Negotiating the redundancy minefield
5th February 2009 by: Caroline Essex
Recent statistics have (unsurprisingly) indicated a sharp increase in the number of redundancies - the figure for the first quarter of 2008 was 28,000 higher than the corresponding figure for 2007.*
These figures (indicative of the current economic downturn), have forced employers and employees alike to consider the possibility and perhaps probability of redundancy.
Many employers regard redundancy as being an easy dismissal. Some employers think that by making an employee redundant they will avoid having to dismiss the employee. This is a common error as redundancy is one of six reasons for dismissal. If a dismissal is cloaked as a redundancy when this is not in fact the case (and regardless of the procedures used or the necessity of the dismissal in question) the employee’s dismissal will be automatically unfair. If there are any “glitches” in the procedure used then (and again regardless of the merits of the employer’s position) the dismissal will be automatically unfair.
If a dismissal is unfair then the compensation payable is linked to the dismissed employee’s ability to find another job – which in this climate can only make getting a dismissal wrong expensive. Added to which if the dismissal is procedurally defective (i.e. if no right of appeal was given or there was no discussion regarding alternative work) then the Employment Tribunal can “punish” the employer by increasing the compensation.
Redundancy - Pitfalls
This article has been presented to illustrate why employers should always take proper advice before carrying out redundancies. Readers should recognise that this article is not a substitute for obtaining proper professional advice.
Redundancy occurs when a dismissal takes place and it is wholly or mainly attributable to the employer –
a) Ceasing or intending to cease to carry on the business for the purposes of which the employee was employed;
b) Ceasing or intending to cease to carry on the business in the place where the employee was so employed; and
c) Having a reduced requirement for employees to carry out work of a particular kind at the place where the employee was employed to work.
If this is the case then a fair procedure has to be followed. There is no set formula for making every redundancy “fair” but there are some practical steps that can reduce an employer’s exposure to such risk. A selection is set out below.
1. Consider whether alternative jobs are available within your organisation. If alternative positions are available these must be offered to the employee prior to the ending of her existing contract of employment. The alternative employment must be on the same terms and conditions of her existing contract or it must be suitable employment in relation to that particular employee. If retraining is necessary this should be done but only if it is practicable to do so. Clearly if the cost of this training is disproportionately expensive then this may not be feasible.
An employer should not be slow in offering alternative positions to an employee, even if he thinks the role is one which the employee is overly qualified to do. The suitability of the new role is something for the employee to decide.
Any drop in status may be alleviated by affording the employee preferential treatment should her original position become available in the future following an upturn in business.
2. Employees should be selected in accordance with any customary or agreed procedure.
You will need to research what procedure the employer followed with previous redundancy situations. Where possible the selection of an employee should be in accordance with these procedures.
If there is an agreed custom it must still comply with other aspects of employment legislation. For example if you have a custom that pays an employee X amount for every year worked over the age of 40 you may well have to justify these age related differences should it ever be questioned in an employment tribunal. Failure to do so may lead to a claim for age discrimination.
Where there is no custom or agreed practice the employer will need to establish objective (and non discriminatory) criteria for selection.
3. How many employees are being made Redundant.
If, within a 90 day period the employer is making between 20 and 99 employee’s redundant, then there are more stringent procedures to be followed. If employers wish to avoid these additional procedures then employers must plan the timing of these redundancies.
4. Avoid the procedures by “Buying the employees off”?
Some employers may well be in a position to offer their employees an enhanced redundancy payment in recognition of the employees valued service throughout their employment. There may well be a tendency to think that as the employee is receiving more than he is entitled to by the statutory minimum, then the employee will lose the opportunity to pursue her employer.
However:
• If the employer has not arranged for the employee to sign a “Compromise Agreement” in which the employee (after having taken her own legal advice on the agreement’s terms) agrees to waive her statutory employment rights the employee will still be able to sue her employer. In such instances the Employment Tribunal will give the employer “credit” for the money the employer has paid the employee.
• The employer should never lose sight of the fact that if the dismissal is procedurally unfair (and any procedural irregularities however small will mean that a dismissal is procedurally unfair) then the dismissal will be automatically unfair and the compensation payable to the employee will be uplifted by 10% - 50%. To place this in context - if discussions occur regarding a “pay off” the employer should always ensure that if the negotiations break down the employee is then unable to argue that the nature of those talks meant that she had effectively been dismissed and accordingly as there was no procedure in place the dismissal is automatically unfair.
The employee should be aware that the employer has to execute the redundancy properly and the employee should take advice to see whether she can bring a claim. The above factors show how easy it can be for employers to make an innocent mistake which significantly increases their exposure to their employees.
* Source– National Statistics Online published at 17 September 2008 at 9.30 am
These figures (indicative of the current economic downturn), have forced employers and employees alike to consider the possibility and perhaps probability of redundancy.
Many employers regard redundancy as being an easy dismissal. Some employers think that by making an employee redundant they will avoid having to dismiss the employee. This is a common error as redundancy is one of six reasons for dismissal. If a dismissal is cloaked as a redundancy when this is not in fact the case (and regardless of the procedures used or the necessity of the dismissal in question) the employee’s dismissal will be automatically unfair. If there are any “glitches” in the procedure used then (and again regardless of the merits of the employer’s position) the dismissal will be automatically unfair.
If a dismissal is unfair then the compensation payable is linked to the dismissed employee’s ability to find another job – which in this climate can only make getting a dismissal wrong expensive. Added to which if the dismissal is procedurally defective (i.e. if no right of appeal was given or there was no discussion regarding alternative work) then the Employment Tribunal can “punish” the employer by increasing the compensation.
Redundancy - Pitfalls
This article has been presented to illustrate why employers should always take proper advice before carrying out redundancies. Readers should recognise that this article is not a substitute for obtaining proper professional advice.
Redundancy occurs when a dismissal takes place and it is wholly or mainly attributable to the employer –
a) Ceasing or intending to cease to carry on the business for the purposes of which the employee was employed;
b) Ceasing or intending to cease to carry on the business in the place where the employee was so employed; and
c) Having a reduced requirement for employees to carry out work of a particular kind at the place where the employee was employed to work.
If this is the case then a fair procedure has to be followed. There is no set formula for making every redundancy “fair” but there are some practical steps that can reduce an employer’s exposure to such risk. A selection is set out below.
1. Consider whether alternative jobs are available within your organisation. If alternative positions are available these must be offered to the employee prior to the ending of her existing contract of employment. The alternative employment must be on the same terms and conditions of her existing contract or it must be suitable employment in relation to that particular employee. If retraining is necessary this should be done but only if it is practicable to do so. Clearly if the cost of this training is disproportionately expensive then this may not be feasible.
An employer should not be slow in offering alternative positions to an employee, even if he thinks the role is one which the employee is overly qualified to do. The suitability of the new role is something for the employee to decide.
Any drop in status may be alleviated by affording the employee preferential treatment should her original position become available in the future following an upturn in business.
2. Employees should be selected in accordance with any customary or agreed procedure.
You will need to research what procedure the employer followed with previous redundancy situations. Where possible the selection of an employee should be in accordance with these procedures.
If there is an agreed custom it must still comply with other aspects of employment legislation. For example if you have a custom that pays an employee X amount for every year worked over the age of 40 you may well have to justify these age related differences should it ever be questioned in an employment tribunal. Failure to do so may lead to a claim for age discrimination.
Where there is no custom or agreed practice the employer will need to establish objective (and non discriminatory) criteria for selection.
3. How many employees are being made Redundant.
If, within a 90 day period the employer is making between 20 and 99 employee’s redundant, then there are more stringent procedures to be followed. If employers wish to avoid these additional procedures then employers must plan the timing of these redundancies.
4. Avoid the procedures by “Buying the employees off”?
Some employers may well be in a position to offer their employees an enhanced redundancy payment in recognition of the employees valued service throughout their employment. There may well be a tendency to think that as the employee is receiving more than he is entitled to by the statutory minimum, then the employee will lose the opportunity to pursue her employer.
However:
• If the employer has not arranged for the employee to sign a “Compromise Agreement” in which the employee (after having taken her own legal advice on the agreement’s terms) agrees to waive her statutory employment rights the employee will still be able to sue her employer. In such instances the Employment Tribunal will give the employer “credit” for the money the employer has paid the employee.
• The employer should never lose sight of the fact that if the dismissal is procedurally unfair (and any procedural irregularities however small will mean that a dismissal is procedurally unfair) then the dismissal will be automatically unfair and the compensation payable to the employee will be uplifted by 10% - 50%. To place this in context - if discussions occur regarding a “pay off” the employer should always ensure that if the negotiations break down the employee is then unable to argue that the nature of those talks meant that she had effectively been dismissed and accordingly as there was no procedure in place the dismissal is automatically unfair.
The employee should be aware that the employer has to execute the redundancy properly and the employee should take advice to see whether she can bring a claim. The above factors show how easy it can be for employers to make an innocent mistake which significantly increases their exposure to their employees.
* Source– National Statistics Online published at 17 September 2008 at 9.30 am
Add new comment