Cost of living crisis and redundancies guide
A guide to the redundancy process for employers
PLEASE NOTE: This article is written for information only and does not constitute legal advice. Every redundancy situation will be different and specific advice should be sought.
The cost of living crisis is having a detrimental impact on every aspect and unfortunately is likely to continue for the foreseeable future.
With the cost of living crisis happening at the tail end of the Covid-19 pandemic, businesses are faced with the biggest challenges since at least the 2008 financial crisis. Unfortunately with many businesses unable to recover after the impact of Covid-19, employers may need to make employees redundant to ensure survival. This article however relates to the redundancy process more generally whether or not because of the current financial crisis.
It is obvious to say that redundancy processes are horrible for both employees and employers. The uncertainty caused by them can stir up understandable emotions in the employees which can lead to feeling disgruntled and upset which can lead to legal claims in the Employment Tribunal. Redundancy processes require time and care to ensure that they are fair and reasonable and carried out correctly. Getting it wrong can be very costly both financially and with respect to the reputation for employers.
Redundancy process guide
Below is a redundancy process guide to inform employers of the process and a guide for employees on what they can expect in the event they are at risk of redundancy.
The guide has been written on the basis that less than 20 redundancies will be made. Where 20 or more redundancies are considered employers will have to ensure that collective consultation takes place.
Where larger scale redundancies are contemplated a business has an added obligation to undertake collective consultation – failure to do so can be very expensive (up to 90 days gross pay per affected employee). Collective consultation requires that the following consultation periods take place before any redundancies can be made:
- For 20 or more redundancies at one site = 30 day consultation period.
- For 100 or more redundancies as one site = 45 day consultation period.
The obligation starts when redundancies are proposed not when they have been decided. One of the key functions of collective consultation is for there to be two way dialogue with between the business and the employees to discuss the reasons for the proposed redundancies and whether some or all can be avoided.
Step 1 – Are redundancies necessary?
Employers should carefully consider whether there is a genuine redundancy situation before speaking to any of the employees and beginning the redundancy process.
The legal definition of a genuine redundancy situation is:
- Business closure (closure of the business altogether).
- Workplace closure (closure of one of several sites, or relocation to a new site).
- Diminished requirements of the business for employees to do work of a particular kind.
Employers should consider preparing a business case or written analysis of why redundancies are necessary. By doing so employers can critically analyse their business and operations and test their assumptions and views. Employers can (and probably should) also gather the necessary evidence and data to support their views. A business case should consider questions such as:
- Why are redundancies necessary?
- How many redundancies?
- Which roles?
- Is there evidence and (financial) data to support the need for redundancies?
- What will the structure of the business be after the redundancies?
- If the duties of those to be made redundant are to be absorbed by others – which duties and who will absorb them?
- Could full or flexible furlough be used to avoid redundancies?
Step 2 – Who is at risk?
Employers should put together a pool of employees at risk of redundancy.
Employers should consider which employees are at risk and why they are at risk. One common reason why redundancy dismissals are found to be unfair by employment tribunals is that the selection pools were too narrow and not adequately considered.
Employers should consider whether employees in roles that remain required should be included in the selection pool. It may be that an employee currently in a role at risk could work in a role not at risk and therefore the incumbent employee should be considered as part of the selection pool.
Step 3 – Selection Criteria
Once an employer has decided on the selection pool they need to be able to decide who should be made redundant. This can be achieved by a scoring selection criteria.
The selection criteria need to be fair, objective and with scores being based on evidence.
Step 4 – Warning
Employers should warn those employees at risk of redundancy both verbally and in writing.
The warning letter should contain information on:
- Why redundancies are deemed necessary (perhaps the employer’s business case could be shared).
- Why the employee is at risk.
- The selection pool.
- The scoring criteria and how it will be scored.
The employee should be invited to an individual consultation meeting and they should be given the opportunity to be accompanied by a fellow colleague or trade union representative.
Step 5 – Scoring
Prior to the consultation meeting, the employer should score each employee. It is advisable for employers to have evidence and data to support the scores (for example disciplinary records, targets and KPIs).
Step 6 – Consultation meeting
This is a crucial step in ensuring that the redundancy process is fair and reasonable. This is the employee’s opportunity to ask questions, raise concerns and challenge the proposed redundancies. It should be viewed as a two-way dialogue where employees are encouraged to put forward their suggestions and raise their concerns.
During the consultation meeting the following topics should ideally be covered:
- The reason why the employee is at risk.
- The employee’s individual score is under the selection criteria.
- The evidence and data upon which the score is based.
- Whether the employee could be considered for any vacancies.
Step 7 – Invitation to further or final consultation meeting
Following the consultation meeting and consideration of everything discussed, the employer should invite the employee to a further or final consultation meeting. The letter should:
- Summarise what was discussed during the consultation meeting (selection criteria score, vacancies and responses to any questions or suggestions raised).
- Invite the employee to a further consultation meeting.
- If it is intended that it be a final consultation meeting the employee should be warned that one possible outcome is that the employee may be made redundant.
- The employee should again be given the right to be accompanied by a fellow colleague or trade union representative.
Step 8 – Final consultation meeting
This meeting should summarise the consultation meeting and to discuss the outcome of the redundancy process including confirmation of redundancies.
Employers should discuss notice, redundancy pay and accrued annual leave with those being made redundant. This should also be confirmed in writing.
Employers should consider whether to allow redundant employees to appeal their redundancy.
This article is intended to be a summary of the key steps to be taken when considering making redundancies. Every redundancy situation will be different and so there is no one size fits all approach. If you’re currently considering redundancies in your company, please get in contact with Kayleigh Arthurs by emailing Kayleigh.Arthurs@GAsolicitors.com or calling 01752 203500 today to find out the correct redundancy process for you.