Redundancy is defined as the closure of a business, the closure of a site or reduction in work of a particular kind, meaning less people are required. According to the latest data from the Office of National Statistics, there were 395,000 redundancies in the third quarter (July- September) of 2020, the highest rate since records began in 1995.
Employment Tribunal Claims: What is a Fair Process?
Employment Tribunal claims are also on the rise. It is important that employers are mindful that redundancies count as dismissals and employees with over 2 years’ service (and sometimes under) can challenge the fairness of any dismissal through an Unfair Dismissal claim.
Firstly, in order to rely on redundancy as a potential fair reason to dismiss an employee, an employer must be able to show it had a redundancy situation. A tribunal will then apply what is known as “the band of reasonable responses test”. This determines whether the decision by the employer to dismiss the employee was within the range of conduct that a reasonable employer would have adopted. Tribunals assess the entire process considering the following three areas:
- Early Warning and Consultation
Firstly, an employer must share their proposals at a formative stage in sufficient detail with those affected. The employees should be given adequate time to respond to the proposals and those views should be taken on-board. The law does not require a certain number of meetings but “meaningful consultation”. Therefore, employers that fall foul of procedural requirements often do so due to having a process which is followed but not one they have engaged fully within.
- Adopting a fair basis of which to select for redundancy
An employer should consider who should make up the “pool” of employees at risk. Also, if work of a particular kind is reducing, then an employer will need a selection criteria to determine who is made redundant. It is important that employees are consulted over the criteria which should be based on several objective (measurable) criteria. Once any scoring is done, the employee should have a chance to discuss the scores with the employer.
- Consideration of suitable alternative employment
Are there any other vacancies available in the company? If an employee unreasonably rejects a “suitable alternative” in a redundancy situation, then that employee will forfeit the right to a redundancy payment. However, an employer needs to consider both the suitability given the duties, pay, seniority and location of the new role as well as the employee’s personal views. If a new proposed job fails to make use of the employee’s skillset, then it normally will not be considered suitable.
Key Points to Remember
- Employees with over 2 years’ service are entitled to a Statutory Redundancy Payment if made redundant. They will also be entitled to the higher of contractual or statutory notice.
- If an employer is proposing 20 or more employees at risk of redundancy, then collective consultation rules will apply and these are more vigorous and involve the election of, and consultation with, representatives.
- There are also many exceptions whereby an employee under 2 years’ service can claim Unfair Dismissal, such as where the employee can show the real reason for dismissal was either: pregnancy, whistleblowing or due to raising health and safety concerns.
Generally, the employees who bring Unfair Dismissal claims are those who do not believe there was a redundancy need as opposed to the process being done unfairly. The employees who win claims are often those who the tribunal believes had an ulterior reason whether that be performance, conduct or discriminatory. Employers should be mindful to only dismiss by reason of redundancy when there is an actual redundancy need.
Therefore, the most important aspect of redundancy is always the starting position. Is there a business need to reduce headcount?