Employment associate Catherine Hawkes provides advice for business owners considering staff redundancies following COVID-19 and explores the typical pitfalls often made by employers
Despite the Government’s best efforts to financially support businesses throughout the pandemic, the reality is that a number of employers are struggling with the impact of COVID-19 and may have to consider making redundancies.
With the furlough scheme coming to an end in October 20201 this may be a potential consideration for many aesthetic businesses. If this is the case for your clinic, it is important to start planning now, as the consequences of getting the process wrong can be costly. Employees with more than two years’ service have the right not to be unfairly dismissed.2
If an employer is faced with a genuine redundancy situation, redundancy is a potentially fair reason to dismiss an employee.3 However, a fair procedure will need to be followed. This will typically consist of:
Identifying the correct ‘pool for selection’ of employees at risk of redundancy
Engaging in meaningful consultations with affected employees before any decisions are made
Considering suitable alternative employment
For employees with less than two years’ service, a comprehensive process may not always be required and should be considered on a case by case basis.
In this article, I will consider the top tips employers should remember when considering and undertaking an individual consultation redundancy process (where less than 20 employees are to be made redundant from one establishment within a 90-day period).
Principles governing procedural fairness in redundancy cases in the UK are those established by case law. To ensure that the correct protocol is followed, businesses should consider the following factors when going through the redundancy process.
Assess your reasoning
In order for a dismissal to be fair, there needs to be a genuine redundancy situation which satisfies the statutory definition under section 139 of the Employment Rights Act 1996.4 Typical redundancy situations will occur where there is a reduced requirement for work of a particular kind; for instance, where a business is closing entirely or the demand for the work has reduced, or the place where the work is undertaken is changing, meaning that there is no longer a need for the work to be done in that particular location. Therefore, before commencing a redundancy process, always ensure that redundancy is the real reason for the dismissal. If redundancy is used to disguise the true reason for dismissal, which may be poor performance for example, then any termination of employment for redundancy is likely to be considered unfair which would entitle an employee to bring a claim for unfair dismissal.
Some employers may want to consider offering voluntary redundancy in advance of starting a compulsory redundancy consultation process, to enable them to short-circuit the process. However, in order to incentivise employees to apply, the amount offered should be over and above the statutory and contractual minimum payments that the individual would receive if they were made compulsorily redundant. A settlement agreement would also need to be signed by both parties.5 This may be feasible for some employers, but for financial reasons it may not be for others.
Keep a paper trail
Employers should consult with employees on the business reasons behind the need for redundancies, and it should be made clear that no decisions have been made until the end of the process.
It is therefore important that employers keep a clear paper trail to reflect the fact that no final decisions have been made, for example, through internal emails and file notes. Further, each step of the process should be clearly documented, which will typically mean keeping notes of consultation meetings, as well as written invitation letters and outcome letters which should be provided to employees. If an employee subsequently sought to challenge the fairness of the process, documentation will be vital in disproving this.
Ensure the correct ‘pool’ for redundancies
Before the consultation process commences, employers should identify an appropriate pool from which to select potential redundant employees which is fundamental for ensuring fairness.6 When identifying a pool, a good starting point is to consider the specific roles at risk, including any positions which are interchangeable with those roles such as administrative or secretarial duties. It is important that the focus is on roles as opposed to individuals, as this may be seen as predetermining any selection process.
Employers can determine their own selection criteria provided that it is objective and measurable, and does not rely on the opinion of the person applying the criteria.7 Standard criteria will typically include performance, skills or qualification, length of service, and disciplinary or attendance records.
Employees should be fairly scored against the relevant criteria and this should be recorded. It is commonly recommended by employment lawyers that two managers separately undertake the scoring exercise for each employee to reduce any risk of subjectivity if this is practical, taking into account the size and administrative resources of the clinic. Otherwise, one manager will suffice.
All employees, regardless of their length of service, have the right not to be discriminated against.8 Therefore, selection criteria should never be discriminatory. If using attendance as a criterion, any absence for pregnancy-related illness, disability-related absence, maternity or other family-related leave should be discounted – otherwise selection because of a high absence record could be considered discriminatory.9
Reasonable adjustments should also be made for disabled employees to ensure that they are not placed at a disadvantage because of their disability, such as making alternative arrangements for consultation meetings or allowing them to bring a companion to a meeting.
Where an employee on maternity leave is selected for redundancy, they are afforded enhanced protection under section 10 of the Maternity and Parental Leave Regulations 1999.10 This means that they are entitled to be offered any suitable alternative role available ahead of other employees. For example, if an employer is reducing five similar roles to three, a woman on maternity leave who currently occupies one of those roles must be given one of the three remaining roles.
Where appropriate, employers should undertake a search within the business for suitable alternative employment and, if available, should notify the employees at risk of redundancy. Where there are a few employees at risk of redundancy who are interested in the same alternative role, they should each be invited to apply and then a standard interview process should be undertaken.
If an employer has given no consideration to suitable alternative employment available within the business, this may amount to an unfair dismissal, particularly if an employee can point to alternative roles that should have been offered and were not.11
Ensure correct payments are made
It is important to check the employee’s contractual rights under their employment contract and staff handbook, specifically in relation to notice provisions, holiday entitlement, benefits and bonus entitlements. If the employee has more than two years’ service, they will be entitled to statutory redundancy pay.12
For employees with less than two years’ service, they will not be entitled to statutory redundancy pay but are entitled to any payments as set out within their contract of employment. If applicable, employees may be entitled to company-enhanced payments in accordance with any redundancy policy and/or custom and practice. Employers should ensure that they treat all employees consistently if an enhanced redundancy package is offered.
To afford an employer protection from any potential employment claims, some employers offer an ex-gratia payment to employees (in addition to their contractual and statutory rights) and require them to enter into a settlement agreement as a condition of receiving additional payment.5 The effect of the settlement agreement is that the employee waives their rights to bring any legal claims against their employer arising from the termination of their employment. It is not necessary in all circumstances, but it is worth giving consideration to after carrying out a risk/benefit analysis, especially if voluntary redundancy is offered.
A redundancy process must be genuine and fair. Fairness relates to the quality of the employee consultation – that is, ensuring that a meaningful consultation is undertaken. It also relates to ensuring that the selection criteria used is objective and the application of those criteria is applied fairly and specifically, ensuring that employees are not dismissed for unfair or discriminatory reasons.
Employers should review individual contracts as well as staff handbooks and any company redundancy policy to ensure they do not fall foul of their own policies and expose the business to possible contractual claims. Furthermore, employee engagement will be crucial to businesses during this time to ensure a smooth process and employee morale. If this can be achieved, this will ultimately assist in minimising any potential employment claims.
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