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Redundancy

What is redundancy

Redundancy is the need, or expected need, to reduce the number of employees an employer employs because of a lack of work.

How does redundancy arise?

Redundancy arises if an employer requires employees to work in a different location, or the requirement for them to carry out work of a particular kind has reduced or ended, or is expected to reduce or end, for example as a result of a re-organisation, new working practices or a downturn in orders.

Employers may ask employees to change their work location if there is a clause in the contract of employment that allows this and it is reasonable to expect the employee to move, but otherwise employees may have to be declared redundant on the basis that they are no longer required in that place and are unwilling to move.

What are an employer’s main obligations on redundancy?

An employer’s main obligations are:

to consider alternatives to redundancy by (say) seeking volunteers for redundancy, reducing overtime or offering early retirement if this would result in practical and reasonable ways of avoiding compulsory redundancy;
to engage in constructive consultation with the employees at risk of redundancy;
to offer any suitable alternative employment within the employer’s organisation to redundant employees;
to conduct a fair selection process if this is necessary to choose between employees at risk of redundancy; and
to pay a statutory redundancy payment to redundant employees (or any enhanced contractual entitlement) and to observe their other contractual rights, including notice which must be worked or paid in lieu.
What are an employer’s consultation obligations?

An employer should consult with affected employees or their representatives about (1) the reasons for redundancy, (2) the alternatives to redundancy, (3) the procedure to be followed, (4) the selection criteria to be applied (if any), (5) any alternative employment and (6) the financial entitlement. The employer should consider and respond to any representations or questions, either at the meeting or later in writing.

There is no standard procedure or timescale, but consultation should take place while the situation is at a formative stage and should begin as soon as reasonably practical. Most employers will conduct an initial meeting followed by at least one consultation meeting allowing the employee sufficient time to respond. A further consultation meeting will usually be required to consider the outcome of any selection procedure. The outcome of the procedure can be communicated at a meeting or in writing. The employee should also be informed of the right to appeal in writing.

What is the role of representatives on redundancy?

The employer should consult with employees individually, but employees also have the right to be accompanied by a representative who must be a colleague or union representative.

What are “appropriate representatives”?

In addition to individual consultation, it may be necessary to provide information to, and consult with, appropriate representatives. If the employer proposes to dismiss between 20 and 99 employees within a period of 90 days or less at any given establishment, then it must begin collective consultation with appropriate representatives at least 30 days before the first of the proposed redundancies take effect, or at least 45 days for 100 or more employees.

Consultation must be completed before any notice of redundancy is served and while consultation may take less than 30 or 45 days, this should be confirmed with the appropriate representatives.

Who can be an appropriate representative?

Any recognised trade union, although the employer should ensure that it has authority to engage in consultation on behalf of all employees. If none exists then arrangements should be made for affected employees to elect representatives for that purpose.

The objective of consultation should be to (1) avoid or reduce dismissals and (2) mitigate the consequences of dismissals, with a view to (3) reaching agreement with the representatives. To that end representatives must be supplied with the following information in writing before the collective consultation process begins:

  • the reasons for the redundancies
  • the type of employees to be made redundant
  • the total number of that type of employee at the relevant site
  • the selection method/criteria
  • the timescale over which the dismissals will take effect
  • the amount of the redundancy payment and how it is calculated

Representatives should be allowed time of work and the facilities required to carry out their role.

When should the employer notify the DBIS?

If the number of redundancies is 20 or more then the employer must notify the DBIS in writing in a prescribed form.

How should employers carry out redundancy selection?

The employer should identify the “pool” of potentially redundant or “at risk” employees, taking care to ensure that employees are not unfairly included or excluded. This should usually be done on the basis of employees with shared skills or experience.

The employer should then identify fair and objective selection criteria, including performance, experience, skills, qualifications and future requirements of the business. These criteria can be weighted according to the importance to the business. Care should be taken to avoid relying on criteria which are potentially discriminatory (either directly or indirectly) and the employer should consult over the criteria in any event.

The employer should then carry out a scoring exercise, which is best done in a matrix. The scoring should be evidence-based and objective. The employer should then consult the employee over the scores and provide a copy of the other scores, without disclosing the identity of the employees.

What is suitable alternative employment?

Employers should offer suitable alternative work to a redundant employee before the redundant position comes to an end. If the position involves different work or terms and conditions, then the employer must allow a 4 week trial period during which the employee must accept the new position or elect to take redundancy.

If an employee unreasonably refuses that offer, then this may jeopardise the right to a redundancy payment.

If alternative work exists but an employer decides not to offer it, the employer must explain why (after due consultation with the employee) it is not suitable.

What if the employee is on maternity leave?

Employees must be offered any suitable alternative work that is available, otherwise dismissal may be automatically unfair.

What is the redundancy checklist in summary?

  • Consider alternatives to job losses
  • Check that the job losses are redundancies as defined.
  • Identify the redundant employees
  • Identify any selection pool
  • Consider voluntary redundancy
  • Consider if appropriate representatives are required and hold elections
  • Identify any recognised union
  • Write to affected employees/appropriate or union representatives with consultation information and hold meetings to begin consultation
  • Notify the DBIS (if appropriate)
  • Conduct any selection process
  • Conduct consultations
  • Consider alternative employment and any trial period
  • Confirm the outcome in writing
  • Offer the right of appeal

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