Common pitfalls in handling redundancies

Redundancies are commonplace as organisations grow and contract, move location and reorganise. Handling redundancies is not always straightforward and there are some common pitfalls which employers fall into when dealing with redundancy situations.

We consider below the 10 most common legal pitfalls in handling a redundancy situation and the ways to avoid them.

1. Is there an actual redundancy situation?

The starting point is for an employer to consider if the situation they face actually falls within the statutory definition of a redundancy.

A redundancy can occur in three scenarios. Broadly these are:

• on the closure of a business;
• the location in which the employee is working closes; or
• there is a diminishing need for employees (i.e. the job disappears/fewer people required in the job).

In some instances, such as with a reorganisation, it can be difficult to know if that reorganisation falls within the definition of a redundancy and such situations need to be carefully considered before any process is commenced. If the situation does not come within the statutory definition then the reason for any proposed dismissals may still be a fair reason if it is “some other substantial reason”.

2. Incorrectly defining the pool for redundancy

In a redundancy situation, there will be a pool of employees from which those to be made redundant will be selected. Often, employers fail to define the redundancy pool correctly, for example making it too narrow or too wide. This can lead to dismissals being held as unfair.

When identifying the pool, an employer should pose the question “what exactly is the job?” in order to identify those employees who are performing the same role within the organisation and who should therefore fall within the pool for selection.

Employers should take care where employees perform similar but not identical work, where employees cover the job during periods of absence and where employees have similar skills/perform similar jobs in different departments within the business. There could well be arguments for including such individuals within the redundancy pool and employers should consider such matters in advance and have a clear rationale for the approach which they ultimately decide to take.

3. Is the selection procedure fair?

To demonstrate if a role is genuinely redundant, employers must carry out a fair selection procedure. Any selection criteria must be objectively chosen, transparent and fairly applied. The selection should not reflect the personal opinion of the selector and should be referenced to data such as appraisals, qualifications, skills and knowledge.

Employers should avoid choosing an individual for redundancy because of a characteristic such as pregnancy or age. Care should be taken to ensure that such characteristics do not indirectly affect the selection process, for example taking into account pregnancy related absence when scoring an individual, as this could result not only in any dismissal being unfair but could also result in it being discriminatory.

4. Failing to inform and consult on an individual basis

If an employer is proposing to make redundancies, then it should inform employees that their jobs are at risk of redundancy as soon as possible.

An employer must act reasonably when treating redundancy as a reason for dismissal. Genuine consultation is an integral part of showing an employer has acted reasonably.

5. Failing to consult properly on collective redundancies

If an employer is proposing to dismiss 20 or more employees at one establishment within a 90-day period then they are required to collectively consult with appropriate representatives about any proposed dismissals. Any consultation should involve: (i) considering ways to avoid the proposed dismissals; (ii) reducing the number of employees to be dismissed and (iii) mitigating the consequences of those dismissals and must be undertaken with a view to reaching agreement with appropriate representatives.

The consultation process is not just a formality and must not be a sham. Any consultation must be meaningful. A failure to do so can result in protective award claims per affected employee.

6. Failing to provide information to appropriate representatives

Specific information must be delivered to appropriate representatives, who are either the union representatives (where a union is recognised in respect of the affected employees) or elected employee representatives. If an employer fails to elect employee representatives or if there is any other failure relating to engaging with the appropriate representatives, then a complaint can be made to the employment tribunal and a tribunal may make a protective award in respect of the dismissed employees. This could lead to an order being made that the employer pay remuneration for the protected period of up to 90 days per employee.

7. Not offering suitable alternative work

An employer must look for alternative work before giving notice of redundancy otherwise any dismissal will be unfair. The duty on an employer, however, is only to take reasonable steps and not every conceivable and possible step to find alternative employment.

It will be a question for the tribunal as to whether it is reasonable to offer a job in a lower and less well-paid position. It is best practice to make the offer, even if it is not expected that the employee will accept it, rather than having to argue at a tribunal that a reasonable employer would not have made the offer.

8. Failing to apply the special rules to employees on family leave

If an employee is on maternity leave, adoption leave or shared parental leave and is selected for redundancy, they have additional legal protection. Such an employee who is at risk of redundancy has a right to be automatically offered any suitable alternative employment available and thereby jumping ahead of any other at risk employees in the queue.

9. Are there alternatives to redundancy?

Employers often fail to consider alternatives to redundancies and as a result can end up losing skilled and valued employees and may even find themselves short-staffed if there is a subsequent upturn of work.

Employers should consider alternatives to redundancies before pressing ahead with a redundancy process. This could include steps such as reducing or stopping overtime or asking staff to volunteer for reduced hours.

10. Failing to hold a dismissal meeting or providing a right of appeal

A redundancy is a potential fair reason for dismissal. However, a failure to follow a proper procedure may render a dismissal unfair. Any notice of dismissal should only be given once all alternatives to redundancy have been considered and the consultation process is completed.

An employer should hold a meeting with employees at risk of redundancy before making a final decision, and should allow the employee to be accompanied at that meeting. Any decision to dismiss should also be confirmed in writing. It is best practice to ensure that any letter of termination also includes a right to appeal to a more senior manager than the one who carried out the consultation process to ensure the fairness of the process followed.