Restructuring and Redundancy: six things Employers need to know

Michael Pope

As the Government’s furlough scheme winds down, Michael Pope, Consultant Solicitor in the Grant Saw Employment department, looks at six things employers should be aware of regarding redundancies.

1 – Understand the reasons for dismissal

First, an employer will identify employees that may be affected by a redundancy process (the “selection pool”). This will usually consist of employees doing the same or very similar roles. Employers are required to use a fair, transparent and objective method to select employees for redundancy, although they have some latitude as to how to do this (perhaps asking for volunteers, looking at disciplinary/performance records, scoring employees using a set criteria or re-interviewing employees). Employers must not select employees on discriminatory grounds or unreasonably exclude people affected from the “pool”.

Employers should consult with employees about the reason for the redundancy, the selection of the pool, the selection process and alternatives to redundancy. They should always consider ways to avoid redundancy (such as changes in working hours, reduced pay or benefits, or look for cost-savings elsewhere). When facing redundancy, employees may be more flexible than employers expect.

For 20 or more redundancies, collective consultation regulations apply. The consultation should last 30 days for up to 99 redundancies, and at least 45 days for more than 100 redundancies. Some employers may consider making a start on the consultations well before furlough ends.

Failure to properly consult or use a fair procedure may result in claims being issued by aggrieved employees in the Employment Tribunal.

Suitable alternative employment

Employers can offer suitable alternative employment as a way to avoid redundancy. Employers should consider:

  • How similar the role is to an employee’s current role (e.g. duties, responsibilities, work).
  • The terms of the new role, (e.g. hours, pay, status, benefits, location).
  • An employee’s skillset/qualifications to perform the role.

Employees can be given a 4-week trial period to establish whether an alternative role is suitable.

2 – Be aware of the notice period

Employees being made redundant are entitled to notice. The statutory minimum notice requirements are one week (for less than two years’ employment) and one week’s notice for each year of employment over two years, capped at 12 years. If, in accordance with their employment contract, an employee is entitled to receive more than the statutory minimum, notice must be given in line with the employment contract instead.

Employees can be required to work all of their notice, or they may receive a payment in lieu of notice, with termination effective immediately or during the notice period.

3 – Be aware of the dismissal process

In order for a dismissal for redundancy to be fair, the employer must establish that redundancy was the real reason for dismissal and the employer must act reasonably throughout the process.  The leading case on reasonableness in relation to redundancy held that an employer will normally not act reasonably unless it:

  1. Warns and consults with the affected employees or their representatives about the proposed redundancy.
  2. Adopts a fair basis on which to select for redundancy; and
  3. Considers suitable alternative employment.

4 – What to do if an employee is sick

A long-term illness may impact an employee’s ability to do their job. We recently discussed the impact of long COVID and this could play a part. It is important to liaise with the employee to ascertain whether there are any alternatives to dismissal. You can try to help them back to work by:

  • Obtaining a medical report from the employee’s GP to gain a better understanding of the employee’s condition, symptoms and limitations.
  • Arranging an occupational health assessment.
  • Determining whether an employee might be disabled under the Equality Act 2010. If so, the employer may need to adjust the redundancy selection process to address any disadvantage caused by the disability. This is in addition to the broader requirement to consider making reasonable adjustments to help them carry out their role.
  • Considering a reduced working pattern, change to working hours or a change in location.

You must ensure that a fair procedure is followed and follow your own policies when it comes to managing ill health at work. If you require assistance here, please contact us.

5 – Could an employee claim for unfair dismissal?

If an employee has been selected for redundancy unfairly (e.g. no genuine redundancy situation exists, no proper or fair consultation has been undertaken, no alternative employment is considered, or the employee is selected on discriminatory grounds), an employee may issue a claim for unfair dismissal in the Employment Tribunal. If successful, a basic award of up to £16,140 (based on weekly pay, age and length of service), and a compensatory award of up to £88,519 could be made. If a discrimination claim is successful, compensation is awarded at the Judge’s discretion and could be substantial. Failure to comply with the collective consultation regulations, may result in an award of up to 90 days’ gross pay at Tribunal.

6 – Be aware of discriminatory pitfalls

Great care needs to be taken to treat employees with dignity and respect, and to ensure the process is fair from start to finish.

If an employer selects someone for redundancy for a prohibited reason, it may face a claim for unfair dismissal and/or discrimination. This protection covers unfair treatment in relation to sexual orientation, race, disability, religion or belief, age, gender and marital status.  There are a number of other prohibited grounds for redundancy.

The Grant Saw Employment department are hosting a webinar on restructuring and redundancy on Thursday 16 September 2021 at 12pm. This is the first of a two-part series on redundancy and will cover the different consultation procedures and when these should be used, how to conduct a consultation exercise, what to do if an agreement is not reached and how to implement changes to employment terms. You can sign up for this webinar here.

To discuss the contents of this article or for specific advice on an employment law matter, please email me or contact the Employment department on 020 8858 6971.