Employees who are dismissed and have 12 months' service or more can claim unfair dismissal. To avoid a successful claim for unfair dismissal, an employer must have a fair reason for that dismissal and follow a fair procedure.
Redundancy is one of a limited number of potentially 'fair' reasons for dismissal laid down by statute. A fair redundancy procedure involves advance warning of the redundancies, a fair selection process, consultation with employees and consideration of suitable alternative employment. When making large scale redundancies, an employer has additional obligations to consult collectively with representatives of the employees.
Any employee dismissed by reason of redundancy who has worked for the employer for more than two years is entitled to receive a statutory redundancy payment. In addition, some employees may benefit from a contractual entitlement to enhanced redundancy payments.
Unfairly dismissed employees will receive a compensatory award.
Is there a redundancy?
A statutory redundancy situation arises where either:
- an employer's need for an employee to do work of a particular kind ceases or reduces; or
- the business in which an employee is employed is shut down, either entirely or at a particular location.
FAIR REDUNDANCY PROCEDURE
Usually the first step in a redundancy exercise is to warn potentially affected employees and, in the case of collective redundancies, their representatives that there may be a need to make redundancies.
Seeking volunteers for redundancy may avoid or reduce the need for compulsory redundancies, and may avoid selection issues.
Selection for redundancy
Where a whole workplace is being shut down, selection for redundancy is unlikely to be an issue. Selection becomes important where there is a reduced requirement for employees to do particular work but some employees are still needed. To avoid a claim for unfair dismissal, it is important to make sure that the correct people are selected for redundancy on objective and verifiable grounds.
The selection process has three stages: selecting the pool and choosing and applying the selection criteria.
The pool: this is the group of employees from which those who are to be made redundant will be chosen. Employers have a lot of flexibility in deciding on the pool but it will usually include all those doing similar work.
The selection criteria: this should be as objective as possible and should be applied fairly. Examples of criteria which are capable of being objective include:
- timekeeping and attendance;
- disciplinary record.
The use of 'last in, first out' as a selection criterion has become less popular due to the risk that it indirectly discriminates on grounds of age against younger employees and is therefore subject to challenge. However it is sometimes still used in a 'tie-break' situation.
It is common for employers to develop a selection 'matrix' under which employees will receive scores against a range of criteria. Different weight may be given in the scoring process to the various criteria. Any information used in scoring should be as objective as possible - for example, if 'performance' is used as a criterion there should be a history of appraisals or equivalent documents to support the score given. The scoring should not be just subjective opinion - for example, the person scoring an employee thinks 'he does not fit in' or 'other people are better' - without some documentary evidence backing up these views.
It may assist if the selection criteria have been discussed and agreed with a union or employee representative. Such discussion and agreement is mandatory in the case of collective redundancies.
Applying the criteria: this will usually be a process of scoring each employee against the criteria. A moderation process
across different scorers and scores should be undertaken to ensure fairness and
Individual consultation with employees is an important element of a fair redundancy dismissal. The purpose of individual consultation is to:
- inform the employee that a redundancy exercise is being undertaken and the reasons for it;
- explain the composition of the redundancy pool, the selection criteria used and why the employee has been provisionally selected;
- give the employee the opportunity to question his selection and provide any additional issues for consideration;
- explain the redundancy terms on offer;
- examine alternatives to dismissal, including alternative employment.
The employer should
provide the employee with details of his scores so that the employee has a
proper opportunity to comment on his selection during the consultation process.
It is not necessary to provide the assessments of other employees. In practice,
if this is at issue, employers will
often provide this information as well as the 'break' point or mark which would
have avoided being selected for redundancy on an anonymised basis to avoid a challenge
of unfair dismissal.
Looking for alternative employment for an 'at risk' employee is an important element of fairness. Employers with more than one site should consider the availability of alternative employment at all of their sites. Employers should not assume that an employee will not be interested because the work is at a different location. The employer should also consider whether alternative employment is available with an associated employer.
Looking for alternative employment is also important for another reason: if an employer is able to offer 'suitable alternative employment', and an employee unreasonably refuses the offer, then he will lose his entitlement to a statutory redundancy payment.
If there are no alternatives to redundancy following the consultation process then the selection for redundancy will be confirmed and the employee may be given notice of termination. The employee should also be informed of any right of appeal. During the notice period, alternative employment should continue to be sought.