Redundancy is biggest headache for HR

December 17, 2003

Redundancy is biggest headache for HR

Managing redundancy tops this year’s list of HR concerns, with fair processes of dismissal and assistance in calculating redundancy payments causing the most headaches, according to Croner Consulting, who said that one in ten calls to their helpline were related to redundancy issues.

The average compensation award is £5917, but in some cases has been over £60,000. This can be avoided if businesses ensure they comply with the Employment Rights Act 1996, which provides guidelines on a fair redundancy procedure.

Cathie Riley, employment law expert at Croner Consulting says: “Unfortunately, some employers think that redundancy is a safe route for dismissing employees with whom they have problems. This is not the case, as redundancy is a dismissal on specific grounds and relates to the job and not the employee.”

According to Section 139 of the Employment Rights Act 1996, redundancy is only fair if the employer has ceased, or intends to cease, to carry on the business, or carry on the
business in the place where the employee was employed; or if the employee’s work has, or is expected to cease or diminish. If an employee’s workload ceases or greatly diminishes, the employer, as part of consultation, should consider alternative vacancies with the employee. If a number of jobs become redundant, employees at risk should be fairly selected for redundancy.

Consultation must then be held with the employees, after which a notice period should be given. Failure to consult in redundancies involving 20 or more proposed dismissals can result in each employee claiming a 90-day protective award. Furthermore, those employees with more than one
year’s service could claim unfair dismissal.

When proposing to dismiss 20 to 99 employees within a
90-day period, the employer must consult with the employees for at least 30 days. 100 redundancies or more require a minimum consultation period of 90 days. The employee may also be entitled to statutory redundancy pay if they have more than two years’ service; this is based on the length of service and the age of an employee at the time of dismissal. The current maximum weekly pay figure is £260.

Cathie continued: “Redundancy can cause unrest and insecurity among remaining employees so employers should be as open and honest as they can, and perhaps consider some employee relations exercises to boost morale.”