Redundancy in the Crunch

During the credit crunch, some organisations may be taking a long hard look at what over-heads can be cut back on and even in the best run organisations, redundancies will occasionally need to be made.

It's easy to get the redundancy procedure wrong and employers should proceed with care. Redundancy is the reduction in the need for people to do work of a particular kind in a particular place, and will often follow a department reorganisation. Replacing an employee with someone doing the same job but on a lower salary is unlikely to amount to redundancy. Whilst it is always advisable to take legal advice, the essence of a fair redundancy procedure is:

1. Select the pool of people from whom the redundancies will be selected. This could be all employees, or all employees from a particular department, or with a certain job title etc. The important thing is to be able to objectively justify how the pool was drawn up. A pool of one employee should be avoided if possible.

2. Consult before any decision is made. Consultation should take place with all employees who may be effected. So if you have 10 programmers, and want to cut the number to 9, you should consult with all of them to demonstrate the fairness of the procedure. The consultation should last about a week (unless more than 20 people will be affected over a 90 day period.

3. Consultation meetings should be a meaningful exercise to discuss with affected staff what is proposed, how it may affect them, what criteria will be relied upon and any potential alternatives (which could include reduced hour working, or other budgetary savings). There should be at least one but ideally two consultation meetings at which the employee in question should have the right to be accompanied by a colleague or Trade Union representative.

4. You should be able to show documents to demonstrate that objective criteria were relied upon to select anybody for redundancy, and how those criteria to everyone in the redundancy pool. That could include what income is generated for the organisation, but for staff members with less easily measurable roles, a more sophisticated score card may need to be drawn up.

5. If selected for redundancy, then the employee should be informed of any suitable alternative vacancies arising within the organisation if applicable throughout the notice period (a full vacancy list is the best option). You do not have to slot people into roles for which they are not suited though. If selected for redundancy, the employee should be given notice in writing and should be given the right to appeal.

6. The easiest way to calculate statutory redundancy payments is to visit http://www.berr.gov.uk/whatwedo/employment/employment-legislation/employment-guidance/page33157.html . Don't forget, regardless of the contractual notice, employees have the right to statutory notice of a week for each full year worked to a maximum of 12 (or payment in lieu) as well.

7. If you do opt to offer an enhanced redundancy package, then it is generally wise to offer it subject to a legally binding compromise agreement under which the employees in question sign away their rights to pursue statutory claims against you arising out of their employment.

However if you do need to make anyone redundant, speak to us first without obligation.

James Carmody
RECULVER SOLICITORS

Tel: 0207 324 6271 Mob: 0788 229 3017 Fax: 0207 477 2276 jrc@reculversolicitors.co.uk
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www.reculversolicitors.co.uk www.compromise-agreement.net

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