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How To… Make Redundancies

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In the current economic climate it seems as though daily we read in the press about another company making redundancies and shedding their workforces. Given the need to cut costs it’s not surprising that companies look to their most expensive resource, their employees, in order to streamline the business.

However redundancy should be a last resort after all other cost cutting opportunities have been explored. It is important to remember that should a business make redundancies and then receive an unexpected large order or contract, the company needs to have in place the resources to deliver on the order or contract.

Still, should there be no other option than to make redundancies it is essential that the redundancy process is conducted fairly in order to avoid potentially costly visits to the Employment Tribunals. The aim of this article is to draw your attention to some of key considerations when running a redundancy process.

Is the Job Redundant?

According to the Employment Rights Act 1996 a true redundancy situation is where either the place of work has ceased or diminished, the work has ceased or diminished or the requirement for the number of people to do work of a particular kind has ceased or diminished. There is also a further justification which is ‘Some Other Substantial Reason’ for instance the need to save money.

Selection Criteria

If one position falls into one of the criteria above and it is the only role of its type then that role is redundant. However, if there are two or three people doing the same role and there is no longer enough work for them all a selection process must be followed to determine who will be selected for redundancy. There are different factors that can be used in a selection process (see below) though it is imperative that no selection criteria are used that could give rise to an unfair dismissal or discrimination claim. For instance, ‘First In, Last Out’ is no longer a fair selection criterion due to Age Discrimination legislation.

Fair selection criteria;
• skills or experience
• formal appropriate qualifications, advanced skills and other aptitudes
• attendance records (excluding any absences which were due to pregnancy or disability, to avoid discrimination claims)
• disciplinary records (current offences)
• performance (there should be objective evidence to support selection on this basis, for example, the company’s existing appraisal system)

Redundancy Procedure

The procedure followed in order to make the redundancy must also be fair, allow for reasonable consultation and follow the statutory dismissal procedure. The first step is to write to the employee inviting them to a meeting, the reason for it and giving them the right to be accompanied. At the meeting they must be given reasons for why there is a redundancy situation and why their role is at risk. Then follows the consultation period during which suitable alternative employment and other possible alternatives to the redundancy must be considered.

Suitable alternative employment is classed as a role the same as what they were doing, they need to be competent to perform the duties in the new job and meet all the requirements of the person specification. If suitable alternative employment is found and the employee declines it, they forfeit the right to a redundancy payment.

Alternative employment should also be considered, are there any other vacancies in the company that the employee could be considered for? If so, the employee can take this position on a trial basis and if at the end of that trial either party deems that it isn’t working then the redundancy can still take place. If there are more than one employee in the selection process who express an interest in one post then a fair selection process must be followed here also, for example an interview process.

Communication

In order to ensure a fair process is followed, communication is the key. It is imperative that employees who are at risk of redundancy are communicated with frequently and in a straight forward, honest manner. Many managers feel uncomfortable when faced with such situations, but it cannot be stressed enough how important it is to communicate with staff.

Remember the employees who are still there

Another important point is to ensure effective communication takes place with the employees who aren’t at risk. A redundancy situation brings about unease and as a result businesses may be faced with employees looking for other employment outside the business. The last thing a company wants when already reducing it’s workforce through redundancies is to lose the remaining valuable staff through resignations.

Therefore communication with the employees who are still with the company is an important consideration to ensure the future success of the business.

About the Author

Marie Ward is the Director of HR Excellence Limited, HR Excellence Ltd provides pragmatic Human Resources solutions to any Human Resource Management issues a company may have. Ms Ward is a Fellow Member of the Chartered Institute of Personnel & Development with a Masters Degree in Human Resources Management and has over 12 years experience with HR in varying industries.

N.B. This article is for information only and does not constitute legal advice.

Marie Ward

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