"I've tried to avoid it as long as possible, but need to reduce headcount"
The economic outlook continues to look bleak, and employers up and down the country are being forced to consider redundancies - in many cases for the first time. This has been particularly evident in the finance and construction sectors, but employers in virtually all industries are affected and are seeking to improve efficiencies or make cuts.
It is essential that this is done correctly and that proper procedures are followed. If not, a business already facing cashflow problems could be met with claims for unfair dismissal, discrimination, and in some cases, protective awards.
In most cases, an employer will have to comply with the statutory dismissal procedures before making redundancies. This will involve, at its most basic level, inviting each affected employee to a consultation meeting to discuss the situation, considering the situation and their views fully, advising them of the decision in writing and offering a right of appeal.
In reality however, the process is a lot more complicated. Before individual consultation can even take place, an employer must correctly identify the pool of employees who are at risk of redundancy - not always an easy task. It is important that this exercise is focused on the roles that are no longer to be needed, rather than the individuals currently in those roles. Once the pool has been identified, a selection process must be carried out, using objective and transparent criteria to determine which employees are selected for redundancy. The criteria used must be fair and not tainted by discriminatory factors, and ideally should be competence based to ensure that the best employees are retained.
Employees must be consulted throughout this process, and must be given an opportunity to consider their provisional assessment and make representations before a final decision is taken on which employees are to be made redundant. This process inevitably takes time and involves significant management input.
In cases where 20 or more employees are proposed to be made redundant at an establishment, collective consultation with employee representatives is also required. This will need to take place over a minimum of 30 days (90 days if 100 or more redundancies are proposed). A failure to consult properly may result in liability for a protective award of 3 months salary per employee.
Employees who are made redundant are entitled to statutory redundancy payments, and will also be entitled to their contractual notice (or in some cases a payment in lieu). Some employers will also make ex-gratia payments to employees in recognition of good service, or to further compensate the loss of employment. These payments need to be carefully assessed so that the correct tax treatment is applied, and employers will frequently wish to ensure a full and final settlement using a compromise agreement.
Employers considering making redundancies should check that they have correct procedures in place to ensure that dismissals will be fair and that protective awards are avoided.
FOR FURTHER INFORMATION PLEASE CONTACT: Alison Gow