Redundancy: An overview of the basis and the process

The word “redundancy” is commonly used in the field of employment law. But, it is not always entirely understood.

If you are contemplating making a redundancy, it needs to satisfy the legal definition. This article covers the key points.

What does redundancy mean?

In basic terms, it is legally defined as a situation where the employer’s requirement for employees has either:

• Ceased; or
• Diminished

It can be related to a particular workplace too, i.e. the closure of that site.

Does there have to be a reduction in work?

Not always now, but it certainly helps!

It often will result from reduced work, but there may be circumstances where it doesn’t.

The key issue is: has the need for employees ceased or diminished?

It can apply where:

• The business wants to outsource the work i.e. the work still needs doing but the business does not want it, or all of it, done by employees any more.
• The business has invested in technology which means the same work can be done by fewer people.
• The business is closing premises and operating its business from other premises.

What should a business do if it has a redundancy situation?

Does your case fit the law?

The first issue is to consider which employees are potentially at risk of redundancy within the legal definition – if not, then you risk an unfair dismissal.

Examples of genuine redundancy:

• By reason of site closure: if the proposal is to close an office in Leeds and operate solely from the existing Bristol office, then all employees employed in Leeds are potentially at risk in law.
  
  
• Reorganisation and efficiencies g. new machines creating reduced need for employees to do work of a particular kind or an amalgamation of roles, for example two into one.

Could the business ask for volunteers for redundancy and, if so, when and on what terms?

Yes, it is a good idea to do this first to avoid compulsory redundancies. But this needs careful thought.

What if the volunteers are experienced long-standing employees whose redundancy payment would be high and who the business would not want to lose?

You can reserve a right to refuse an employee’s election for voluntary redundancy.

What about total numbers?

If you reach 20 ‘redundancies’ at one ‘establishment in a period of 90 days or less, then you attract the wider consultation regime under section 188 of the Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA), meaning you must:

1. Notify the secretary of state – it can be a criminal offence not to.
2. Elect representatives to consult; and
3. Consult for 30 days prior to making any redundancies.

Remember, a ‘redundancy’ under section 188 is much wider; it can include those who leave due to refusal to vary terms.

If you breach the TULRCA regime, each employee can claim 90 days actual pay!

Remember voluntary redundancies do count towards the total.

Could the business make employees with under 2 years of employment redundant?

Yes, this can often be a useful thing to consider first.

They’d not be entitled to claim a redundancy payment nor to claim (other than in exceptional circumstances) unfair dismissal.

However, care would need to be taken as they would still be entitled to bring a discrimination claim, for example, age discrimination in the case of the application of a last-in-first-out policy.

What kind of sub-20 process does the law expect?

That the business follows a fair and reasonable consultation process.

This generally requires the following:

• Written notification to the affected employees setting out:
  • that they are at risk;
  • why they are at risk;
  • the timing and process of consultation; and
  • that they have a right to appeal any decision to dismiss by reason of redundancy.
• An invitation to a consultation meeting.
• The business to demonstrate that it has:
  • considered the employees’ comments in consultation; and
  • whether or not there is any other suitable alternative employment.
• That contractual obligations are met on exit i.e. notice, holiday pay, etc.
  
  

What about selection?

You need to show:

1. How and why you have identified the pool to be selected from.
2. The objective and fair method used to select.
3. That you have shared the criteria with those to be scored in advance and taken their feedback.
4. That you have shared their scores and, ideally, the breakpoint and again asked for their feedback.
5. That those scoring had experience of those they score and that they are not the decision makers in consultation.
6. That you have done all of the above prior to issuing notice of redundancy based upon the above.
   
   

How does the business decide?

Depending on feedback from employees, the business may:

• Find suitable alternative employment.
• Agree on reduced hours (be careful here, if you reduce by/below 50% the lay-off regime applies).
• Have to establish selection criteria if it concludes it needs some but not all employees to remain.
• Conclude it has to make some employees redundant.
  
  

Does the business have to give a right of appeal to employees made redundant?

Yes, and an appeal hearing would then need to be fixed with another objective officer.

Does the employee have a legal right to be accompanied at the hearings?

No.

If redundancy is confirmed, could the employee claim unfair dismissal?

Yes, provided at the termination date they had accrued at least two years of continuous employment. Remember: Statutory notice can be counted!

Need more advice and support Of Employment Law Experts?

This is a snapshot of key points.

If you are an employer contemplating redundancy or an employee facing a redundancy situation, it is wise to seek early legal advice.

Shaun Pinchbeck has been advising employers and employees on redundancy situations for 34 years and can give you the benefit of his experience.

Feel free to contact him for a no-obligation chat – shaun@bridgeehr.co.uk.