Official early estimates from the Office for National Statistics suggest that some 649,000 employees have lost their jobs between March and June 2020, as a result of the Covid-19 lockdown.
Andrew Masters, Partner and Head of Employment at Furley Page, said: “We are probably going to be experiencing difficult economic times for a considerable period to come and many employers will unfortunately be forced to make reductions in their staffing levels. While redundancy is an accepted reason for dismissal, no redundancy exercise is completely without legal risk.
“However, employers who approach redundancy in a transparent way, being honest about the difficulties the organisation faces and open to suggestions from employees, can greatly minimise the risk of disputes arising and hopefully avoid subsequent litigation. Over the years the courts and Employment Tribunals have developed a range of standards that a reasonable employer will be expected to meet.”
Employers should think about the following seven key areas when making employees redundant:
Should you ask for volunteers?
There may be employees who are willing or even eager to be selected for redundancy. Where there are sufficient volunteers then the employer will avoid the process of selection and also avoid the risk of legal proceedings from longer-term employees who feel unfairly treated.
Andrew said: “One reason not to offer voluntary redundancies is that very often the wrong employees volunteer. Those whose skills and experience will make it easier for them to find new work are probably not the employees that the employer will most want to make redundant.
“It is important therefore for the employer to reserve the right to refuse any application for voluntary redundancy. Employers should therefore think carefully about whether asking for volunteers is the best approach for them to take given the particular circumstances that they face.”
The pool for selection
To apply selection criteria fairly there will need to be a clearly defined group – or ‘pool’ – of employees from whom those to be made redundant will be selected. How wide or narrow that pool should be is a matter for the employer to reasonably decide.
Selection criteria
The employer also needs to be able to explain the basis on which the selection for redundancy was made in each particular case. Where possible this should be an objective assessment of the strengths of an employee and how they match the future requirements of the employer.
Andrew explained: “Traditionally selection for redundancy was based on an employee’s length of service. The principle of ‘last in, first out’ has the advantage of being completely objective. However, the business’ best performing employees may not have the longest service, and alternative selection methods, such as assessing job performance, attendance or disciplinary records, qualifications, experience, attitude and potential, can all be applied.
“It is vital that employers consider whether the selection criteria they choose has any potential to operate in a discriminatory way.”
Consultation
One of the key aspects of a fair dismissal for redundancy is consultation. It must take place when the employer’s proposals are not yet finalised, and there must be room for the employer to change its plans based on employee feedback. A lack of consultation may in itself be enough to render the dismissal unfair.
Andrew continued: “Redundancy should not be announced as a foregone conclusion. The more the employer can show that it shifted its position in response to the consultation process, the easier it will be to show that the consultation was a genuine exercise.”
Applying the criteria
Employees who are selected for redundancy should be told why they were selected and how they were assessed against each of the criteria. They should also be given the opportunity to correct any errors in that assessment. This may involve a formal appeal against their selection, but this is far from being a universal practice and is not a legal requirement.
Pregnancy and family leave
In any redundancy exercise it is crucial to ensure that pregnant women and those on maternity, adoption or shared parental leave are not placed at a disadvantage. There is, however, no law against making such employees redundant provided the redundancy is a genuine one and the pregnancy or taking of leave does not in any way influence the employer’s decision.
Alternative work
A reasonable employer carrying out a redundancy exercise will consider whether there is any alternative work available for affected employees elsewhere in the organisation.
Andrew said: “Employers sometimes make the mistake of not discussing some alternative roles with employees because they believe they will not be interested. They may be lower paid or less senior roles than the one the employee currently has. On the whole, however, it is better to present all the possible alternatives to the employee and have a genuine discussion about which of them might be appropriate.”
For a more detailed examination of the seven key issues that employers should consider when making redundancies, please see the article on Furley Page’s website.
For legal advice about making redundancies contact Andrew Masters on 01227 763939 or email asm@furleypage.co.uk
You can also follow the firm on Twitter @furleypage and on LinkedIn.