UK: Redundancies & Avoiding Costly Mistakes?

Last Updated: 25 March 2009
Article by Barbara Stewart

In times of recession employers are often forced to take the tough decision to reduce their workforce. Regardless of how many redundancies are proposed, it is imperative that employers follow the correct procedures and that there is a genuine redundancy situation.

Employment law is notorious for pitfalls and during times of recession in the past, employment tribunals have been clogged up with claims for unfair dismissal relating to redundancies.

Compensation for unfair dismissal may be up to Ł66,200 per person - more in some cases where the dismissal is tainted by some form of discrimination or victimisation. This does not include the cost of redundancy payments. These cases often stem from employers falling into the following traps:

Making staff 'redundant' when there is no redundancy situation

When recession hits, employers may use this as an excuse to cut the wheat from the chaff in their workforce and falsely claim that their position is redundant.

A genuine redundancy situation is when:

An employer has ceased, or intends to cease to carry on:

  • the business for the purposes of which the employee was employed; or
  • that business in the place where the employee was so employed, or

the fact that the business no longer has a need, or has a diminished need for:

  • employees to carry out work of a particular kind, or
  • for employees to carry out work of a particular kind in the place where the employee was employed.

It may be that a business undertakes a reorganisation due to the financial challenges it faces and as a result, employees' roles and duties are changed which may give rise to redundancies. In these circumstances, there must still be a reduced need for employees doing work of a particular type.

Failing to properly consult with affected employees before making the redundancies

Employers must inform and consult in advance with relevant staff regarding the proposals and rationale for making redundancies. The consultation must be approached with the aim of avoiding redundancies wherever possible and employees are entitled to offer their suggestions.

There may be plenty of options, for example, a shorter working week, pay cuts, redeployment to another branch/office and job sharing amongst others. One should not make assumptions about how staff will react to a redundancy consultation. Whilst employers need not necessarily agree with the suggestions, employers must give these proper consideration and report back to the employees.

Where 20 or more redundancies are proposed in one establishment ("collective redundancies"), there are particular statutory rules which must be followed regarding election of employee representatives and/or consulting with recognised trade unions. In these cases, there is a minimum consultation period of 30 days. Where 100 or more redundancies are proposed, the consultation must last at least 90 days. 'Protective Awards' of up to 90 days' pay per employee can be awarded if employers fail to follow the consultation requirements in collective redundancies. This is in addition to any compensation for unfair dismissal.

Unfair selection

If you need to make a few people redundant from a group of employees doing similar jobs, you must justify your choices objectively. Objective criteria such as disciplinary record, attendance record, recent appraisal results are easier to justify should they ever be challenged in an Employment Tribunal. However, apparently objective selection criteria can still be tricky. For example, taking into account staff attendance records may seem fair; but if an employee's absence is due to a disability or perhaps related to their pregnancy, it may be discriminatory to take those absences into account when calculating their scores. "Last in, first out" may (but not always) have the effect of discriminating against younger workers on the grounds of their age, as the older a worker is; the longer their service tends to be.

Subjective criteria can often be difficult to justify and employers must ensure that any selection criteria and scores attributed to employees can be objectively justified as fair and reasonable.

Employers must not forget to give employees advance notice of their scores and an opportunity to challenge these scores before a final decision is made regarding who will be selected.

Failing to Offer Alternative Employment

Employers must have, at least, carried out a search for possible alternative employment within the company including possibly at all branches/locations and within any group companies. An offer of suitable alternative employment must be made to those potentially being made redundant.

Whether it is suitable alternative employment, however, is a matter of fact and degree in each case and all relevant factors must be taken into account such as pay, hours, location, conditions, qualifications and experience. It may be that there are alternative roles which may not be 'suitable', however, consideration should be given to offering such posts in any event as the selected employees may be receptive to a change of job. It is not for an employer to decide whether an employee will not relocate. Employers often forget that the obligation to look for and offer alternative employment exists right up to the date of termination.

6 steps to getting it right

The process and procedures relating to redundancies are complex, but the 6 main points to remember are:

1. Inform all affected employees about the business' proposals for redundancies;

2. Consult with affected employees with a view to avoiding the redundancies;

3. Identify categories of staff and formulate fair selection criteria;

4. Score the employees against the selection criteria;

5. Confirm to staff whether they have been selected for redundancy;

and

6. Appeal process (for redundancy process where the statutory dismissal procedure has been commenced before 5th April 2009 and in more complex cases post - 5th April 2009).

The costs of getting it wrong

The cost of losing a tribunal case can be massive, and not just in terms of compensation or management time as Employment Tribunal hearings are open to the public and the press. Compensation will cover not only the employee's loss of earnings and benefits up to the date of the Tribunal, but may also include future losses. Compensating unfairly dismissed employees for the value of lost pension rights alone can result in high awards. The technical legal rules mean that it is easy to make expensive mistakes.

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.