Redundancies
Redundancy is the last thing any Company Director wants to have a conversation about. Unfortunately, on some occasions, it is necessary. We talk you through the process.
How can I avoid redundancies?
The natural instinct of any Director is to try and avoid redundancies. Here are some options you can consider.
- Flexible working
- Temporary pay cuts
- Offer alternative jobs
- Remove overtime and fringe benefits
- Cut down other costs
Consider if it is feasible to introduce popular flexible working options. To reduce business rates, you could offer staff the option to work from home. Alternatively, you could reduce the number of hours / days they come into the office. Job shares can also prove to be effective in keeping people in employment. This is where two people share the responsibilities of one role.
Most employees would be happy to accept a pay cut if it means that they retained their job. Review this option with them, whilst having a plan to restore their payback to the original amount when things go back to normal.
A good way of introducing pay cuts without employees feeling its pinch is by asking them to ‘buy’ more of their annual leave at the expense of a reduced salary for that financial year.
If certain posts are to be retired altogether, consider retraining employees in other business functions.
Fringe benefits and overtime allowances are a luxury during a time of financial difficulty. Removing these could save you redundancies.
Have you tried a fiscal review to see where costs could be saved without making redundancies?
If you find there is no route but to make redundancies, you have make sure you are aware of the laws and regulations around redundancy.
You can only make employees redundant if you can genuinely prove that the role they’re currently doing will no longer exist.
Why would a job no longer exist?
-
Your business is closing down.
-
Your business is changing what it does.
-
Your business is changing the way it works e.g. using machinery.
You have to give them a reasonable amount of time to look for a new job, offer them any redundancy pay that they may be eligible for and make sure any they have not been unfairly selected for redundancy.
How can I make sure I am fair when selecting employees for redundancy?
The criteria for redundancy should be based on one of the following (or more):
-
Skills and qualifications. This means only making people redundant whose skills and qualifications no longer match the job description.
-
Ability at meeting the criteria of the job role being made redundant.
-
Attendance. Consider things such as absenteeism or regular sick leave without explanation.
-
Disciplinary record.
What are examples of incorrect reasons to make someone redundant?
-
Because they have or are going to become a parent.
-
Any protected characteristic: age, gender, sexual orientation, race, religion and disability.
-
Because they are on a lower wage so it’s easy to make them redundant.
Yes, you have to let them know and consult with them. If you are making 20 or more employees redundant, you have to do what is called a collecting consultation. If you are making fewer than 20 employees redundant, there is no legal obligation to consult, but it is very wise to otherwise employees could file for unfair dismissal.
How does collective consultation work?
-
Give notice to the Redundancy Payments Service (RPS) before the consultation.
-
Only then you should begin the consultation.
A minimum of 30 days if you are making between 20 and 99 employees redundant; this increases to 45 days if 100 or more employees are being made redundant.
You have to inform employees of the planned redundancies and the reasons why. Naturally, employees may have questions or ask for more information. You must meet these demands to the best of your ability. Lastly, once the consultation is complete, give the affected staff the termination and redundancy notice.
The main thing a termination notice should include is the date the employee will be leaving the organisation.
It depends on how long the employee has been working for you. A week’s notice is required, if they’ve worked up to two years, an additional weeks notice for each year employed between two and 12 years and 12 weeks notice if they have been employed for 12 years or more.
A minimum of 30 days if you are making between 20 and 99 employees redundant; this increases to 45 days if 100 or more employees are being made redundant.
Not necessarily. If applicable, the consultation may be held with the employees’ representatives or trade union.
The entire purpose of the consultation is to try and reach an agreement but this is not a necessary condition for the redundancies to take place.
What information do I need to communication to the employees (or their representatives / trade unions) in writing?
-
Why the redundancy is happening
-
The number and category of employees being made redundant
-
The number of employees per category being made redundant
-
What criteria is going to be used to select employees for redundancies
-
How the redundancies will be carried out.
-
Any redundancy payment calculations.
They should get redundancy pay as long as they have worked for two continuous years and are under an employment contract.
1.5 weeks’ pay for each full year of employment after their 41st birthday, a week’s pay for each full year of employment after their 22nd birthday, half a week’s pay for each full year of employment up to their 22nd birthday.
There is a cap of £538 per week or £16,140 per year but you can give them more at your own discretion.
You should make the payment soon after the employee has been made redundant. If you don’t, the employee could take you to an employment tribunal.
You could ask your employees if they would like to retire early via a pay package or other incentives or ask them to volunteer for redundancy. If you opt for the former, the offer has to be made to everyone at the company, not specific people. For the latter, you must follow a fair selection process as described above.
My employee is taking me to Court, what shall I do?
If your employee is taking you to an employment tribunal, it is wise to get legal advice as soon as possible.