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Chartered Accountants

Redundancy

 

For many employers Redundancy will be the last resort. Sadly as the furlough scheme is wound down towards the end of October it is estimated that 2 in 5 employees may find themselves in a redundancy situation. Redundancy is a special form of dismissal used mainly when an employer needs to downsize the workforce. An employee may be dismissed for redundancy if the employer ceases, intends to cease trading or the requirements of the employee to perform the job has ceased or diminished.

 

It can be a stressful time for the employer and the employee, nobody wants to be the person to tell someone that they may not have a job to return to. However, as an employer, you need to ensure you’re doing it right!

 

Firstly, you should explore all other options as an alternative to redundancy prior to this, these may include:

 

  • Reviewing existing terms and conditions of employment – this could be reduced hours, or pay, however the employee(s) will need to agree to this. This may be more appealing than it sounds as a reduced income would be better than no income at all!

 

  • Temporary period of lay-off – If you are unable to provide no work and no pay as a result. Again, staff will have to agree to receive no pay if there is not a term in their contract permitting it.

 

  • Short-time working – Staff could be placed on this where their hours are reduced temporarily so that they are paid less than half a week’s pay. Staff will need to agree to this if there is not a term in their contract permitting it.

 

  • (LOST) Lay off or short-time working – This is a shorter term option and only available to any staff who have been with the company for 1 month or more will be entitled to Statutory Guaranteed pay for the days not worked – this is currently £30 per day for a maximum of five days. LOST is fully funded by the employer. If an employee is kept on LOST for longer than 4 consecutive weeks, or a total of 6 weeks, they may automatically be eligible to claim statutory redundancy pay.

 

 

What if I have to make staff Redundant?

Although the Job Retention Scheme is intended to avoid redundancies, some businesses will have to take this step. Employers who misunderstand the law or do not follow the correct procedure may find themselves in a tribunal for unfair dismissal. Redundancy legislation is complex and covered by statute and case law, which both regulate employer’s obligation and employees’ rights.

 

 

How much am I likely to have to pay?

Firstly, only employees with over 2 years of employment will be entitled to statutory redundancy pay. The amount of Statutory Redundancy an employee gets is calculated using various criteria, with weekly pay being one of them. Currently many employees have dropped to 80% when on furlough. The general rule is, 1 weeks’ pay (or an average of) for every full year of service.

As with any leavers you would also need to ensure that you have paid your employee any outstanding holiday pay that they haven’t already taken – if they have taken too much then you are allowed to deduct this from their final pay.

 

My employee is on Furlough, can I still make them redundant? And can I claim for the Statutory redundancy pay through the CJRS?

 

Any employee can be considered for redundancy, weather they are on furlough or not. The redundancy notice period for the employee can be claimed through the CJRS however the statutory redundancy payment cannot! If an employee is not in work then you can conduct your redundancy consultations remotely – you do need to be sympathetic to their knowledge of technology.

 

How do I plan for redundancies if our business situation deteriorates?

Exact processes will vary according to the timescale and size of the redundancy pool, but organisations should follow these stages at a minimum:

  • Planning – Firstly, you must check your employee’s contract and the company’s usual redundancy process (if any). You must have considered all additional options, such as those listed above. If you are making more than 20 employees redundant then you will need to inform the Redundancy Payments Service.
  • Identifying the pool for selection – This must be carefully identified and may consist of some of the following: individuals who take on a similar role, in a particular department, location or where work has ceased, expected to cease, or been drastically reduced. If employers fail to identify pools then this can be seen as legally unfair if a tribunal was to take place.
  • Seeking volunteers – Offering employees to opt for voluntary redundancy can take the burden off your decision making and may avoid compulsory redundancies.
  • Consulting employees – For dismissal of under 20 employees the consultation period is at least 30 days BEFORE the notification of redundancy. Individual consultations should be carried out to give reasonable warning of impending redundancies. The law requires ‘meaningful’ consultations, and employees are allowed to be accompanied by a trade union representative, or a colleague.
  • Selection for redundancy – If there have been no volunteers, or not enough, then employers may need to choose individuals from the selection pool. The choices can be based on length of service, attendance, disciplinary and performance reports, skills, competencies, qualifications, to name a few. First in last out (FILO) rules aren’t always advisable as often those who are newer to the organisation, are younger, and this may be seen as potential age discrimination. Employment tribunals look favourably on a selection process that has considered a wide range of scoring. Advisably it should be carried out by 2 managers, each scoring separately, totalling the score and comparing for each employee.
  • Appeals and dismissals – written notice should be given to the employees who are at risk of redundancy, the letter should invite them to an individual meeting, during this meeting the employer must consider any points that the employee puts forward. After the consultation meeting the employer must then decide who they wish to put forward for redundancy, conduct another meeting and issue them with a written redundancy notice. This will either be the statutory notice or the contractual notice, whichever is greater, the employer must also explain any redundancy payment calculations. Making someone redundant because of their sex, age, race, marital status, religion, disability sexual orientation or any other characteristic is unlawful under the Equality Act 2010.
  • Suitable alternative employment – Employers must consider offering their employees reasonable alternative work. For instance, you may not have work in one department, but are looking for a new member of staff in another. The employee has the right to refuse this, however they can also have a trial period of four weeks to see if it is a suitable alternative for them. If employer and employee agree that the role is not suitable then the employee reverts back to being redundant. Don’t worry if you do not have any alternatives as this isn’t always the case.
  • Redundancy payment – Payments can depend on a few factors and can depend on contractual and statutory redundancy payments. Full details can be found on the Gov.uk website.

 

There can be a lot of red tape to get redundancy right, and as a result, we would advise that you speak to a HR expert BEFORE making any decisions.

 

 

Useful contacts & further information

 

Acas – Manage staff redundancies – https://www.acas.org.uk/manage-staff-redundancies

GOV.UK – Making staff redundant – https://www.gov.uk/staff-redundant

GOV.UK – Calculate your employee’s statutory redundancy pay – https://www.gov.uk/calculate-employee-redundancy-pay

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