The Coronavirus pandemic has left a significant impact on society and created a lot of uncertainty around employment. The greatest challenge might still lie ahead when the government's furlough scheme comes to an end in Spring 2021, if the situation does not improve by then.
Businesses will need to prepare to make some serious decisions in order to ensure the long term viability of their business.
Unfortunately, there may come a time when all avenues are exhausted and the only option left is redundancy. In this scenario, employers need to follow the correct procedures to mitigate the risk of unfair dismissal claims being lodged against them.
We have put together this blog to outline everything you need to know about the Redundancy process
What is Redundancy?
A redundancy situation exists where: you shut down a business or part of it completely. You shut down at a specific location (even if you are moving to a new location); your requirement for employees to do work of a particular kind has reduced or come to an end.
· the reasons for the proposed redundancies
· the numbers and descriptions of employees who are at risk of redundancy
· the total number of those types of employee who are employed at the establishment in question
· the proposed method of selecting employees
· the proposed method of carrying out the actual dismissals (including any time-frame)
· the proposed method of calculating any redundancy payments to be made.
· this information has to be given to the employee representatives in writing.
· the information must be given to the appropriate representatives to trigger the consultancy period of either 30 or 45 days.
Employers must consider if there is any suitable alternative employment before deciding on making an employee redundant. If alternative employment is available, you must inform the employee of the terms and conditions for that position so they can consider it properly.
Looking from a wider unfair dismissal perspective, if alternative employment arises after the employee has been made redundant, and within the three-month time limit, for the employee to bring a tribunal claim, you should consider offering the role to them as a matter of fairness.
Where 'suitable alternative employment' is available and is offered to an employee, and the employee unreasonably refuses it, the employer is no longer obliged to make a statutory redundancy payment.
Once an employee has been issued with a dismissal notice they have the right to reasonable time off with pay to look for new work or to undergo training for future employment and you must not unreasonably refuse such a request.
It is paramount that employers do not issue any notices during the consultation period, as this undermines the consultation process.
The statutory periods of consultation are as follows:
· If you propose to dismiss between 20 and 99 employees within 90 days or less, the obligation to notify the Redundancy Payments Service on Form HR1 is triggered. Whether this has to be done 30 days or 45 days before dismissals take effect will depend on how many employees are involved.
· Employers are required by legislation to inform and consult with 'appropriate representatives' of any employees who may be affected, where it is proposed to dismiss at least 20 employees at any 'one establishment' within 90 days or less.
· Where fewer than 20 redundancies are proposed, you are not required by statute to consult collectively, but it is worth considering doing this to assist in showing a fair procedure has been followed for the purposes of the unfair dismissal regime.
· There are minimum periods for collective consultation. When it is proposed to make between 20 and 99 redundancies consultation must begin at least 30 days before the notice of dismissal is given. Where 100 or more employees are affected this is increased to 45 days.
· Individual consultation should take place in all cases.
· All selected employees have the right to appeal against selection.
· Redundancy payments are tax-free up to £30,000.
Most often organisations end up facing unfair dismissal claims because they fail to follow the correct procedures.
Stage one – Issue an At-Risk Letter. This explains to the employee that there could be potential job losses.
Stage two - Meeting with the employee. This is the first stage to meet the employee to explain what issues the company is facing and explain their jobs may be at risk.
Stage three – selection criteria. All decisions are based on a matrix of performance, attendance, length of service, and many more.
Stage four – collective consultation completed, issue letters to confirm the selection.
Bumping is a term used to describe a situation in which, for example, a more junior employee is dismissed on grounds of redundancy to make way for a more senior employee whose post has become redundant. The lawfulness of such actions will be dependent on the individual's circumstances.
To be entitled to receive a statutory redundancy payment, an individual must:
be an employee working under a contract of employment;
have at least two years of continuous service; and
have been dismissed, laid off or put on short-time working (and have a qualifying period of lay off).
When issuing redundancy pay, an employer must provide a statement showing how it was calculated.
Rates The amount payable is dependent upon age, length of service, and contractual earnings.
Up to the age of 21: half a week’s pay for each completed year of service;
22 to 40 years of age: one week’s pay for each completed year of service;
41+ years of age: one-and-a-half weeks’ pay for each completed year of service.
The calculation for weekly pay is subject to the statutory limit of £560 (6 April 2020). This is reviewed annually.
The maximum number of years that can be taken into account in a redundancy payment calculation is 20.
It is always advised to seek professional advice before dismissing an employee. Contact a member of Copacetic Business Solutions to advise you on the correct redundancy procedure.