By law, a genuine redundancy situation is one of the following:
• 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 an employee (or employees) to do work of a particular kind.
The key principle applicable to redundancy situations is that meaningful employee consultation takes place before any final decision is made by the employer to terminate employment. During such consultation period, employees are “at risk of redundancy”, until final confirmation is given at the end of the process. Employers that conclude certain employees are redundant before entering into consultation, are at a high risk of being open to legal challenge to an unfair dismissal claim. Either from: 1. employees who have two years’ (or over) continuous service and qualify for unfair dismissal rights; or 2. any employee who qualifies for automatically unfair dismissal rights with less than two years of service (see below).
Summary overview of process
Step 1: consider which potential redundancies may be required. Do not make any final decisions or pre-empt outcomes. Consider if any staff members managing the process will require training.
Step 2: check if there is a company policy to follow and if the collective consultation requirements are triggered (see below). If so, comply fully.
Step 3: inform the relevant set of employees: a. they are at risk of redundancy; b. the number of people being considered; c. next steps of the process.
Step 4: hold redundancy individual consultations (and if required, collective consultations) in line with the relevant time scale. Consultation must be genuine and meaningful. Consider availability of other suitable employment.
Step 5: select employees for redundancy. Use selection pools and selection criteria as applicable.
Step 6: calculate redundancy pay (company and/or statutory as applicable), calculate any outstanding holiday falling due (to be taken or paid out) and confirm the notice that must be given. Offer suitable alternative employment and trial periods as may be applicable. Offer an appeals process.
Types of consultation
Individual consultation – what must be discussed?
• The changes that are needed, what you plan to do, and why;
• Ways to avoid or make fewer redundancies;
• The skills and experience needed for the future;
• The criteria for selecting employees for redundancy;
• Any concerns employees may have; and how you can support and arrange time off for affected employees, for example to update their CVs and access training.
Collective consultation – what are the obligations?
In addition to carrying out individual consultations, where a company is considering the potential redundancy of 20 or more people within a 90-day period at a “single establishment”, this triggers its obligation to collectively consult with employee representatives and inform the government in advance of the potential redundancies in the required format. If it fails to do so, the company risks a protective award being made by an Employment Tribunal in respect of each employee (up to 90 days’ full pay for each affected employee).
Employees with two years’ or more service have “unfair dismissal rights”. If their employment is terminated, it must be for a “fair reason” and must be carried out following a “fair process” by law. Redundancy is one of the legal “fair” reasons for dismissal, but such dismissals must still be carried out using a “fair” process (as set out above) to avoid legal challenge.
Employees with less than two years’ service do not have the same wider unfair dismissal rights. However, they could still claim unfair dismissal if they perceive the dismissal relates to the following:
• Any form of alleged discrimination. I.e. being treated unfairly because of: age, disability, gender or gender reassignment, marriage or civil partnership, pregnancy and maternity, race (including colour, nationality, ethnic and national origin), religion or belief, sexual orientation.
• Making a flexible working request.
• Being pregnant or on maternity leave or wanting to take family leave, for example parental, paternity or adoption leave.
• Taking part in legal, official industrial action for 12 weeks or less, eg striking and/or being a trade union member or representative.
• Asking for a legal right, for example to be paid the national minimum wage.
• Doing jury service.
• Being involved in whistleblowing.
• Being forced to retire (known as “compulsory retirement”).
• Taking action, or proposing to take action, over a health and safety issue.
If it is suspected that an employee with less than two years’ service may perceive their redundancy to be allegedly linked to a reason in the bulleted listed above, the employer should carry out the full redundancy process (including consultation), and where possible, offer suitable alternative roles.
Regardless of the number of years of service, any contractual entitlements remain applicable (e.g. entitlement to notice or a payment in lieu of notice, pay in respect of accrued but untaken holiday, and so on). If any contractual obligations are not fulfilled, the employer could consequently be liable for breach of contract (known as “wrongful dismissal” in this context).