We have seen the collapse of Thomas Cook in the last week resulting in thousands of job losses and now Ryanair has urged its pilots to go on unpaid leave or transfer to other bases to avoid redundancies of the kind that have resulted from the demise of Thomas Cook.
There is more to making someone redundant than handing them a letter and waving them off!
Here are our top 10 redundancy pitfalls:
1. Defining the pool for redundancies incorrectly
The first danger is that the employer can define the redundancy pool too narrowly.
In some circumstances only one employee may be potentially affected by the redundancy and there will be no need to identify a pool for selection. In all other situations the pool of selection must relate to the reason for the potential redundancies, which can be tricky where employees hold similar positions or where employees’ skills are interchangeable. If in doubt put the whole pool of those “at risk” from redundancy and consult them on the selection criteria.
2. Not offering suitable alternative employment
Even though vacancies may be few and there is no legal requirement for the employer to create a vacancy, it is still under an obligation to consider suitable alternative employment in the organisation or its associated bodies.
The employee has a four-week trial period in this alternative post. If they unreasonably reject it, then the redundancy payment may be forfeited.
Remember that a woman on maternity leave must be offered a suitable alternative post before those “at risk” staff that are not on maternity leave.
3. Absence of a genuine redundancy situation
A genuine redundancy occurs where the business or workplace is closed, or there is a diminished need for employees to carry out “work of a particular kind” – that is, a reduction in the size of the workforce. A reorganisation of the business could also lead to redundancies.
Less principled employers may see an economic downturn as a great opportunity to get rid of underperforming staff. This is to be avoided at all costs – an employer failing to prove there is a genuine redundancy situation could end up facing a charge of unfair dismissal.
4. Failure to carry out a fair selection procedure
To prove a role is genuinely redundant, employers must carry out a fair selection procedure, using transparent, consistent and objective redundancy selection criteria. They should avoid choosing an individual for redundancy because of a characteristic such as pregnancy, age or length of service. ‘Last in, first out’ may still be a valid selection criterion but only as one of many others, not on its own.
5. Failure to consult properly on collective redundancies
Consultation is fundamental to a fair redundancy procedure. If an employer is considering making 20 or more redundancies at any one establishment, then it is under a strict legal duty to consult with elected representatives of the workforce for a minimum of 30 days – if laying off 100 or more staff, the minimum period of consultation is 45 days.
The consultation must be “meaningful”; it must not be a “sham”. The decision to make an employee redundant must not have been taken before the consultation begins and the employer should avoid implying that a final decision on the redundancies has already been reached: redundancy is only a possible option at this stage.
6. Failure to inform and consult on an individual basis
Furthermore, even if such collective consultation takes place, an employer is also under a separate duty to consult individually with each employee selected for redundancy. This duty applies in all cases, regardless of the number of redundancies being made. Again, the consultation must be proper and “meaningful”. As with the collective consultation process, it should be a two-way dialogue exploring ways of avoiding, or at least mitigating the effect of the redundancy.
This individual consultation with the “at risk” employees is an essential and integral part of a fair dismissal. Again, failure to consult can lead to the award of hefty compensation for an unfair dismissal.
7. Failure to consider alternatives to redundancy
Employers leaping onto the redundancy bandwagon leave themselves at real risk of being left ill-equipped for the upturn. By failing to consider alternatives to redundancy, they may end up losing skilled and valuable employees, maybe even finding themselves short-staffed. The following should be considered:
• Review whether or not any new vacancy can be filled by redeploying an existing member of staff, with appropriate retraining where necessary.
• Review overtime to see if it can be reduced or stopped altogether.
• Invite staff to volunteer for reduced hours or alternative ways of working.
• Consider reducing or stopping the use of temporary staff.
• Consider seeking agreement to a temporary reduction in the number of days/hours that staff work.
• Consider inviting employees to apply for sabbaticals on part or no pay.
8. Failure to train managers in how to carry out the redundancy exercise
While HR can slink off to its own department once a redundancy announcement has been made, it is up to line managers to cope with redundant staff in the run up to their departure.
Lacking the skills and experience to do so effectively and compassionately will make the situation worse for all concerned – including ‘surviving’ staff.
Communication is key – employers must make sure everyone involved (particularly those being made redundant) hears the news in a timely and appropriate fashion, through the right channels. This is especially important today when so many people use social media for instant communication.
9. Not accounting for the extra costs and resources involved
Redundancy does not begin and end with breaking the news. Employers should be very careful to allocate resources – both time and money – for the duration of the consultation period, and often beyond. Remember as well as a redundancy payment there is also a notice payment that needs to be made in lieu if an employee is not going to work their notice. Accrued but untaken holiday also must be paid to an employee being made redundant. It’s worth also considering the potential for challenges to the redundancy in employment tribunal.
10. Failing to account for the wider effects of the redundancy exercise
It’s inevitable that the staff left behind will suffer from low morale, lower productivity and possibly even increased absence.
They may even suffer ‘survivor guilt’. Employers should never underestimate the impact redundancies can have on remaining staff.
It is essential that employers get the planning and documentation right during a redundancy exercise. Effective communication is vital. An employer should not underestimate the level of compensation that may be awarded by an employment tribunal if it gets something wrong, let alone the legal costs and wasted management time in defending any such proceedings. Nor should the employer underestimate the effect on staff morale of a redundancy situation in the workplace.