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Employers can find themselves in a tricky situation where they
have a reduction in work but still require the same number of
employees. Can they oblige employees to reduce their hours or does
this trigger a redundancy situation? In the case of Packman v
Fauchon the Employment Appeals Tribunal
("EAT") has held that a requirement to reduce hours but
not headcount can amount to redundancy. The consequence is that an
employee who does not accept a reduction in hours and is dismissed
may be entitled to a statutory redundancy payment.
Ms Fauchon was employed to provide book-keeping services to
Packman Lucas Associates ("Packman"). Packman
introduced an accountancy software system which, combined with a
downturn in business, led to a significant reduction in the number
of hours Packman required her to work.
Packman could not persuade Ms Fauchon to agree to a reduction in
her hours and she was dismissed on the grounds that there was no
longer any need for her to work her contractual hours. Ms
Fauchon did not receive a redundancy payment on the basis that,
even though there was a reduction in the amount of work there was
in fact no reduction in the number of employees required to carry
out the work.
The EAT confirmed that Packman had run out of credit and that Ms
Fauchon's dismissal was on the grounds of redundancy as
headcount does not necessarily need to be reduced to satisfy the
definition of redundancy, provided that there was an overall
diminution in the requirement "for employees to carry out
work of a particular kind". In the judgment, the
President remarked that where the hours of two full time employees
are reduced to 50% but both continue working, there is deemed to be
a reduction in headcount measured by full-time
equivalent.
Where there is a significant reduction in working hours of say,
50%, there is a strong likelihood that this will create a
redundancy situation. Anything less is open to debate.
Employers need to be aware of this risk as it may affect the way a
reorganisation process is run. An attempt to save some staffing
budget may actually result in significant redundancy costs as
employees ask for severance rather than accept reduced hours.
We suggest that you seek legal advice before contemplating
significant changes to work structures as these situations can turn
into a maze and we would not want any ghosts coming back to haunt
you!
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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