employees’ right to a company car.

First it tried to get the employees to agree to new contracts that made no mention of their company cars. They refused.

The organization then wrote to them to terminate their employment. It offered to take them on again only on new terms that excluded an indefinite entitlement to a company car.

The letter said they could keep their current cars until the end of the year, or take a sum of money instead, but then they would lose the right to both.

In effect, the organization was saying that the employees would have to accept worse terms and conditions if they wanted to carry on working for it. If they refused, they would lose their jobs.

This was an ultimatum and not a mutually agreed change to the employees’ terms and conditions. The employer was consequently breaching their contracts.

It would have been exactly the same if the employer had tried, without the employees’ consent, to “buy out” their right to a company car by offering them a mileage allowance for the business use of their private cars.

I advise employers never to introduce major changes like this without getting the staff concerned to agree. This may be by inviting the employees to meetings individually, or doing it through their elected representatives.

If your organization recognizes a trade union, it must be significantly involved in the consultation process and employee agreement should be confirmed in writing.

If you cannot reach agreement, I recommend that you seek legal advice, as it is possible to alter terms and conditions by ending contracts and offering fresh terms but it is a complex area of law and needs professional guidance.

Some organizations state, in their employee contracts, that the employer holds the right to vary the terms and conditions of employment upon reasonable notice. But these so-called “flexibility clauses” are simply not precise enough to be relied on in all cases.

Mike Pitt Employment-law partner at Greater Manchester solicitor Pearson Hinchliffe Commercial Law. He can be contacted by e-mailing michael.pitt@pearson-hinchlif.co.uk or by telephoning +44 (0)161 785 3500