UK: Redundancy Rollercoaster – Some Trends For Those Living In Interesting Times?

Last Updated: 22 January 2009
Article by Richard Linskell

No one can fail to have noticed the deluge of disastrous economic news exemplified by the descent of the value of Sterling and the steady stream of companies going into or teetering on the brink of administration. The impact on employment has been drastic with few employers in the country not currently in the midst of, or at least considering, making redundancies – various bodies have been predicting enormous rises in unemployment with the Chartered Institute of Personnel and Development predicting unemployment to reach at least 2.8 million in 2009 and the CBI predicting unemployment will peak at around 2.9 million in mid 2010 .

Redundancies have not been happening on this scale since the early 1980s. Even in those gloomy economic times when we had only just got used to the idea of unemployment exceeding one million, the rate of increase was nothing like it has been recently. With so much doom and gloom about, it is little wonder that employment lawyers have been kept busy of late. At Campbell Hooper, since we advise both employers and employees, we are particularly well placed to identify a number of interesting trends in the current round of financial soul-searching.

Where Is The Axe Falling?

There is no doubt that many companies across most sectors are feeling under severe pressure at the moment. Many of them are simply involved in the "wrong" industry for a recession and may have been particularly affected by, in particular, the dramatic fall in property prices and the inability of individuals or businesses to obtain credit for mortgages and loans. However, we are not seeing the great structural realignment that took place in the 1980s where the number or type of jobs had literally become outdated or superfluous. We are seeing many companies removing people that they ideally would want to retain, often good performers, but are having to downsize simply to make the numbers add up. What remains to be seen is whether those companies that take those steps now will impede their development once the economy does start to recover and are faced with the inevitable rush for talent which pushes salaries through the roof.

Is It Really A Genuine Redundancy?

Some businesses are downsizing as a way of protecting themselves against the storm to come and the reduced level of business overall in whatever sector they may be. Other businesses remain profitable but are using the fact of widespread redundancies and general belt-tightening as an excuse to deal with performance and other HR issues that they were facing without having to follow a full performance management or health-related absence management process. One reason is that it is much easier to make redundancies fairly than to follow these procedures and becomes more difficult for an individual who is being made redundant to argue against the redundancy when so many others are being made redundant at the same time, either within their own organisation or more generally among the workforce. Employers will need to be sure, though, that they can justify the redundancy to avoid claims that they are simply using it as a smokescreen. Otherwise, they will not be immune to findings of unfair dismissal.

Not Unfair But Discriminatory?

One of the trends that appears to be emerging is that fewer claims of unfair dismissal are being brought. As suggested above, in light of the increased difficulty in bringing a redundancy claim when large numbers are being made redundant, many employees are accepting their lot, recognising that their employer is required to take some steps and some even commenting that they would have made the same decision if they were in the shoes of their employer! But this new pragmatism is tempered by the fact that there is likely to be an increase in the number of discrimination claims, where it is believed that the redundancy is a veneer for an otherwise discriminatory dismissal. A discriminatory dismissal could still lead to a large award and makes it worthwhile an employee pursuing the claim.

Taking The Package Before The Company Goes Bust!

Another trend that has emerged is the rather surprising willingness of many employees to accept the initial packages they have been offered. Undoubtedly settlements are at a generally lower level than they were a year or two ago. Many are paying no more than statutory redundancy and only a minority of employers are still offering packages in the region of several months' salary, but what is different now is that people cannot realistically expect to be in work within the next six months, whereas that was often the case in the last few years. Previously, employees would regularly seek to challenge their package, believing that they had been unfairly selected and made redundant at a time when their employer was making record profits, particularly those working in the City. Employees would be ready to stand their ground in the belief that their employer had sufficient cash and was just being miserly in its approach. However, many employees now appear to be worried about the financial viability of their employer and just want to get out as soon as they can with a lump sum payment in the belief that, were they to hang around for another month or two, they may end up working for a company put into administration and walking away with nothing at all! Furthermore, employees do recognise that employers genuinely have less spare cash to offer for termination settlements and, so long as they are protected for the short to medium term, usually being measured in a matter of three to six months, many employees are prepared to walk away rather than make a fuss.

It remains to be seen what the long term impact of the recession is, but it is clear that employment lawyers will be busy for the foreseeable future. And it appears the old Chinese curse has come true - we are undoubtedly living in interesting times!

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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