What Does A Fair Redundancy Process Look Like?

posted by KeithDaniel

Practically, now is the time to start considering your workforce requirements post furlough. If you are considering dovetailing the phasing out of the furlough scheme with a redundancy exercise, thought needs to be given to consultation requirements and the impact they may have on redundancies taking effect where minimum consultation periods apply. The last dates for starting collective redundancy consultation and lodging form HR1 will be 16th September 2020 (if proposing over 100 redundancies) and 1st October 2020 (if proposing 20-99 redundancies).

Even if there are less than 20 redundancies proposed and the collective consultation rules do not bite, many organisations may decide to use the furlough period to bear the brunt of salary costs during the consultation and/or notice period.

Once it is established that there is a need to make redundancies, to avoid claims for unfair dismissal and/or discrimination, it is important that employers follow a fair redundancy process.

I set out below the key steps that make up a fair redundancy process where there are less than 20 redundancies proposed over a 90-day period.

The process

1 - Establish whether there is a genuine redundancy situation.

The first consideration is always going to be to establish whether there is a genuine redundancy situation. The statutory definition of redundancy identifies 3 sets of circumstances:-

  • Business closures (closure of the business altogether).
  • Workplace closure (closure of one of several sites or relocation to a new site).
  • Diminished requirement of the business for employees to do work of a particular kind.

The reality is that the law does not interfere with an employer’s freedom to make such business decisions and the employer will not be required to justify its reasons for making redundancies provided that a Tribunal is satisfied that redundancy is a genuine reason for any subsequent dismissal. 

Once the business case has been established, employers should then turn their minds to the process they are going to follow.  This is where the majority of employers land themselves in unfair dismissal territory. 

2 - Decide upon the pool for selection

Where there is a need for a reduction of employees doing the same, similar or interchangeable work, the employer is required to ‘pool’ those employees and select those to be made redundant by using fair and objective selection criteria (see point 4).

There are no fixed rules about how the pool should be defined and, unless there is a collectively agreed or customary selection pool, an employer has a wide measure of flexibility. The starting point is usually to consider which particular kind of work is ceasing or diminishing and which employees perform that kind of work.

Where the role is unique or “stand-alone”, there is no requirement to pool with other staff (indeed it’s impractical to do so) and therefore no selection criteria come into play.

3 - Carry out a consultation process

Where there is a pooling situation, the consultation process should consist of an initial group meeting to set out the proposals and selection criteria, and a subsequent group meeting to enable employees to challenge the proposals or comment on the pools and selection criteria. During this initial stage we would usually expect to see a minimum of 2 group consultation meetings before moving onto the scoring.

Once the scoring exercise is complete, we would then move to individual consultation meetings with the employees with the lowest scores to consult on the scores, suggest alternatives to redundancy and explore alternative vacancies. We would usually suggest carrying out between 2 and 3 individual consultation meetings to ensure all matters are covered off prior to making a decision.

Where the role to be made redundant is a standalone role we would normally suggest 3 meetings are held over a 2 to 3 week period to satisfy the consultation requirements. The emphasis is at first to allow the individual to challenge the redundancy proposals or their selection for redundancy. If the proposals are confirmed, then the emphasis shifts to exploring alternative employment. 

When conducting the individual consultation meetings, it is best practice to allow each employee to be accompanied by a single companion of their choice, who must either be a trade union representative or work colleague. Failure to do so may in some circumstances lead to a risk of a dismissal being unfair.

4 - Decide upon an appropriate selection criteria

When selecting from a pool of employees, appropriate selection criteria must be prepared to score each employee. The criteria should be as objective as possible otherwise there is the risk that it could be deemed unfair. Acceptable criteria include skills, qualifications and experience as well as job performance – ideally you want criteria which can be backed up with objective data such as appraisal and attendance records, examination certificates, etc. If this is not possible, then the scoring manager should give a comprehensive narrative as to the reasons underpinning each score that s/he awards, and they also need to be consistent. Each employee should be scored in a fair manner, by an appropriate manager with knowledge of the individual’s capabilities.

5 - Explore alternative employment

It is a key component of a redundancy process that the employer informs the employee of any alternative vacancies within the business before making a decision to dismiss. A failure to explore alternative employment is likely to render any resulting dismissal unfair.

Alternative employment should be explored following the scoring process. You should inform the employees of any alternative vacancies within the group prior to taking any decision to dismiss.

There is no positive duty to create alternative roles, but if there are any roles available in the business or in any associated companies or businesses, then if they are suitable, these should be offered to an employee provisionally selected for redundancy.

6 - Decision and Appeal

Once the consultation process has ended, a decision will need to be made. If there are no feasible alternatives to redundancy and there are no suitable alternative vacancies, the employer can proceed to a dismissal. An employee should be informed that they may appeal the decision and an appeal process carried out if required.

Conclusion

Although the Coronavirus Job Retention Scheme may have been extended until 31 October 2020, it is advisable for employers to imminently consider what their workforce might look like following the end of subsidised furlough and a return to more normal working patterns.

Please contact us if you would like more information about the issues raised in this article or any other aspect of employment law at 029 2034 5511 or employment@berrysmith.com