UK: Redundancy - A Reminder Of Employers´ Responsibilities

As we enter a period of some considerable economic uncertainty, many employers may be considering the need for redundancies. Whilst the Employment Tribunals continue to be deluged by claims for unfair dismissal, many arising out of alleged redundancy situations, employers need to plan carefully to minimise the risk of successful Employment Tribunal claims against them.

Redundancy is a potentially fair reason to dismiss employees and can be summarised as a dismissal wholly or mainly attributable to:

• the shutting down of an entire business,
• the shutting down of a business in one location, or
• the reduction or ending of a particular kind of work, either entirely or in one location.

Employers need to consider whether the situation they are dealing with is really a redundancy. Even if it is, this does not of itself make the dismissals fair. There are still essential procedural steps if the redundancies are to be fair.

All staff likely to be affected by potential redundancies must be given sufficient advance warning. Notification of the risk of dismissal should be in writing and set out why redundancies are required, how the redundancies will be administered and any financial compensation for those dismissed. Employers may seek volunteers for redundancy / early retirement, possibly on enhanced terms.

Consultation is essential and should consist of a meaningful two-way dialogue between employer and employee regarding both parties' proposals for the avoidance or the minimising of the need for redundancies. The employer should take time to consider any proposals from employees before making any final decision.

Where 20 or more employees are to be made redundant over a three month period, there is an additional duty to consult with union or employee representatives. Such large–scale redundancies must be notified to the Department of Trade and Industry.

Where it is necessary to select employees for redundancy from several who all do similar jobs, the employer must adopt a fair method of selection. The relevant groups or pools from which selection will be made should be identified. Each pool consists of those employees capable of undertaking each other's jobs.

Potentially redundant employees must be selected from the pool using objective criteria. Recent case law has re-affirmed the employer's right to use the "last in first out" method of selection, though employers will want to consider whether this will result in the retention of a suitably skilled mix of staff. It is essential that employees are consulted regarding both the selection pools and criteria.

Consideration should be given with potentially redundant employees to the availability of alternative work. An offer of suitable alternative work may result in the loss of an employee's entitlement to a redundancy payment and may ensure that a redundancy dismissal is fair.

Employees should be given the opportunity to appeal the decision to dismiss (even if the redundacy is considered to be inevitable).

Employees with 2 years' service will be entitled to a statutory redundancy payment. The exact amount will depend upon the employee's age, length of service and weekly wage. (Some employers may have more generous provision within redundancy policies.) Employers will also need to consider whether or not they want employees to work their notice or whether a payment in lieu of notice is to be made.

An employee under notice of dismissal for redundancy, with two years' service, is entitled to paid time off work to look for new employment or to arrange training for future employment.