April 27, 2022

How to get redundancy right

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How to get redundancy right

Last month P&O Ferries found themselves in deep water after dismissing 800 of their employees without notice via a video message.

Redundancy is a tricky issue to navigate, here’s how to make it as painless as possible for both employer and employee:

  1. Is redundancy appropriate?

To follow a fair redundancy process, ask yourself as a business: ‘Has work of a particular kind ceased or diminished?

In the case of P&O ferries, there was evidence to suggest work had not diminished and was still in demand. You may want to apply redundancy for one of the following reasons…

  • you feel your employee’s role is no longer necessary to your company

  • you want to change or eliminate your employee’s role

  • your company has closed or is in the process of closing

  • you’re moving to a new location

…but care must be taken to ensure you are following the law to the letter. A redundancy is fair if your employee’s job is no longer needed or useful, for example, if you now have machinery that can do the same work. If you make an employee redundant and then immediately hire someone else to do their job, the role wouldn’t be redundant, and you would be liable for an unfair dismissal claim. Plus, if you rehire someone, you’d need to show you didn’t require the role when making the redundancy, but that your business’s circumstances changed to necessitate reinstating this exact role. Remember, if you make staff redundant on the grounds of poor performance or misconduct you will need to follow a capability or disciplinary procedure.

 
  1. Notify the RPS

By law, you need to notify the Redundancy Payment Service (RPS) – filling in and sending off an HR1 form – if you’re making 20 or more employees redundant within a 90-day period. Failing to notify them could result in a large fine or even prosecution.

If you’re making between 20 to 99 staff redundant, you need to notify the RPS 30 days before you make any redundancies. For 100 or more staff members, it’s 45 days.

 
  1. Consult

Before you make any redundancies, you need to follow a consultation process. You must:

  1. Notify the RPS before starting any consultation.

  2. Consult with a trade union representative or an elected employee representative (you need to elect one if you don’t have either of these.)

  3. Inform the representatives and staff of the redundancies you intend to make and give them time to consider what you tell them.

  4. Respond and provide as much information as possible if anyone asks for more information.

Employees must be consulted first and given an opportunity to challenge your decision and put forward possible alternative solutions. A consultation should be a two-way process and without one any redundancy should be considered unfair.

In any meeting, explain that you are considering redundancy and why, how many redundancies you are thinking about making, what the next steps are and how the whole process is going to work. Give all staff the opportunity to ask questions and be totally transparent with them about your aims and what you plan to do.

If you’re making less than 20 employees redundant, there are no rules on how you should consult, but if your employee has worked for you for two years or more, it’s advisable to have at least three redundancy meetings with them over a 14-day period.

You should also consult all peripheral staff who may be affected by the redundancy.

In the case of P&O, their CEO admitted to MPs he didn’t carry out consultations prior to dismissing staff, which he was required to do as the dismissals involved over 20 employees.

 
  1. Give notice

P&O employees had their jobs terminated with immediate effect, so they didn’t receive a notice period. There must be one! Once you’ve finished the consultation process, you’re required to give redundant staff a notice period and a leaving date, depending on how long your employee has worked for you.

The statutory notice periods are one week’s notice if your employee has been employed between one month and 2 years, one week’s notice for each year if your employee has been employed between 2 and 12 years and twelve weeks’ notice if your employee has been employed for 12+ years. If you want to give more notice, you can. You will pay staff throughout their notice period, except if their contract specifies, ‘payment in lieu of notice’.

If your employee has worked for you for two years or more, you’ll need to make a statutory redundancy payment. This is calculated on your employee’s age, length of service, and weekly pay (the average your employee earned over the 12-week period before they got their redundancy notice). If you make staff redundant after 6th April 2022, the statutory limit on weekly pay for redundancy is £571.

Redundancy is not nice for anybody, but do it right and it can be a more palatable procedure, with all steps covered and understood by both employer and employees.

 

Any questions? Please don’t hesitate to contact one of our team.

Stuart.belbin@ascendbroking.co.uk  |  Office: 01245 449067