It may not be an issue that an employer wishes to face, but in today's economic climate, redundancy is becoming an increasing reality for some. Embarking on a redundancy procedure can seem like a daunting task, but it does not have to be if you give proper consideration to implementing a fair and reasonable process.
Most large businesses have a formal procedure in place for handling redundancy situations, but not all employers know where to start and can so easily fall foul of what is deemed to be objectively reasonable, giving them an even bigger issue to deal with in the long run.
In Guernsey there is no statutory process which employers must adhere. Following Commerce & Employment's Code of Practice and adopting a step-by-step process can help reduce the risks of getting it wrong.
So, where to begin?
Start by taking stock and ask yourself: ''Is this truly a redundancy situation?"
To dismiss an employee on the grounds of redundancy is a fair reason providing the redundancy is genuine. Have the requirements of your business changed?
Next - consider whether the situation can be avoided. Is there any suitable alternative, such as redeployment? If not, identify those employees who fall within the 'pool' of people facing redundancy and then, through an objective selection process, identify those from the 'pool' that will face redundancy.
Once identified, an employer should embark on a fair and open consultation process to ensure that both parties fully understand the position and all reasonable alternative solutions have been explored before making the final decision. Only then, after all of these steps have been taken, can an employer truly say they have conducted a fair and reasonable redundancy procedure.
Do remember that there are no statutory provisions in Guernsey that require an employer to make a redundancy payment to an employee. In Jersey, however, statutory redundancy pay has recently been introduced.
In Guernsey, unless there is a contractual requirement stipulated in an employee's contract of employment, the employer is not obliged to pay the employee anything. It is, however, common for employers to make voluntary (or 'ex gratia') redundancy payments.
What if it goes wrong?
Although making an employee redundant is a potentially fair reason for dismissing a person, get the procedure wrong and an employer can find themselves facing a complaint to the Employment Tribunal and, if unsuccessful, making an even bigger payment than they had ever envisaged: up to 6 months' gross earnings!
It is, of course, possible to defend complaints but to do so is time-consuming, very expensive and can often generate negative publicity.
This is one of the main reasons for having an employee enter into a compromise agreement once the redundancy has been finalised - an employer may be required to offer a financial pay-out to 'sweeten the deal' but by doing so, the employee waives his/her rights to pursue an employment-related grievance. This saves the employer from risk of a future claim, particularly if he/she suspects the procedure may not have been handled as fair and/or as reasonably as perhaps it could have been.
Even if an employer feels they have done everything 'by the book', it may be sensible to try to enter into a compromise agreement, as employees often bring claims without any real merit, and because legal costs are irrecoverable before the Tribunal, it will cost the employer a significant sum to defend the claim, win or lose.
A final word of warning - if your business is considering making redundancies, please seek professional advice as soon as possible. It is so easy to mis-handle the situation and put your business at risk of a possible claim and exposure to an award of compensation.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.