Redundancy and restructures

  • By The Alchemist About Town
  • 16 Feb, 2017

People stuff #employmentlaw

No one wants to make redundancies or be made redundant; from time to time however businesses have to re-organise themselves and cut overhead costs. 

Restructures and redundancies can pave the way for positive change for both employers and employees, and how you approach a redundancy (sometime deriving from a TUPE situation) will depend on your experience with these matters: you might have dealt with redundancy of 2 or 3 people before, but when it is 400 is a different thing, for example organisations that often outsource aspects of their business would deal with TUPE issues more frequently than those making their first corporate acquisition.

In order that the morale of employees and reputation of the business is preserved and financial penalties are minimised, it is vital the re-organisation is properly managed.

Build a project plan and seek professional advice. If there are going to be job losses as a result of the transfer ( in case of an acquisition/merger), or significant changes to T&Cs, that’s when it is worth talking to someone.

Once a redundancy programme is underway, it is vital to minimise the risk of unfair dismissal or other claims by complying with statutory procedures, observing the strict consultation and selection requirements and making the correct payments, this is where most of the issues generally arise from : who should be in the section pool? who should conduct assessments? etc.etc.

Business reorganisations, or restructures,  however, may involve the redistribution of work among the same number of employees and therefore this may amount to a proposal to vary employees’ contracts rather than a redundancy situation at law.


For both redundancies and restructures it is essential that the employer follows a fair process to avoid claims for unfair dismissal; at the most basic level, it is important to adhere to the correct consultation procedures and timings.


Individual consultation


Employers must consult with employees on an individual basis. This usually involves face to face meetings with employees to discuss the employer’s proposals. For redundancy consultation this would usually include: 

  • the business reasons for the proposal, 
  • possible ways of avoiding redundancies, 
  • the proposed pool of employees at risk of redundancy, 
  • the selection process, 
  • available alternative employment. 

The process used to select employees for redundancy should be objective and fairly applied. The organisation should consider a recruitment freeze during any redundancy process, certainly in relation to roles similar to those at risk.

Collective consultation

Where organisations are proposing to make 20 or more employees redundant within a period of 90 days (which also includes terminating contracts and offering new terms as part of a restructure) the consultation must also be on a collective basis. 

This means that the organisation must consult with:

  • the recognised trade union(s) (if there is one or more) or
  • employee representatives that are elected by the employees or are already in place for the purposes of such consultation.
And
  • between 20 and 99 proposed redundancies the consultation must begin 30 days before the first dismissal takes effect and 
  • for 100 or more proposed redundancies the period before the first dismissal takes effect must be 45 days. 

The employer must also notify the Redundancy Payments Service (RPS) using Form HR1.
  You can be fined up to £5,000 if you don’t notify RPS.

The organisation must also consult with employees individually alongside any collective consultation.When an employee is dismissed for redundancy, providing that they have been employed for at least two years they will be entitled to receive a statutory redundancy payment. This is calculated using a formula involving a week’s pay (which is capped at a maximum level set by the government each year), the number of years’ service that the employee has with the organisation and their age. 

 A statutory redundancy payment calculator may be found at https://www.gov.uk/calculate-your-redundancy-pay

 

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Laura xxx
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