UK: Handle With Care: Redundancies In The Workforce

Last Updated: 30 June 2008
Article by Tony McPhillips

Faced with an economic downturn and increased pressure on North East businesses, Tony McPhillips, partner and head of the Employment Services group at Muckle LLP, considers the duties and responsibilities owed by employers when considering redundancies in the workforce.

When America sneezes, we catch a cold - so the saying goes.

What began with a housing slump in the US in spring 2007 developed into a global liquidity crisis in late summer and has now resulted in turmoil in global financial markets. The shock of the Northern Rock collapse is still reverberating around the UK economy and business and consumer confidence has been severely dented.

Fighting for survival

Mortgage lenders have tightened their belts and Britain's construction industry is being hit by the housing market slowdown, with growth in the sector at its lowest level for 12 years.

The Chartered Institute of Personnel and Development has warned that 2008 will be the worst year for employment since Labour came to power in 1997.

Many businesses have to fight for survival. As so often happens in periods of economic downturn, employers' budgets are squeezed and organisations need to re-organise and re-structure in order to ensure they remain competitive in an ever-tougher commercial environment. In many cases compulsory redundancy programmes will be implemented.

Employer duties

Employers have a duty under section 188 (1) of the Trade Union and Labour Relations (Consolidation) Act 1992 (TULCRA) to consult with employee representatives where they are proposing to make more than 20 redundancies within a 90-day period.

This is called collective consultation and exists in addition to the duty to consult with individuals whose jobs are at risk of redundancy (individual consultation).

An employer proposing to make this many redundancies is required to consult in advance with representatives of the affected employees, and to notify the projected redundancies to the Secretary of State using an HR1 form. If there is a collective agreement in place collective consultation will generally take place with the recognised trade union.

The minimum consultation period where 20 or more employees are proposed as redundant is 30 days and where over 100 employees are at risk this rises to 90 days. Consultation must be completed before any notices of dismissal are issued to employees.

Handling the consultation process

It is advisable to have a timescale and outline agenda for the consultation process. Meaningful consultation must address issues such as the need for redundancies, avoiding dismissals, reducing the numbers to be dismissed and mitigating the consequences of dismissals.

The penalties for failing to comply are severe: an employment tribunal can make a protective award to each employee of up to 90 days' full contractual pay. This award is in addition to any compensation payable for a successful unfair dismissal claim.

If fewer than 20 redundancies are being proposed, it is still necessary to consult with staff who are at risk of redundancy. The starting point is to identify who is at risk and then to formulate a list of objective criteria such as disciplinary records, timekeeping and appraisal ratings to form the basis of any selection process.

Consultation should then continue over the criteria adopted and the scoring system before any final decision is made on which jobs are redundant.

Meaningful consultation should also involve discussing ways of avoiding redundancies or reducing the numbers of jobs at risk. If redundancies are unavoidable then it is advisable to discuss ways of mitigating the effects of a redundancy process on the employees.

This may involve offering enhanced redundancy packages as a means of persuading individuals to apply for "voluntary redundancy" rather than proceeding with a compulsory redundancy programme.

There is no hard and fast rule about what constitutes meaningful consultation. However it is inevitable that a number of consultation meetings will be required before any decision to select a person's job for redundancy is made.

Employers must ensure that any suitable alternative employment available within the organisation is offered to those at risk of redundancy by way of possible redeployment before the decision to dismiss is taken.

A difficult process

Managing a redundancy process is never easy, but if handled in a professional manner it can reduce the risk of discontentment - and dispute.

Whilst anybody whose job is at risk of redundancy is bound to be unhappy, they can at least recognise that they have been treated fairly by the process. Contrast this with somebody who feels aggrieved and unfairly treated: the former is more like to address future challenges quicker and in a more positive manner and this may be crucial in obtaining a new job.

Employers contemplating redundancies should therefore recognise that their responsibilities go further than the strict legal duties that exist.

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.

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