Covid-19 Redundancy Factsheet
Many businesses will be looking at the uncertain prospect of beginning to consider compulsory redundancies in view of the ongoing impact of Covid-19.
This factsheet explains all aspects of the redundancy process for employers, including the redundancy consultation process. It also explains why you might want to use a Settlement Agreement in a negotiation, with a view to agreeing the basis of a termination.
An introduction to the redundancy process for employers
When it comes to redundancy, it is vital to follow the correct procedure, including the correct redundancy consultation process. A genuine redundancy situation can result in a finding of unfair dismissal at Employment Tribunal if you do not adhere to the correct processes.
While the rights to claim unfair dismissal only arises after two complete years of service, (including the statutory notice entitlement, not the contractual period), selection for a discriminatory reason can result in a claim from the onset of the employment relationship. We therefore strongly advise a best practice approach for all employees.
What does not constitute redundancy?
An employee would not be regarded as redundant where a dismissal is wholly or mainly attributable to:
- Transferring night-workers to day-workers
- Changes to a shift system to promote efficient working
- Reduction of overtime
Transferred redundancy (“Bumping”)
Bumping in redundancy is where an employee, whose own position is redundant, is transferred to a second position, making the holder of that second position redundant. Redundancy bumping is legally permissible provided the correct procedure is followed in respect of the bumped employee.
By linking a dismissal to a diminution in the need for employees, a redundancy situation arises for the bumped employee, notwithstanding that it may not be a diminution in the work which the dismissed employee carried out or could have been required to carry out.
The redundancy procedure and the consultation process for redundancy
When a redundancy situation arises, the following steps should be followed:
Give employees sufficient advance warning of the impending redundancy situation and the fact that it may affect them. It is advisable for this to be confirmed in writing in the form of an “at risk” letter. Ensure employees who are absent for whatever reasons, including maternity and disability reasons, are also contacted.
Fair selection: a selection pool
In some instances, there will only be one employee potentially affected by redundancy and therefore there will be no need to identify a pool for selection. For example, a local office may be closing where only one employee works. In all other cases, you should identify a pool of employees from which to select those who are potentially redundant. The type of work the employees do will be important and the pool of employees must relate to the reason for the proposed redundancy.
What is redundancy?
An employee is regarded as redundant where a dismissal is wholly or mainly attributable to:
Move of place of business
This is where an employer moves, or intends to move, the place of business from the place where the employee was employed. The test here is where the employee worked, not where they could be required to work under their contract of employment. Whether the move is sufficient to warrant a redundancy situation is based on the distance between the old and new premises, and the level of inconvenience to the employee.
Cessation of business
This is where an employer has ceased, or intends to cease, to carry on the business for the purpose for which the employee was employed. It also applies if the part of the business where the employee works is closed, but the rest of the business continues.
This is where an employer requires fewer employees to carry out existing work, or there is less work for existing employees. An Employment Tribunal will not simply look at the actual work the employee was doing at the time of dismissal, but also the work they could be required to perform under the contract of employment. Redundancies can arise out of a work re-organisation where fewer workers are needed because of the introduction of labour saving devices or where different skills are required. In relation to changing their operational models, as they emerge from lockdown, there is a good chance many businesses will feel that they have surplus labour.
You are entitled to determine the make-up of the pool. However, it may be advisable to consult with employees beforehand and reach an agreement on its correct membership. You can create a number of pools to reflect redundancies being made in different parts of the business and at different levels.
Redundancy selection criteria
Once the pool has been agreed, you should determine how employees will be selected from that pool. A list of criteria should be drawn up to reflect the employer’s business priorities in order to retain the best employees.
Criteria must not be discriminatory and must be capable of objective assessment or measure. In particular, attention should be paid to avoid indirect discrimination. For instance, could your criteria have a disproportionate adverse effect on an ethnic group, gender group or disabled person? For example, criteria based on flexibility in working hours might adversely affect single parents – a greater proportion of which are women and this may constitute indirect sex discrimination.
Last in first out, or “LIFO” has previously been a popular sale selection criterion. While this method is both simple and, on the face of it, fair, it may not produce the desired result for the employer. By using this method, you may lose the employees best able to drive the business forward. It may also indirectly discriminate against younger employees. Length of service should therefore only be used as one of a number of potential criteria which can be weighted according to priority. LIFO should not be given the greatest weight.
It is advisable to consult with employees as to the criteria to be used, explaining:
- How the proposed system will work
- Why the criteria have been chosen
- Why some criteria, if any, are weighted
Redundancy Consultation process
You must enter into meaningful and proper consultation process for redundancy with employees selected for potential redundancy. A meaningful redundancy consultation process means more than simply informing the employee(s) of a decision already made. You need a two-way dialogue with the objective of finding ways of avoiding the dismissal. If at all possible, for example, job sharing, sabbaticals and a reduction in hours. At least two individual consultation meetings are recommended. Employees are entitled to know why they have been selected for redundancy and to see their selection scores.
The employer must make genuine efforts to ascertain whether suitable alternative employment exists within the employing entity of any associated company. Suitable alternative employment, if available, should be offered during the course of the redundancy consultation process.
There are some situations where you might want to consider offering a Settlement Agreement to employees you are making redundant. For example, where you and your employee agree that this is the best way to end the employment relationship but neither of you want to go through the redundancy process, which usually takes about a month. You may also want to repeat post termination restrictive covenants contained in your employer’s contract to ensure they do not contravene them.
A Settlement Agreement ensures those dismissed by reason of redundancy do not bring claims against you for unfair selection/dismissal. This may require you to pay a contribution towards their legal costs as a Settlement Agreement must be “signed off” by an appropriate legal adviser.
It is usual to offer an ex-gratia payment over and above their statutory redundancy payment as an incentive for them to waive their rights to bring a claim over and above their statutory and contractual rights.
NEED REDUNDANCY ADVICE FOR YOUR BUSINESS?
Please contact Richard Moore on 01539 816416 or email: email@example.com for a free initial consultation about your lockdown related redundancy queries.