Redundancy Guide For Employers

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1 Redundancy Guide For Employers 1. Introduction Handling redundancy becomes more complex every day. There is, of course, the need to keep up to date with redundancy legislation. But there are also: i. the legal requirements relating to consultation; ii. managing the fears and expectations of employees affected by workforce cuts; iii. the provision of additional support to employees to help mitigate the impact of redundancy. Each one is a significant issue in its own right. When you add in the need to ensure that the employees who are to remain don t feel disaffected and threatened by what has happened to their friends and colleagues, then little wonder that redundancy programmes are viewed with fear and trepidation. This guide provides employers with some practical advice and information about these issues and, hopefully, will help make a difficult process more manageable. 2. What legislation covers redundancy situations? The main legislation governing redundancy is: The Collective Redundancies (Amendment) Regulations 2006 (in force from 1 October 2006). The Employment Rights Act 1996 The Collective Redundancies and Transfer of Undertakings (Protection of Employment) Regulations 1995 The Collective Redundancies and the Transfer of Undertakings (Protection of Employment) (Amendment) Regulations 1999 The Trade Union and Labour Relations (Consolidation) Act 1992 Other legislation which may be relevant includes: The Employment Equality (Age) Regulations 2006 The Information and Consultation of Employees Regulations 2004

2 3. What legislation covers redundancy situations? The first step is to confirm that you have a redundancy situation. Redundancy takes place when you dismiss someone for one of the following reasons: you have ceased - or intend to cease - carrying on the business for the purposes of which the employee is employed; you have ceased - or intend to cease - to carry on the business in the place where the employee is employed; you no longer require the employee to carry out work of a particular kind because the work has ceased or diminished (or is expected to cease or diminish); or you no longer require the employee to carry out work of a particular kind because the work in the place where they were so employed has ceased or diminished (or is expected to cease or diminish). Note: for a redundancy to be genuine the employee s job must disappear. This does not mean that you cannot hire new staff - but not to do the work the redundant employee was previously doing. 4. What to do first Redundancy is a difficult and painful process and you should consider alternative options to prevent the need for redundancies, such as: Cancelling all recruitment; Filling internal vacancies with existing employees; Cutting back on the use of temporary employees (provided they are not fixed-term or part-time employees); Reducing or stopping overtime; Retraining employees; Asking staff to work flexibly; Pay freeze or temporary pay reductions; Introducing short-time working or temporary lay-offs; Asking for volunteers for redundancy and/or early retirement. As well as being included in any consultation process it is good practice to involve your employees in these discussions/considerations as they may suggest other viable alternatives that have not been thought of.

3 5. What the law requires of you There are certain legal requirements that must be followed to ensure that any redundancy process is fair. A. Consulting with employees Many employers get confused about the changing requirements for consultation with employees when a redundancy situation arises. Part IV of the Trade Union and Labour Relations (Consolidation) Act 1992 (TULR(C) A 1992 outlines the statutory minimum guidelines for consultation that must be followed. The first potential stumbling point for employers is to understand what those minimum guidelines are: Who is covered? What does consultation mean? What is an establishment? Who should you consult with? What s the difference between individual and collective consultation? What should you consult about? How long does consultation last? What happens if you fail to consult? Who is covered? The provisions apply to all employers and employees except those described below. They apply regardless of how long employees have worked for their employer or for how many hours a week they are employed. The provisions do not cover: Anyone who is not an employee - for example, an independent contractor or freelance agent; Members of the police service and armed forces; Masters and crew members engaged in share fishing who are paid solely by a share in the profits or gross earnings of a fishing vessel; Crown servants and Parliamentary staff;

4 Employees employed for a fixed term of three months or less, or engaged for a specific task which is not expected to last more than three months. What does Consultation Mean? An employer proposing to make collective redundancies is required to consult in advance with representatives of the affected employees. Enough information must be provided by the employer to those representatives about the employer s proposals to allow them to take a useful and constructive role in the process of consultation (see What to Consult About ). Merely providing representatives with plans for redundancy as information does not constitute consultation, nor does foreshortening timescales to allow no time for meaningful dialogue to take place. What is an establishment? The definition of establishment can be vague for the purposes of redundancy consultation. It may mean a single site, or it could span multiple sites where there are employees conducting the same work. The actual employer as an entity may be considered to be an establishment. For employers operating out of one site this should not be a problem. However, for multi-site employers the definition is much harder. Sadly, there is no statutory definition of 'establishment', but there has been considerable case law on the issue and generally the Tribunals take a reasonably common sense approach. Establishment means the unit to which the workers are assigned to carry out their duties. The following have been important factors in determining whether different sites are distinct establishments: Geographical separation of the sites, Managerial independence and control, Whether the sites are permanent or temporary. The key message from the European Court of Justice seems to be that the term 'establishment' should be defined very broadly to limit as far as possible cases of collective redundancies which are not subject to Directive 98/59 (which TULRCA implements) (see Athinaïki Chartopoiia AE v Panagiotidis (C-270/05 [2007] IRLR 284)).

5 The key message is to give careful consideration to where redundancies are being made and if there is any doubt or risk that more than one site could be considered a single establishment then err on the side of assuming that they are a single establishment and carry out collective consultation if 20 or more employees are likely to be dismissed over a period of 90 days or less. Also consider seeking expert legal advice if there is any doubt. Who Should You Consult With? For collective consultation the employer should consult with either recognised Trades Unions or properly elected employee representatives. Individual consultation should take place with employees potentially affected by the proposals, but employers should consider communicating to a wider audience to remain in control of the flow of information. Individual Consultation There is no legal obligation to undertake collective consultation if less than 20 employees are being considered for redundancy. However, there is a requirement to meet and consult with all employees on an individual basis. This time period can be reduced where less than 20 employees are to be made redundant but it is recommended that you ensure that there is at least one week between each stage of the Consultation period. Collective Consultation There is a legal obligation to undertake collective consultation when the employer proposes to make 20 or more employees redundant at one establishment over a period of 90 days or less. Where collective consultation is being undertaken, individual consultation should also take place. What to Consult About During collective consultation employee representatives/trades Union representatives must be provided with the following in writing and in good time to provide a response: The reason for any proposed redundancy dismissals; The number and different types of employees that are proposed to be made redundant; Why individuals have been provisionally selected;

6 How the selection process will be conducted; The timescales for the process; How redundancy payments are calculated; Any possible ways of avoiding redundancies or mitigating the impact; Any options for alternative work. It is also good practice to provide the same information to individuals during individual consultation. Click here for a suggested presentation template. How Long Does Consultation Last? Consultation must begin in good time and take as long as is necessary. As a minimum the consultation process must be completed before any redundancy notices are issued. Consultation should be conducted with a view to reaching agreement, but can end before agreement is reached. Although there is no time limit to how long a consultation period may last there are minimum periods in place dependent upon the number of proposed redundancies: redundancies, consultation must start at least 30 days before any dismissals take effect; 100 or more redundancies, consultation must start at least 90 days before any dismissals take effect; Failure to Consult If the employer fails to consult under the requirements of TULR(C) A, then employees or elected representatives/trades Union representatives may make a claim at the Employment Tribunal for a protective award. This can be on a number of grounds but typically include: Not beginning consultation early enough Not consulting properly Ending the consultation early The protective award payment is up to 90 days' pay for each affected employee (The Employment tribunal will decide based upon the extent of the failure to consult in the circumstances).

7 Further, failure to consult employees - and their representatives if applicable - in a redundancy situation, will almost certainly render any subsequent redundancy dismissals unfair. Complaints may also be made directly to Employment Tribunals by employees for unfair dismissal claims where the employee has more than one year s continuous service (discrimination claims and breaches of the Part-time Workers Regulations (2000) or Fixed-term Workers Regulations (2002) are exempt from the qualifying service criterion). At the time of writing the maximum award for compensation for unfair dismissal was 65,300. There is no maximum limit for discrimination awards. B. Notifications Do you need to tell the Regulators? If you plan to make 20 or more employees redundant in one place of work within a 90 day period you must notify the Insolvency Service using form HR1 (see link in Useful Links section. This can be done by writing to them at: The Insolvency Service, Redundancy Payments Service PO Box BIRMINGHAM B16 6HP or by to or by fax on

8 6. An example process 1. Announce the potential redundancy situation through a formal briefing to the workforce either through elected representatives and/or Trade Union officials where they are recognised (or where your policies dictate) and for an collective consultation 2. Following the collective announcement commence a series of individual meetings with all affected employees giving more detail of how this affects them and seeking their views on ways to mitigate the impact and number of redundancies. Also confirm the process for selecting employees and timescales 3. Continue to hold collective consultation meetings to explore all possible options and counter-proposals put forward by employee representatives. As guidance these meetings should be held on a weekly basis to allow for fast, but appropriate discussions to take place. These meetings should continue throughout the process in parallel with individual consultation 4. Use all relevant channels to communicate directly with all employees. Consider setting up specific intranet pages for consultation, and publishing Q&A documents for the most commonly asked questions. Also consider, where appropriate, management briefing sessions to all employees 5. Provide written copies of all relevant documentation for employees 6. Conduct the selection process (see below) 7. Conduct a second round of individual consultation meetings to inform employees of the outcome of the selection process and provide the right of appeal

9 7. Selection for Redundancy One of the most contentious aspects of redundancy is the selection of employees. Having a robust and agreed (via consultation) selection process may not prevent employees from being disgruntled and unhappy but will make it easier to objectively justify selection decisions if challenged. A. Interview Selection Perhaps the easiest method to justify to affected employees as it is perceived as being open and fair. To conduct a fair interview selection process the following is recommended: At least two interviewers are present, one of whom should be the manager making the ultimate decision (the other may be from HR or a fellow manager); Interviews should be conducted against the criteria for the job being selected into, not the job(s) the candidates are leaving; A standard set of questions should be devised and all candidates interviewed against them, linked to the competencies for the role (this does not preclude asking different questions that may arise from answers given but ensures that all candidates are measured against the same criteria); Use a standardised marking system for each question and weight as necessary; Review the responses against the job description and identified competencies do not compare the candidates against each other; When complete the two interviewers should score candidates individually and then discuss their scores to come to an agreement. If it is not possible to come to an agreement on any particular point the disparity should be noted with the selecting manager having the final decision; Another manager not connected with the redundancy selection process should review all of the scoring for consistency and fairness; B. Desk-Based Selection Where it is not possible to conduct an interview process, for example a number of departments are being merged (so no single decision-maker) or

10 where employees are geographically spread out, then a desk-based selection process may be considered. The first step is to construct a selection matrix with associated scoring key and weighting. Typically, selection is conducted against a number of criteria such as: Skills and competence; Standard of work performance; Adaptability to changing business needs; Disciplinary record; Attendance record. Length of service is also used from time to time but it is essential that care is taken to ensure that age and sex discrimination does not take place as a result. However, there are a number of criteria that are automatically unfair: trade union membership, non-membership or activity; legal industrial action lasting up to 12 weeks, or longer; certain employee representative reasons; actions taken on specified health and safety grounds; reasons associated with pregnancy, maternity, paternity, adoption and parental leave; reasons relating to regulations on part-time workers. In coming to a decision the scoring manager should consider: Appraisal scores are they relevant for the role being reviewed against? Has the employee been in a role long enough to make an objective assessment? Are all attendance records up to date? Generally speaking this criterion should not be used as a tie-breaker For disciplinary scoring, documented evidence must be available to support any negative scoring. Where an employee is on or has been on maternity leave, and this will affect the scoring the manager should seek advice on how to proceed.

11 As with the interview process another manager not connected with the redundancy selection process should review all of the scoring for consistency and fairness. If it is found that the selection matrix produces inconclusive results, for example 3 employees are scored very closely together or have the same score, then an interview process can be conducted for those employees. C. Selection - Hints and tips For all individual meetings provide adequate written notification of the meeting where possible It is best practice to allow employees to be accompanied to such meetings Have a note-taker with you if you feel you need support Ensure you have copies of all the relevant briefing material to hand Explain the selection process in enough detail so that the employee understands it Remember to ask for any individual views on the process Confirm the outcome of all meetings in writing and provide copies of all relevant documents employees are often in shock when they hear the news so don t remember everything you say Arrange follow up meetings as necessary 8. Other rights Employees under notice of redundancy have the following rights: To be offered alternative employment wherever possible To have a trial period in the alternative employment without losing their right to a statutory redundancy pay Reasonable time off on full pay for job-hunting or to arrange training

12 9. Redundancy pay Employees with at least two years (including those on fixed term contracts) continuous service have the right to a redundancy payment if he/she is dismissed due to redundancy. The amount is calculated according to the employee s age, length of continuous service and weekly pay (up to a maximum which is reviewed from time to time). You must provide a financial statement to the employee to show how you have calculated this payment at or before the time that it is paid. To calculate the statutory entitlement, access the statutory redundancy calculator from the link below. However, if through a contractual or negotiated agreement you have an improved payment schedule you must follow this and ensure that the employee understands the calculations. 10. Useful Links ex.htm HR1 Form Note: The material in this document does not give a full statement of the law. It is intended for guidance only and is not a substitute for professional advice. is not responsible for the results of any action taken as a result of reading this document.

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