Conducting a Fair Redundancy Exercise – A Guide For Employers

With the ongoing global crisis caused by the COVID-19 outbreak it is clear we are heading towards at best a period of readjustment and at worst recession, if not depression.

Unsurprisingly, in this climate the latest Labour Market Outlook survey conducted by the CIPD indicates that redundancies are set to increase substantially in the next few months. Only recently British Airways announced 12,000 jobs at risk and no doubt more will follow from the the aviation, hospitality and retails sectors.

It may therefore be wise to take early advice on how redundancies should be carried out in order to comply with the law, whether you will be the one making the redundancies or facing redundancy yourself.

Redundancy is an often misused word. The legal definition can be found in statute and occurs in broadly three circumstances: firstly, where there is a closure of a business, second where the employee’s workplace closes, i.e. a branch of the business, and thirdly where there is a diminishing need for employees to do available work.

The primary decision to make redundancies is not one the employment tribunal will look behind, it views this as a commercial issue not a legal one. What is capable of challenge however is the decision to select an individual employee for redundancy over and above another. In this connection some reasons will be considered automatically unfair, for example reasons connected to pregnancy, trade union activities and the assertion of various rights. Other reasons, whilst not automatically unfair may nonetheless render the decision to select an employee unfair. For example, where the criteria used in the selection procedure is subjective or biased or where the employer used the process to give effect to a hidden agenda to dismiss specific individuals. Likewise, selection criteria may infringe discrimination law by indirectly discriminating against employees, most notably on the grounds of age or sex. Employers often link enhanced redundancy payments to length of service, which may put women and younger workers at a disadvantage.

Even if the selection procedure is fair the consultation, and hence the dismissal, may still be considered unfair if inadequate consultation is provided or the employer fails to properly consider redeployment.

There are essentially five factors to consider in assessing whether a redundancy dismissal will be fair:

1. Warning – has sufficient warning been given by the employer to employees on the possibility that their position is at risk of redundancy. This will give employees enough time to seek and obtain new work.
2. Consultation – has an adequate, lawful and fair consultation period been undertaken to avoid the lowest level of hardship for employees whilst allowing the employer to make necessary cost cuttings.
3. Selection Criteria – is the selection criteria fair, objective and unbiased.
4. Selection – is the selection fair and reasonable.
5. Re-deployment – has the employer considered re-deployment where possible to avoid the need to make redundancies.

The key therefore to ensuring that a redundancy exercise is carried out lawfully is in ensuring the process and procedure is fair. The first step is to start the consultation at an early stage, when the proposals to make redundancies are still in the formative stage and in good time for employees to participate in the consultation and if need to be look for alternative employment. If more than 20 people are being made redundant within a ninety day window the consultation must commence thirty days prior to the first dismissal taking effect. If more than 100 people are going the consultation period increases to 45 days.  Failure to provide consultation periods of this length may result in a. protective award being made of up to 90 days pay. Employers who ambush employees with redundancy notices without prior consultation are likely to face challenges in the employment tribunals, which could prove extremely costly and to a business already facing financial difficulties could be fatal.

Finally, in the current context, it remains to be seen whether a failure to place employees on the Government’s Job Retention Scheme (Furlough) as an alternative to making them redundant will be unfair, but we would suggest that it may very well be, depending on the circumstances.  If a business has been subject to an order to close due to COVID-19 this will only be a temporary measure and the business may very well remain viable once the current lock down has been lifted.

For a useful calculator for redundancy go to the Government page https://www.gov.uk/calculate-your-redundancy-pay

For a useful Guide to making redundancies https://www.acas.org.uk/redundancy