Conducting a large-scale redundancy exercise: practical tips
With many high street names reporting sliding profits and financial difficulties, a jittery property market and slowing investment, many businesses are in the unfortunate position of having to contemplate making redundancies or relocating jobs (particularly roles dependent on being within the EU). Although implementing redundancies is never pleasant, with some careful advance planning businesses can minimise the impact on staff and the legal and reputational fall-out.
Do you need to make redundancies?
There may be ways of reducing headcount and payroll costs without making compulsory redundancies, such as recruitment freezes, agreeing reduced hours with some employees (which would require careful handling) reducing reliance on (often more expensive) agency staff or offering voluntary redundancy on enhanced terms.Unionised employers may be required to take steps to avoid compulsory redundancies under a collective agreement – even if this isn't legally binding, antagonising the union at the outset is a recipe for industrial unrest.
It's also worth checking contracts to see if you have a contractual right to relocate staff – if so, you may be able to rely on that to move them to the required location (although bear in mind that you still need to comply with the implied term of trust and confidence).
Will you need to consult collectively?
If you're proposing to make 20 or more redundancies at one establishment in a 90 day period, you will need to carry out collective consultation with elected employee representatives (or with a trade union if you recognise one)."Redundancies" is defined widely to include any dismissals which aren't related to the employee personally (i.e. not related to conduct, performance, illness, etc.). This will include dismissals where the employer is planning to re-engage the employee under new terms of employment, but not termination of a fixed term contract on the expected end date.
You will need to assess whether the redundancies will be at one establishment – multi-site employers will often be able to argue that the different sites are separate establishments (and so may be able to avoid collective consultation if making fewer than 20 redundancies at each site), but this is fact-sensitive.
If you will need to consult collectively, this will add considerably to the lead-in time: if you are making 20 – 99 redundancies you will need to start consulting at least 30 days before giving notice of termination, or 45 days for 100+ redundancies. And before you even get to that point you will need to arrange the election of employee representatives if you don't have a recognised trade union or standing staff consultation body – this can add at least an extra week. Individual redundancy consultation doesn't generally take as long but is likely to involve around 2 or 3 meetings with the employee before the redundancy is confirmed.
It's essential to ensure that staff on maternity, paternity or other forms of family leave, or those who are on sick leave, are included in the consultation process.Women on maternity leave have enhanced rights to be offered a suitable alternative role if their role is identified as redundant – failing to do so will leave the business exposed to an unfair dismissal claim and possibly a discrimination claim. Also make sure you check (and follow if necessary) any redundancy policy.
Whether you are consulting collectively or individually only, it's important that you get across the business rationale for the redundancies and set out clear information about the process, alternative vacancies, etc. – this is a valuable opportunity to take control of the message to employees and the market generally. If you do need to consult collectively, you need to provide specific information in writing to the employee representatives.You will also need to notify the Secretary of State for Business, Energy and Industrial Strategy of the redundancies at the start of the collective consultation process using form HR1 – failure to do so is a criminal offence.
You will need to identify selection 'pools' and criteria so that, where you are reducing the number of people performing a particular role (or several similar roles) you can choose between them.The employee representatives will need to be consulted with over these in any collective consultation. Criteria should be as clear and objective as possible; if they involve some subjective judgement (e.g. performance-based criteria), any scores should be backed up by evidence from appraisals.
You should check whether there is any (express or implied) obligation to make enhanced redundancy payments.Even if there isn't, it may be worth offering enhanced terms with financial and non-financial elements (such as assistance with CVs, agreed references, etc.), whether under a settlement agreement or otherwise, as this can reduce ill-feeling and have reputational benefits (as well as the legal certainty achieved under a settlement agreement). Some of these payments/benefits can be provided tax-free.
Addressing these issues in advance and factoring them into your planning is likely to make the process much smoother, as well as reducing legal and reputational risks.
If you would like any additional information, please contact Jane Amphlett.