Employment Law in Practice
In these difficult economic times, employers need to ensure their businesses run at maximum efficiency and this sometimes involves making redundancies. Whether or not you consult with employment solicitors, it is important that you ensure any redundancy is correctly carried out to avoid a potential claim. Prevention can be better than cure and if you do take advice from employment solicitors - from the outset and through the process - it will minimise your risk of an unfair dismissal claim, saving management time and costs. There are many pitfalls and employers should seek the advice of employment solicitors prior to commencing any consultation process.
A genuine redundancy arises when either there has been, or is going to be, a business closure, a workplace closure or a reduction or cessation of the employee's particular work.
If you are considering making employees redundant it requires careful planning and a good understanding of employment law and procedures. Remember that if you get it wrong you can be facing a claim in the Employment Tribunal, at a time when you should be focusing on your business and trying to save costs.
There are four main areas that an employer must consider:-
- The number and category of at risk employees
- Method and criteria of selection
- Procedure as to carrying out the redundancy process
- The amount of money for redundancy payments
Redundancy occurs when your business no longer needs the same number of employees to fill certain roles or when a business is closing down. It is about the needs of your business and it takes time to make people redundant.
Plan through the selection criteria - make sure it is fair, reasonable and objective. You should decide on the pool of employees who are at risk of redundancy; the selection criteria has to be non discriminatory, objective and capable of measurement. Select employees for redundancy fairly from the criteria.
Consultation is a two way process and your decision should not be prejudged prior to entering the consultation process. Employees should be informed as to the selection criteria - they have the right to question if the selection method is correct and how it is applied. Alternative employment or alternative ways that the existing jobs can be preserved should be discussed.
Take your time. The consultation period can be over a 90 day period if it is for more than 20 employees and consists of at least three meetings. Remember, if you get the procedure wrong you could be facing disclosure of all written evidence at the Employment Tribunal, so act correctly. Do not diverge from the selection criteria at a later date without due consideration, for instance an e-mail or new organisation chart that is inconsistent with your redundancy programme, could have a significant impact in respect of an unfair dismissal claim.
Contractual notice periods, salary and bonuses should be calculated. Redundant employees with at least two year's service are entitled to statutory redundancy payments. This is calculated according to each employee's age, length of service and weekly pay and can be at least £11,400.00, as of April 2009. Additionally, contractual redundancy payments may have to be paid or it may be company policy to pay enhanced redundancy payments to avoid claims for breach of contract.
In view of unfair dismissal rights, and the £30,000 tax free element, you should consider offering a Compromise Agreement.
Ensure you take all the appropriate steps, such as:
- Always record meetings and keep the redundancy process well documented to show you have been reasonable and fair
- Explain clearly the reason for redundancy and the selection criteria
- The letter informing the employee that they are at risk of redundancy should make it clear that no final decision has been made
- Inform your employees that they can have a representative with them at the meetings
The main danger areas for employers are:-
- Dismissing employees when they are not genuinely redundant
- Unfair selection - you must be able to justify your choices
- Consultation - you cannot dismiss someone without discussing it thoroughly
- Failure to consider alternative action, from pay cuts to shorter weeks
Take your time and work through the procedure and consult an employment solicitor every step of the way, preferably from Stone Joseph (0207 8549098).