What is a redundancy?
Generally, an employee is redundant where the employee is surplus to requirements. More specifically redundancy is defined in section 139 Employment Rights Act 1996 as either:
- Where the employer intends to or has stopped trading; or
- Where the work that the employee is employed to do either stops or reduces; or
- Where the work that the employee is employed to do either stops or reduces in the place that the employee was employed to do it.
The redundancy process
Redundancy can be costly for businesses. Pay is based on a sliding scale depending upon age and length of service; redundancy can cost up to £16,320 per employee and a proper redundancy process would need to be followed, taking time and expertise.
In overview, the redundancy process will include at least:
- an announcement meeting explaining the need for redundancy; and
- an compliant invitation to first consultation; and
- a second consultation; and
- and an outcome.
These are the minimum steps that an employer must complete in order for a redundancy to be legally compliant. The exact process and employer should follow will vary from case to case, we need to consider how to evidence the need for a redundancy, the number of employees put at risk of redundancy and whether representatives should be appointed, the possibility of pooling and scoring employees against each other if they do the same or substantially similar roles, and in some cases additional meetings. Our redundancy How to Guides will provide you with guidance and support in determining the correct process but our lawyers remain on hand to help you with this.
You should always seek advice prior to undertaking formal procedures. A redundancy is still a dismissal and failing to properly carry out the process can lead to unfair dismissal claims in the employment tribunals.
What are the alternatives to redundancy?
There are lots of steps that can be taken to try and avoid redundancy. Below are some of the most popular methods but there are additional ways, including commercial methods not discussed below, to try and avoid redundancy.
Short service dismissals
Employees with less than two years service can be dismissed without any process whatsoever and they are prohibited from bringing unfair dismissal claims in most cases. More importantly, employees with less than two years service are not entitled to redundancy pay. Assessing employee start dates is a quick and cost effective way of avoiding redundancies, particularly where the business can do without those employees.
There are lots of exceptions to the two year rule however, some of which entitle the employee to bring a claim for unfair dismissal. It is always advisable that employers take advice before undertaking a short service dismissal and provide employees with a dismissal letter detailing the reason for the dismissal. It should be noted that employees with less than two years service can always bring claims for discrimination so extra should be taken to manage this risk.
Remove temporary staff
Temporary and agency staff can incur enhanced costs. The needs of the business should be assessed to determine whether temporary and agency staff are necessary. Depending upon the terms it may be possible to terminate contracts and temporary remove staff, and their associated costs, from the business with minimal risk of employment tribunal claims.
Where recruitment campaigns have been started it may be appropriate to halt the recruitment drive, employers will need to consider rescinding any offers that have been made to candidates.
If cash flow is a short term problem assessing employee’s wages and benefits could be a useful way to address the short term issue.
Depending upon the terms of any agreements in place it maybe possible to:
- Reduce pay; or
- Temporarily stop benefits, for example enhanced pension contributions or health care schemes; or
- Reduce or remove commission and bonus schemes.
Employers should bear in mind that they may need to consult with their employees depending upon the terms and conditions that are in place, should there be a requirement to consult consent to vary the terms will be needed. Any variation, whether temporary or permanent should be detailed in writing and where consent is necessary a formal variation to contract should be drafted and signed by both parties.
It may be a hard sell to get employees to agree to a variation to or a reduction in pay and benefits however if employers are honest with them in relation to the reason for the change they are likely to agree. It would help if you the length of any variation could be limited but in some cases this isn’t possible.
Our lawyers can of course assist you in drafting appropriate variations for your staff.
Change in working hours
Some employers may want to consider moving to reduced hours, this would of course impact the pay of the employees who may be affected by this decision.
As above where a reduction in hours is considered necessary to secure the long term future of the business any variation to working hours should be discussed with the relevant employees, proposed and their consent sought and agreed in writing. Where consent cannot be achieved employers may wish to consider enforcing temporary changes via short time working and lay-off.
Short time working is where employees working time is reduced by a set number of day or hours per week. Lay-off is where employees are not been provided with any work on a temporary basis, this is usually one week at a time.
There is no set process to follow when placing employees on short time working or laying them off, however employees simply need to be notified and we recommend that it is confirmed in writing.
Ready and willing to work
If an employee is ready and willing to work, but the employer has no work available, they are entitled to be paid for any time spent not working unless the employer has invoked its contractual right to lay-off without pay. A Statutory Guarantee PAyment is available for every workless day and you can read more here (https://employmentlawsolutions.co.uk/lay-off-short-time-working/) . Statutory GUarantee payments and 100% tax deductible too.
It should be noted that employees are entitled to be made redundant where they have been laid-off or put on short time working for (or a combination of the two) for either:
- 4 or more consecutive weeks; or
- a total of 6 weeks (of which no more than 3 are consecutive) in any period of 13 weeks.
We have calculated that by using a combination of lay-off and short time working you you could extend the lay-off and short time working period by up to 8 weeks before redundancies must be carried out.
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