The term redundancy means that the job ceases to exist, causing a member of staff to leave the business. Redundancy concerns the business need for a job role, not the relative success or failure of an individual working in that particular role. Redundancy can be devastating for workforce morale - not least for individuals unexpectedly finding themselves back in the job market. It creates uncertainty amongst the remaining members of the team, in which the redundant person worked. Making an employee redundant, also wastes the business investment in ongoing business training and expertise the employee has acquired.
In tough economic times, employees can protect themselves by taking out redundancy insurance, in the form of income protection plans. From a business perspective, redundancy is a reasonable basis for dismissing employees, as long as it is done using the statutory procedures, in a fair and non-discriminatory way. Failure to make an employee redundant without following the correct procedure may result in a employee claiming unfair dismissal at an employment tribunal. As an employer, you must be able to prove that either:- The job has disappeared
* In situations where organisations are using technology to replace humans, it is more complicated deciding which jobs need to be made redundant. To be fair during the process, the organisation must have (or plan to):-
Technology is replacing human jobs in industry sectors such as manufacturing, construction and information technology. As cheaper foreign labour and jobs being are 'off-shored', some domestic workers are being made redundant. In these situations, there are various methods in deciding who should lose their job, in situations where across-the-board cuts need to be made. Firstly, traditional workplaces have used a 'last in, first out' principle, to provide clarity and supposed that fairness. Secondly, employers may request for voluntary redundancies, (which may be desirable to some older workers nearer retirement age, seeking a nice payout settlement). If traditionally there has been a usual 'custom and practice', non discriminatory process for selecting employees, it is prudent to stick to that arrangement. Trade union organisations who may represent the rights of workers, will also need to be consulted throughout the process, and any disputes potentially mediated by the Advisory, Conciliation and Arbitration Service (ACAS).
If an alternative job exists elsewhere in the business, as an employer, you must consider whether the employee being made redundant, could do the alternative job instead. If the employee agrees to undertake the alternative job, (which may be based on different terms and conditions), a four-week trial period must be offered. After the trial, if the employee refuses to accept the alternative, then it is possible grounds for dismissal without paying redundancy. Always seek professional legal advice to clarify each individual situation to see what is 'reasonable' and lawful.
To avoid being sued for wrongful dismissal, appropriate notice periods should be provided to the employees you plan to make redundant. The length of the notice period depends upon the amount of time they have worked within an organisation, their age, and any conditions in their employment contract. During the notice period, the employee is entitled to reasonable time off in order to search for a new job, by visiting recruitment agencies or going to a job interview. The statutory redundancy notice periods are as follows:-
If a large group of staff are to be dismissed, collective redundancy rules may apply. Employers must undertake group collective consultation before individual notification takes place. Written notification and face to face meetings with trade union officials or elected officials, must be undertaken to explain the situation. These discussions should include agreement on options to avoid the dismissals in the first place, or at least ways to possibly reduce the planned number of redundancies, and their impact. The notice periods are set out in law as follows; where 20 or more employees are planned to be dismissed, employers must provide 30 days before the day of the first redundancy, and least 90 days before where 100 or more to be dismissed.
The law protects workers employment rights by providing protection against a dismissal in certain circumstances. If a worker is dismissed under such circumstances, a claim for an unfair dismissal may be brought by the employee against the employer. It is unfair to make an employee redundant because:-
Likewise, by changing the 'flexible' terms and conditions of the employee's employment contract, (to lower pay or working hours), it may constitute constructive dismissal. This can only be achieved with express written agreement of the employee. Failure to achieve this may result in a claim for unfair dismissal.
Employees who are going to be made redundant and have had at least two years of 'continuous' service, are entitled to a Statutory Redundancy Payment. This statutory payment is calculated based on the age of the employee, their age and years of service. The rate an employer is obliged to pay, changes annually according to changes in UK employment law. There are some exceptions and exclusions to this statutory entitlement. As an employer, you should consult your solicitor or provider responsible for human resources, to clarify each individual situation. The payment represents a form of compensation to help the employee get back on their feet and seek alternative employment. Employees who have worked less than two years are only entitled to the contractual notice period or money in lieu of their notice period. As well as the statutory redundancy payment, if the employee has not had all the holiday they are entitled to, (by the date their work is scheduled to end), employers must pay the employee in lieu that holiday entitlement. As a caring and supportive employer, you may want to offer more than the statutory minimum to help the employee you are making redundant.
Employers naturally want to avoid making valued employees redundant. Any redundancies send a worrying message to the remaining workforce, (that their jobs are insecure and the company is struggling). All the original money spent comprehensive business training courses for staff is wasted. To make matters worse, should economic conditions pickup in future, the employer will have to spend more money with local recruitment agencies to attract new staff. However, there are some alternatives to making employees redundant, which may retain the invaluable business skills, keeping valued employees happy, while partially reducing staff related overheads. The main ones are as follows:-