In the current climate, unfortunately just one issue tends to be top of mind for those in the advertising and marketing services industry with HR responsibilities. Victoria Parry offers her top ten tips for minimising the pain of redundancy procedures for all concerned.
Topic: Dismissal procedures
When: October 2008
Law stated as at: 31 October 2008
The impact of the "credit crunch" has been more apparent in recent weeks than ever, with news of large-scale redundancies dominating the headlines daily. As a result, the risk of claims for compensation by employees following redundancy has grown. With fewer businesses currently recruiting, employees are more willing to fight for their jobs.
Employers must take care to manage any redundancy process correctly and, most importantly, document and evidence their management of this process to protect themselves against the risk of the legal claims to come.
Here are our top ten tips for managing the redundancy process, including five essential "Golden Rules":
1. Golden Rule: Genuine Redundancy Situation
As with any dismissal, employers must show that there is a "fair" reason for that dismissal. Redundancy is a fair reason and it is therefore vital to have sufficient evidence to show a Tribunal that a "genuine redundancy situation" did exist. The best way to do this is to compile a business plan showing that the needs of the business necessitate one of the following situations, and why:
- a closure of the business for which the employee was employed;
- a closure of the place of business where the employee was employed;
- a reduced requirement for employees to carry out work of a particular kind.
2. Golden Rule: Identifying the pool
Employers will need to identify the group of employees in relation to which selection for redundancy will apply (referred to as "the pool"). The pool should consist of employees holding similar positions and/or whose skills are interchangeable with the positions identified as being at risk of redundancy for e.g. if it is necessary to make an account manager redundant, all account managers should be included in the pool. It is important to document why the pool is structured as it is.
3. Golden Rule: Selection
The employer should establish a proposed set of objective selection criteria to be applied to the pool. Naturally, where a role is unique and the "pool" is only one employee, no selection criteria will apply. Employers should bear in mind that:
- Criteria such as "good team player" are too subjective;
- Don't discriminate e.g. if attendance is a criterion, ensure that maternity-related or long term sickness absence is excluded. In addition, a criterion of length of service (or 'last in first out') may now raise age discrimination issues.
4. Golden Rule: Consultation, Consultation, Consultation!
If fewer than 20 redundancies are proposed, then it is necessary to follow the statutory standard dismissal and disciplinary procedure. If 20 or more redundancies are proposed in a 90-day period, whether in one block or in tranches at different times, then collective consultation obligations will arise.
Amongst other things, collective consultation will involve appointing employee representatives to consult with on behalf of the "at risk" employees as well as individual consultation.
Consultation must be a two way dialogue that is not pre-determined when it starts. Representatives and individuals have a right to respond to the redundancy proposals and any proposed selection criteria, and their comments should be taken into account by making amendments to the criteria and process where possible.
5. Golden Rule: Alternative Employment
It is essential that the employer considers the availability of alternative work for the "at risk" employees and keeps this well documented. The full details of the vacancies should be provided to the whole pool and opportunities should be discussed with each employee individually.
Employers should not to assume that an employee would not be prepared to accept an inferior or lower paid job or even a job in another location if nothing else is available.
6. Redundancy Payments
Employees with 2 years' service or more who are made redundant will be entitled to statutory redundancy pay (unless they unreasonably refuse an offer of suitable alternative employment), calculated by reference to their age and length of service.
Employers should also be sure to check employee's service contracts and staff handbooks for enhanced redundancy pay provisions, particularly if any employees have recently transferred to the business under TUPE. Recent case law has shown that enhanced redundancy provisions contained in staff handbooks may often be contractually enforceable.
7. The cost of getting it wrong
Failing to follow a fair procedure or to show that there was a fair reason for a dismissal may result in claims of unfair dismissal. The damages for such claims are currently capped at £63,000 per claim (although this may be uplifted by between 10-50% for automatically unfair dismissals where the statutory disciplinary and dismissal procedure was not followed).
In addition, the Tribunal can make a protective award of up to 13 weeks' actual pay for each affected employee where there has been a failure to collectively consult. It is typically the case that, once one employee makes such a claim, all those affected have the same idea.
8. Watch your language!
The employer should be mindful of using the right terminology such as "proposed" and "considered" to show that nothing is set in stone. Every document, communication or meeting note should be drafted in view of the fact that it may be disclosed in a subsequent Employment Tribunal claim.
9. Future recruitment
Recruitment for posts similar to those subject to redundancy may antagonise employees recently dismissed into bringing a Tribunal claim and may call in to question whether there was a genuine redundancy situation. The Tribunal may take the view that any vacancies which could have been filled by the "at risk" pool should have been offered to them.
10. Employee Relations
The redundancy process is unsettling for all employees, including those remaining in employment. It is good practice to update those staying with the business as to the basic redundancy process and to assure them that those "at risk" have been notified.