At the beginning of summer, confirmed redundancies in Northern Ireland reached their highest monthly level in almost five years. Are employers getting redundancy right?
Employers in Northern Ireland are coming under growing pressure from economic uncertainty and increasing operational costs due to the rising cost of living and increases to both the National Minimum Wage and employer National Insurance contributions. More and more, we see employers considering and, increasingly, resorting to redundancy to reduce their workforce to weather the storm.
In this three-part series on "Getting Redundancy Right", we guide you through handling individual redundancies, navigating collective redundancies and managing those trickier redundancy issues that can trip up even experienced employers and HR teams.
Handling individual redundancies with care
Redundancy is a complex area of employment law. Part one of our threepart series provides a step-by-step guide to carrying out individual redundancies where fewer than 20 employees are to be dismissed as redundant.
If you are proposing to make 20 or more employees redundant at one establishment within a period of 90 days, you must follow the statutory procedure for collective consultation. Large scale redundancies are covered in Part two of our series, Navigating collective redundancies with confidence.
To avoid a successful claim for unfair dismissal arising out of a redundancy situation, there must be:
- a genuine redundancy situation
- adequate warning and consultation of affected employees
- a fair selection process
- consideration of alternative employment
- a fair procedure, including the right to appeal against any dismissal N.B The statutory three-step dismissal procedure still applies in NI.
Employees in NI must have one year's service in order to claim unfair dismissal, and two years' service to be entitled to statutory redundancy pay.
Step 1: Identifying a genuine redundancy situation
A common area of dispute is whether a redundancy situation actually exists. If a tribunal is satisfied that redundancy is the true reason for a dismissal, it will not examine the circumstances that led to the redundancy, whether it could have been avoided or whether there were any viable alternatives.
But how does an employer demonstrate that a genuine redundancy situation exists?
The Employment Rights (NI) Order 1996 sets out the statutory definition of redundancy. Broadly speaking, a redundancy situation exists where:
- the business as a whole is closing down;
- the particular part of the business in which the employee works is closing down;
- the business is closing down in a particular location; or
- the business needs fewer employees with the redundant employee's skills.
You can demonstrate that a genuine redundancy situation exists by preparing a clear business case for making employees redundant, before embarking on the process. This might include financial information, organisation charts, details of the loss of any significant contracts, automation plans, etc. It should also explore any ways of avoiding redundancies, such as restricting recruitment and overtime, retraining or voluntary redundancies.
N.B. a redundancy process should not be used to deal with individual conduct or capability issues, which should be addressed through disciplinary or capability procedures, as appropriate.
Step 2: Identifying the affected employees
Having assessed whether a genuine redundancy situation exists, you need to determine how many and which categories of employees are at risk. You should consider which roles are potentially redundant, whether these are unique roles, roles which are being amalgamated or whether employees will need to be selected from a pool of employees on objective selection criteria.
If it will be necessary to select employees from a pool, you must:
- consider the appropriate pool of affected employees
- establish selection criteria
- score affected employees
Employers have some flexibility in defining the pool and it will be difficult for an employee to challenge your choice of pool where you have genuinely applied your mind to the issue.
Special cases, such as affected employees who are pregnant or on maternity, adoption or shared parental leave are covered in Part three of our series, where we also consider affected employees on long-term sick leave.
Selection criteria
A common ground for challenging a redundancy is the suitability of the selection criteria used to select an employee from a pool.
If it's proposed that all employees within a selection pool will be redundant (for example everyone in a particular role or at a particular location), then detailed selection criteria are not necessary. However, if you are proposing keep some people within a pool, but make others redundant, then specific criteria will be needed to determine who should be provisionally selected for redundancy.
Selection criteria should be objective and capable of independent verification, i.e. criteria should be measurable. In practice, most employers use a matrix of criteria which takes account of a range of issues such as:
- relevant skills and knowledge
- relevant experience
- relevant qualifications or training
- disciplinary record
- attendance record
- communication skills (verbal/written)
- time management/productivity
HR records, including appraisal records and attendance records can provide objective documentation upon which to score "at risk" employees. Subjective criteria, such as 'attitude' or 'team player' should be avoided.
You should also be mindful of criteria which may indirectly discriminate against employees due to a protected characteristic. For example, the criterion of "last in first out could" indirectly discriminate against younger staff members in the absence of justification. Criteria which relate to absence should not take into consideration absence due to a disability and/or maternity, which is likely to be deemed discriminatory.
Although selection criteria can be drawn up during the initial stages of the redundancy process, it is advisable to only score employees after consulting about the redundancy situation at workforce level. If feasible, ensure that at least two managers separately conduct the scoring, to help ensure scores are objective.
Step 3: Consultation
Genuine consultation is crucial to a fair redundancy. Consultation meetings should occur at a formative stage in the process and before any final decisions have been made. This should be a twoway process: to help you to gather information to assist in the decisionmaking process and give employees the opportunity to ask questions, make suggestions and have their say.
It is advisable to have an initial "at risk" meeting with all those who are potentially affected by the redundancy situation, followed by one or more individual consultation meetings with each affected employee. It is important that, during the consultation process, you do not assert or imply that the employee will definitely be made redundant.
Consultation meetings
"At risk" meeting
An initial townhall style "at risk" meeting can be a good opportunity to break the news of the redundancy situation to affected employees as a group. This meeting is not normally to discuss the potential redundancy in detail, but rather, a way of introducing the news and explaining what measures the company is taking to try to minimise the effect of the redundancy situation.
Following this meeting, employees should be scored as necessary, on the basis of the selection criteria identified. "At risk" letters should then be provided to provisionally selected employees to invite them to an individual consultation meeting.
Individual consultation meetings
All employees who are at risk of being made redundant must be consulted with individually. This includes those employees who are on maternity leave, long-term sick leave or on secondment, for example.
Employees should be given adequate time and information to prepare properly for their individual consultation meetings. They should be given the option to be accompanied at the meeting by a colleague or trade union representative, particularly to any meeting where the outcome could be confirmation of their dismissal by reason of redundancy.
Matters to be discussed during individual consultation meetings include:
- the reason for the redundancy
- an explanation of the pool for selection
- the selection criteria
- why the individual has been provisionally selected for redundancy according to the criteria (including the scores given)
- the timescale for the redundancy process
- any financial package, statutory or enhanced
- available vacancies, including details of the nature of the job, the location and terms and conditions
- details of any other support available, e.g. outplacement services
- other suggestions to avoid the employee's redundancy
After each meeting, follow up any suggestions to avoid redundancies and consider any representations the employee made regarding their scores. If an employee's score changes as a result of this process, check if this will result in a change to the group of employees that has been provisionally selected for redundancy. If so, you will need to repeat the relevant parts of the procedure with any employees that have been selected for redundancy as a result of the review.
The consultation process will usually continue over a number of weeks.
Suitable alternative employment
An employee who is selected for redundancy should be offered any available vacancy that they could fill, even if it is at a lower salary or at a lower status than the post from which they are being made redundant. Some employees would rather be working at a lower salary than be unemployed and a tribunal may criticise an employer who fails to at least offer an employee that possibility
If the terms and conditions of the new or renewed contract of employment differ in any way from the provisions of the previous contract, there is a statutory four-week trial period for the employee to decide whether the alternative employment is suitable. If the employee terminates the contract during the statutory trial period, they are treated as having been dismissed on the date at which the original contract ended.
If an employee has been given notice of termination by reason of redundancy, you have a duty to search for suitable alternative employment until the end of the affected employee's notice period.
Step 4: Outcome
Outcome meeting
Once the consultation process is complete and a decision to proceed with redundancy is made, the next step is to invite the affected employee to an 'outcome' meeting. At this meeting, you should confirm the redundancy decision, outline the redundancy package, and explain the notice arrangement, i.e. whether the employee will work their notice period, be placed on garden leave, or receive payment in lieu of notice (PILON).
The employee should be reminded of their statutory right to reasonable time off to seek alternative employment or training, and the right to appeal the redundancy decision should be clearly explained. A detailed note of the meeting should be kept for records.
Outcome letter
After the outcome meeting, where relevant, you must issue a formal dismissal letter confirming the redundancy, specifying the termination date, and setting out the notice arrangements. The letter should clearly explain how statutory (and any enhanced) redundancy pay and other sums due have been calculated. It must also confirm the employee's right to appeal, including the timeframe for doing so (for example, within five working days), ensuring transparency and giving the employee a final opportunity to challenge the decision.
Step 5: Appeal
If an employee chooses to appeal the redundancy decision, you should arrange an appeal meeting. Ideally, this meeting should be chaired by someone who has not previously been involved in the process and, where possible, is more senior than those who made the original decision. The employee must be allowed to be accompanied by a trade union representative or a colleague.
During the appeal, you should revisit all relevant aspects of the process, including the selection pool, the criteria used, the evidence supporting the scoring, and the efforts made to identify suitable alternative employment. Once the appeal has been fully considered, you should write to the employee to confirm the outcome of the appeal, making it clear that the decision reached is final.
When handled well, redundancy situations can be managed fairly, lawfully and with respect for everyone involved. But when larger groups are affected, the rules become stricter and the risks greater. In Part two of our series, Navigating collective redundancies with confidence, we'll guide NI employers through the collective consultation process, statutory requirements and financial risks of getting things wrong.
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.
