A Guide to Redundancy
Redundancies are a form of dismissal that happens when an employee's job no longer exists. This may be due to an employer needing to reduce their workforce (usually for costs savings), close the business, or when certain types of work is no longer needed. Since a redundancy is a dismissal, it can be either a ‘fair’ or an ‘unfair’ dismissal and if it is the latter, then it may give rise to employment claims. It is for this reason that even where a redundancy situation seems ‘obvious’, an employer needs to take care (see further below).
In order for an employer to achieve a fair dismissal, it is essential that the employer follows a fair process. This means undertaking a meaningful consultation with employees before making any final decisions. Employers must consult with employees on an individual basis in the form of face to face meetings. An employer should usually explain the reasons for the redundancies, ways of avoiding redundancies (if any), the proposed pool of employees at risk, the selection process and any available alternative employment. Whilst the employer has considerable discretion over the selection process it should be objective, fair and not discriminatory.
Given the current Covid 19 crisis it is hoped that tribunals would take a sensible approach to consultation perhaps accepting that meetings might need to be conducted by telephone or ‘zoom’, but the current extraordinary situation, should not be used as an excuse for trying to avoid meaningful consultation altogether.
20 Or More Redundancies
Where an employer is proposing to make 20 or more employees redundant within a period of 90 days an employer must also collectively consult. The collective consultation is with:
- the recognised trade union(s) (if any) and/or
- employee representatives that are elected by the affected employees. The employer is obligated to facilitate the election of employee representatives if there are no employee representatives already in place.
For between 20 and 99 proposed redundancies the consultation must begin 30 days before the first dismissal takes effect and for 100 or more proposed redundancies consultation must 45 days before the first dismissal takes effect. The employer must also notify the Secretary of State using Form HR1.
Collective consultation does not negate the obligation to consult individually. Where most employers go wrong, is that they fail to allow sufficient time to allow for proper consultation or the election of employee representatives.
The Cost of Getting it Wrong
Where an employee has more than 2 years’ service they may bring claim for unfair dismissal. Ordinary unfair dismissal claims are capped at the lower of 1 year’s salary or £88,519.00 whichever is the lower.
Where an employer has failed to collectively consult an employee may claim a protective award of up to 90 days gross pay (no cap).
Failure to file form HR1 can result in a criminal prosecution punishable on conviction by an unlimited fine and disqualification as a director.
The above is intended as a guide only you should always seek legal advice on your own specific circumstances
Sarah Rushton is Head of Employment and a Partner at Moon Beever LLP she can assist with any employment law queries email@example.com