Guidance for Employers
Insights into Managing a Redundancy Process
As the world slowly starts to re-open, there is a reality that many businesses are having to face – the fact that they need to reduce their headcount. There are many businesses who know that their recovery is going to take a while and that they need to reduce costs for the foreseeable future.
Insights into Managing a Redundancy Process
23 June, 2020
by Lianne Lambert
As the world slowly starts to re-open, there is a reality that many businesses are having to face – the fact that they need to reduce their headcount.
Whilst the Coronavirus Job Retention Scheme has made a huge difference to employees and employers alike, there are many businesses who know that their recovery is going to take a while and that they need to reduce costs for the foreseeable future.
Businesses have been putting off making some of these difficult decisions but, with the upcoming changes to the Coronavirus Job Retention Scheme, we are seeing more and more clients who are starting to deal with the inevitable redundancies that they need to make.
As with all of the guidance with coronavirus, we need to remind you that these are unprecedented times and it is unclear as to how employment law will be applied in these exceptional circumstances.
The information that follows has been compiled with input from government websites, Acas and HMRC (the only official resources that we’re happy to use as these are the institutions who will be responsible for enforcing the rules as we move forward), but the reality is no-one really knows for certain how actions that businesses need to take now will be interpreted later.
We strongly advise you get in-touch with us on 0203 319 1649 to get expert, tailored guidance before you take any actions.
1. Increased Complexity of Redundancies in these Uncertain Times
Redundancy processes are complicated, and what we’re also seeing is that more and more employees are challenging the process and the decisions that businesses are making.
With a great deal of uncertainty in the market, this is to be expected. Although businesses should always strive to ensure that their redundancy process is fair, this is now more important than ever.
This update assumes that you have basic knowledge of the redundancy process and is designed to help you avoid some of the pitfalls.
- If you’ve never managed a redundancy process before then we do advise you to seek expert help before getting started.
- If you’ve managed redundancies before but are perhaps needing to make larger changes (the process is entirely different if you are making more than 20 people redundant in a 90 day period) then again, we’d suggest you get some expert help.
2. Questions to Ask Yourself Before Starting Any Redundancy Process
You start with lots and lots of thinking and planning. We know that it can be tempting to move straight to action but that is usually a mistake in redundancy situations. You need to start by answering the following questions:
- Is it really a redundancy situation? Redundancy has a clear legal definition and “employee X isn’t very good at their job” doesn’t form part of it! The need to make a redundancy will largely be that you have diminished need for people to undertake work of a particular kind. If you are trying to use redundancy to manage a single person who is underperforming out of your organisation, then you’re highly likely to come unstuck.
- What are the alternatives to redundancy? If your business has contracted due to Coronavirus then it’s highly likely that, even with the other measures, you’re still going to need to achieve a headcount reduction but be sure to use redundancy as a last resort rather than a first. You are obligated to consider alternatives to redundancy before you start the process and documenting that you’ve done this is highly recommended. Alternatives to redundancy that employers consider are things like
- salary reductions across the board,
- reducing/eliminating the use of contractors or freelancers,
- looking at other ways to achieve cost reductions.
- Who is in the pool? This starts to get into the technicalities of the redundancy process but you need to place all of the relevant people into the redundancy pool and then go through a fair selection process to determine who stays and who goes. So, if you have multiple people doing the same job then they will all need to be put at risk of redundancy. This is one of the elements of the redundancy process that causes the most challenge from our clients. They simply don’t want to put multiple people at risk of redundancy when they’ve already decided who is leaving! And herein lies the problem. You CANNOT have decided at the start of the redundancy process who is leaving. You need to go through consultation and selection before you make that decision. Failure to put all of the relevant employees into the selection pool could result in a finding of unfair dismissal if the employee who is selected decides to bring a claim against you.
- How will you select who stays and who goes? You’ll need to define the selection criteria and assessment method that you’re going to use, communicate these to the individuals in the pool and give them an opportunity to raise any concerns that they have regarding fairness. Be open to issues and concerns that they raise and do take the time to think through alternatives if individuals aren’t happy with the approach that you’re suggesting. However, also remember that the decision on how you select is ultimately a business decision and you don’t have to have agreement from everyone.
- What will your consultation process be? This will depend on the numbers involved. If you are dealing with fewer than 20 roles, there is no defined time limit as to how long redundancy consultation should last. However, our guidance is that it’s a minimum of 2 weeks. You need to decide how many consultation meetings you’ll have with the impacted employees and exactly what it is that you’re consulting about.
3. Considerations when Starting the Redundancy Consultation with Employees
You’ve sat in a room and you’ve thought everything through. You’ve had input from the relevant members of your senior team and now you need to move to action. The next step, the initial employee consultation, is potentially the most challenging element of the redundancy process, particularly at the moment; many people are already facing a great deal of challenge in their life, the recruitment market is very flat in some sectors and now you’re going to tell someone that they may not have a job in a few weeks.
There are some things to remember when you are delivering this message:
- It’s about them not about you. Telling someone that they are at risk of redundancy is, without a doubt, one of the hardest things that a business owner/manager has to do. Hearing that you’re at risk of redundancy is far, far harder. You need to park your own emotions and focus on the individual to whom you are delivering the news.
- It’s a surprise to them. You’ve been thinking about this for a while. You have done your planning; you’ve thought through the alternatives. This is all a shock to the person on the receiving end. In the initial meeting, don’t try to share everything in one go. Our recommendation is that you keep the opening meeting brief and then provide a letter that gives them all of the detail that they need. From there, arrange the next consultation meeting approximately 48 hours after the first meeting when the individual has had time to gather their thoughts.
- They may not take it well. You should be ready for the full range of reactions. Some individuals behave professionally and control their emotions, others are angry, others are sad. Be ready for whatever comes your way and ensure that you remain calm and in control no matter what.
4. Top Tips when Conducting a Redundancy Process
The number one tip that we can give you is: Stay open-minded and actively engage with the consultation process. It can be so easy to go into this process with a sense that the outcome is inevitable. This is problematic. Firstly, if that is your mindset then it is possible that you’ll say something that you shouldn’t. A redundancy consultation process is about exploring all of the options before reaching a decision. You never know, someone may have a great idea as to how you could avoid the need for redundancies. Someone may come forward and tell you that they have skills you didn’t know about. Be open to everything that can come up during consultation and use it for the purpose for which it was created – to make sure that absolutely nothing gets missed before you make a decision.
And our final tip: Stay Patient. You may very well find yourself dealing with an employee who is particularly challenging. You’ve a business to run, a million things to do and there’s this person who you feel is making this whole process more difficult than it needs to be. The moment you lose your patience, stop listening and just start to focus on bringing the consultation to a close is the moment where you’re likely to do something that would jeopardise your chances of winning an employment tribunal if that’s where you find yourself. Hang on in there. Be thorough, be diligent and be open-minded.
These continue to be very challenging times and we can’t stress enough the importance of open and honest communication with your employees and getting tailored professional guidance (preferably from us!) before you take any action.