The Office for National Statistics showed GDP (Gross Domestic Product) growth at zero per cent between April and June 2008. As a recession is defined as two or more consecutive quarters of negative GDP, and taking into account the current economic climate and the unemployment jump in August 2008 it is evident we are facing a downturn.
It’s feared that an increase in redundancies will mean the number of unemployed people will break through the two million level by Christmas. And the sad fact is that many small companies will have to consider making some staff redundant at this time.
Redundancy is a potentially fair reason to dismiss an employee, but it is vital that companies get this procedure right as failure to do so could result in an unfair dismissal claim at the employment tribunal.
A business must only dismiss an employee if they are genuinely redundant; otherwise the company could be sued for unfair dismissal. A genuine redundancy situation arises when a company has ceased to operate, has moved to a different place or the companies’ need for work of a particular type has ceased or diminished, or is expected to.
Redundancy procedure
The employers must follow the statutory dismissal procedures before dismissing an employee on the grounds of redundancy. Such procedures should be outlined in the employment handbook. Principally an employer must:
1. Write to the employee letting them know that they are at risk of redundancy, detailing the situation and inviting them to a meeting to discuss the matter further. They should then follow a period of consultation with all affected employees who have been put at risk.
If no alternatives have been found during the consultation period then the employer should write to the employee again inviting them to a further meeting, confirming that the decision has been made to make their position redundant. Employers should let the employee know that they are entitled to have a representative with them at the meeting that can either be a work colleague or trade union representative.
2. Hold a meeting with the employee and notify them of the decision reached, allowing time for an adjournment. The decision from the meeting should always then be communicated to the employee by letter and should also inform them of their right of appeal.
3. If the employee wishes to appeal, an appeal meeting should be arranged. The employee should be advised of the final decision in writing.
Helpful guidelines
- Record keeping and thorough documentation is a necessity. Well-prepared documentation regarding the employee will help back up any redundancy decision, especially if it is their job that has ceased.
- The employer must clearly explain the reason for redundancy.
- The letter to the employee informing them that they are at risk of redundancy must make it clear that no final decision has been made.
- It is essential to record the minutes of all meetings as this allows the employer and employee to hold an accurate record of what has been discussed.
Key tips for the redundancy process
Whether you have five or 100 employees it is important to keep them up-to-date and in the picture, giving as much warning as possible. One of the main things an employer can do is keep their employees informed at each step of the way. Make sure employees know and understand the situation and that they could be at risk.
Keeping employees involved prevents rumours from spreading across the work force and a low staff morale. Consult with your employees; spend at least 20 minutes with each department. Together you might be able to work out which departments can be slimmed down, staff may be willing to cut hours rather than employees lose their job. A tribunal will not criticise how a business is run; only the way the employees are dismissed.
Remain objective and ensure that a fair selection criteria is used when deciding which employees will be made redundant. If a particular department is affected by the possibility of redundancies and there are five individuals who carry out the same role but only two are now required, be objective.
It is not recommended to use ‘last in first out’ and it is important to note that part-time employees have the same statutory rights and protection as full time employees. The correct process must be followed.
Consultation with employee representative
Consultation is essential; the steps taken here will depend on the number of redundancies you need to make. There are four areas which need to be covered clearly in the consultation:
1. The number and category of at-risk employees
2. Method and criteria of selection
3. Procedure as to carrying out the dismissal – statutory procedure
4. How the redundancy payments will be calculated
Use a selection criteria (points based system) to work out general performance and what each individual brings to the business. Employers should look back over the annual reviews, attendance and disciplinary record. This will ensure that the selection for redundancy is objective and fair and in accordance with the criteria set.
An employment tribunal will take into consideration, whether the employer considered any suitable alternatives for the affected employees; if the employer hasn’t, the tribunal will consider whether a dismissal was unfair. However, if an employee unreasonably refuses an offer of suitable alternative employment they will lose the right to a redundancy payment.
Redundancies of 20 people or more ‘collective redundancy’ must be discussed with a recognised trade union, plus the Department of Trade and Industry must be notified 30 days before the first dismissal takes place. If there are more than 100 employees involved this period increases to 90 days.
Communication is a key strategy in redundancy, it prevents rumours from starting, and it makes the employees feel part of the situation. More importantly remaining employees will remember how well or how badly you treated your staff.
Further Information
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