How do I make staff redundant?
The COVID-19 pandemic has naturally created a shift in how businesses operate. This new way of working and the requirement to adapt has caused many inevitable changes. We have had the benefit of more time at home, with business owners having more time to look at their business structures, review efficiencies and areas to make cost savings in this uncertain time.
Some businesses are moving completely online and closing physical shops, or deciding to outsource parts of their business.
With the ongoing Government support coming to an end in the near future, including the Furlough scheme which had provided a critical lifeline for businesses and staff alike, minds now need to be turned to transitioning back to the workplace in these changing times and longer term plans.
Has your business changed?
While some very positive steps have been made for businesses in terms of efficiencies, and working flexibility, this may lead to changing the workforce and potentially needing to consider redundancies.
Is there a redundancy situation?
This can arise as follows:
- Whole business closure;
- Partial business closure i.e. a site or office; and/or
- Business change (reduction in requirement for staff to carry out work of a particular kind).
It is important to note that not all redundancy situations arise due to wanting to save costs. Businesses can continue to trade at the same level and face a redundancy situation i.e. where they reduce their headcount by reorganising staff to streamline a particular department or process, or increase efficiency.
Some restructures do not amount to a redundancy situation and a different process can be followed to seek to change terms. I suggest seeking advice to see whether a redundancy process needs to be followed as these processes can often overlap.
What are the key stages of redundancy?
- Warn employees of possible redundancies (group or individual meetings);
- Consider selection pools (it is possible that there will be no selection pool and the role is standalone);
- If relevant, decide on and apply fair and objective selection criteria;
- Hold individual consultation meetings;
- Listen to suggestions from employees on ways to avoid redundancies. This can open up ideas that the company had not considered – perhaps an employee would be willing to work in a completely different role/department, or move to part time hours to help alleviate the situation;
- Respond to suggestions made by employees;
- Consider whether there are suitable alternative vacancies as an alternative, including whether a person selected for redundancy should be bumped into a different role;
- Hold a final meeting with the employee to discuss the outcome and, confirm dismissal;
- Write to the employee confirming the outcome, offering the right to appeal;
- Follow a full appeal process.
If you are considering making more than 20 staff redundant within a 90 day period (whether this is in one process, or several stages), a collective consultation process may need to be followed. A tribunal will generally look forwards and backwards for a total amount of redundancies. This catches employers who try to avoid collective consultation by making a series of redundancies in small groups. Strict time limits must be complied with, together with a full process including notifying the Secretary of State. Failure to comply with collective consultation obligations could result in the company receiving an unlimited fine and affected employees could lodge Tribunal claims for protective awards.
Read more on the redundancy process here.
How much do you need to pay?
All employees are entitled to receive their notice pay (requirement to work their notice of a payment in lieu). Be aware, if an employee works their notice period, this could lead to their termination date increasing their service to 2 years, leaving them entitled to a statutory redundancy payment.
Employees with over 2 years’ service are entitled to a statutory redundancy payment (or enhanced redundancy payment if a contractual policy is in place). For statutory redundancy, weekly pay is currently capped at £544 and the maximum amount of statutory redundancy pay is £16,320.
You can use the helpful Government calculator to work out the statutory redundancy payments for your staff.
What will happen if you do not follow the correct redundancy process?
Employees with over 2 years’ service can bring Employment Tribunal claims of unfair dismissal, which can be costly and time-consuming for businesses to deal with.
Will the Employment Tribunal take a lenient approach to rushed or flawed redundancy processes made during the COVID-19 pandemic?
In short, this is yet to be seen as claims have generally not reached final Tribunal hearings on this issue. The law on redundancy has not altered in response to the COVID-19 pandemic. So this will ultimately be at the discretion of the Tribunal. For redundancies made at the start of the pandemic, as a knee-jerk reaction in efforts to save businesses, a more lenient approach may be taken. However, redundancies made at this late stage of the pandemic are likely to receive the same scrutiny as normal. Arguably businesses have now had the time to make appropriate plans.
If you have any queries in relation to the above or wish to discuss whether a redundancy situation exists in your business and the correct way to approach this, please do not hesitate to contact one of our experienced Employment Lawyers on 01202 525333 for further advice.