Publish date

3 July 2020

Expert guidance for charity chairs: staff restructuring and redundancies

According to Third Sector magazine, the sector is facing a 12.4 billion shortfall this year with 10 billion of that in the next 6 months, representing a 24% fall in income according to the Institute of Funding.

In addition, 20% of the sector has been furloughed and some big names like RSCPA are making hundreds of redundancies, Breast Cancer Now is making 60 collective redundancies and Action on Hearing Loss is vacating its London premises to run the charity ‘virtually’ from staff and Board members’ homes.

The easing of lockdown and the winding down of the furlough (CJRS) scheme on 31 October means that we could see many businesses, including charities, looking to implement redundancies and it is quite conceivable that some will be implemented earlier.

There are likely to be discussions about what a charity will look like and many senior management teams within charities are currently making and reviewing business plans. The key question is do you start implementing change now? If you do, you need to take into consideration that at the moment 80% of what you normally pay to staff in terms of notice pay is reimbursed by HMRC, but when they are under notice, they are entitled to full normal notice pay. So your charity will still get some of this covered by CJRS.

What are the reasons for a restructure?

There has to be a reason for a restructure. What does this mean? Usually, it is the same people being employed but doing different jobs for different pay. This is often called a restructure, but sometimes it strays into redundancy if the requirement for people to do a particular job is eliminated and instead they cannot do another job instead.

You may be looking at adapting the business model with less management and less administration.

People could be taking on more duties for the same or less money.

The role of a charity Chair is to ensure that there is oversight and that the proposals that come forward are justifiable and any chairperson needs to challenge with rigour any assumptions.  Certainly if you are looking at more than 20 employees to be made redundant over a 90 day period, you will have to go through more hoops through collective consultation.

What you need to know about redundancy

As far as redundancy is concerned, many employers get confused. Redundancy is not about the person, it is about the job that they are doing.  There has to be a cessation or a diminution, i.e. reduction, in the requirements for them to carry out work of a certain kind.

If you are talking about the cessation of the whole business because it is insolvent or the place where it operates closes, then this is cessation of business or place of work redundancy.  If however there is a need to employer fewer people to do certain jobs, then this is job redundancy.

Is this just about over-capacity or is it the case that some person’s roles and duties are going to be redistributed amongst remaining employees?  The impact for them may be important as far as pooling is concerned.

You will need to ensure that the case for redundancy is justified with sufficient factual and evidence detail because of the requirement to meaningfully consult.

How to correctly conduct consultation

Consultation must be done correctly and it is important that any line manager involved knows how to conduct it appropriately.

Certainly consultation in the sense of being meaningful, means that you have to be receptive to alternatives.  Is there some way in which employees could return to work from furlough, but work flexibly, maybe for reduced pay, or are there other jobs that they can do?

When you are consulting with people over redundancy, always use the words “potential” or “may”, not “will” and “must”, because those words can denote that you have made up your mind and this will detract from a fair process for redundancy.

It is not just the reason, but what you are trying to achieve that needs to be consulted about.

You will need to consider whether there should be a voluntary scheme and a window of opportunity to accept applications for voluntary redundancy or perhaps early retirement. You will need to set out your store as far as any enhancements are concerned over the standard entitlements. This depends upon a number of factors such as date of birth, date of commencement, complete years’ service at the likely end of employment date and weekly pay, which is capped £538.

If having closed the window for voluntary redundancy you do not get enough volunteers or you turn down some who you wish to retain, then you will need to move onto compulsory redundancy.

Then you will need to consult on pools, selection, the application of the selection criteria, alternatives and the time frame.  You will also have to have an audit trail. The ACAS website is a useful resource where you can download a number of redundancy letter templates.

There are also likely to be people on maternity leave and they are protected because you cannot make them redundant during their maternity leave. But you should make them aware of what is going on because they are entitled to return to the job that they used to have before they went on maternity leave and they do ‘trump’ other employees as far as suitable alternative employment, is concerned, so you will need to make way for their return to work and not assume that they are going to be made redundant at the end of their maternity leave.

What are pools for selection?

In relation to pools, there is such a thing as a pool of one and that usually means that one person doing one job is redundant and that their skills are not interchangeable with someone else. If however they do have interchangeable skills and experience, then you will need to put the person who you think is more likely to be made redundant into a pool for selection along with other people who have similar skills and experience, even if that means unfortunately upsetting the other people and putting them at risk.

You will have to distinguish between what they can do under their contract and what they are currently doing functionally.  Because the contract job description is not the be all and end all as far as identifying whether they are in a pool of one or more and again you need to consult and you may have to be flexible with your pooling.

What is selection criteria?

Criteria has to be objective and you will need to get together a matrix of criteria to use, which is objective and can depend upon number of factors from output or quality of work to skills, attendance, disciplinary record and even length of service.

Avoid making any criteria which amounts to a provision criterion or practice (PCP) which has an indirect, detrimental effect on people of a certain protected characteristic such as disabled or older people or people of one gender or another.

You will also need to decide on your weighting and again, that will need to be consulted about, whereas if you, for example, give disciplinary record a score of 5, but output and quality a score of 15, then you are obviously giving more weighting to the latter.

Application of selection criteria

The application of those scores is going to be very much a matter of judgment and you are going to have to set the benchmark at a level below which people will be selected for redundancy.  You will also need to consider a tie-breaker where two people or more have the same scores.

Avoid the trap of giving the task of scoring to those who do not know the individuals concerned and who have never conducted an appraisal with them or performance review on an annual basis, because you will be caught out.

Certainly when scoring, you will need to provide evidence and a fair selection matrix should not only contain the selection criteria, but the scores and alongside those scores the evidence of why someone scored a higher score or not and again you must consult over that.

What about offering suitable alternative employment?

Having scored and consulted over the scoring, you will need to consider suitable alternatives and there will usually be genuine vacancies, but there also may be vacancies in the future. This is important as any Employment Tribunal, which is asked by an ex-employee to assess the fairness of the steps that your charity has taken in making them redundant; will assume that if you give someone notice and it is of, say 3 months duration and a new position appears in the future, they should be considered for that and not simply written off.

You will also need to consider bumping or transfer redundancy, which is to bump a candidate who is selected for redundancy into another position occupied by another employee with perhaps less skills or less service and bumping that 2nd employee out, to retain the first employee’s skills.

You will also need to ensure that the suitable alternative is suitable by skills and terms, but that is not to say that you cannot offer a lower position on less money if that is the only position that is available.

You can conduct competitive interviews for other roles if it is not for same or substantially similar role to the one that is being made redundant.  The old practice of getting people to apply for their jobs is considered unfair.  The practice of getting people to apply for different roles where their existing jobs have been eliminated due to redundancy is fair.

Finally in relation to suitable alternatives, you will need to consider the trial period of 4 weeks and also put in place requisite training and support to help them into the new role.

How can you handle challenges of dismissal?

You will need set out in your final dismissal letter for redundancy why they had been selected and why their position is redundant, the notice they can expect to get and when that will expire, when the notice will be implemented, when their employment will come to an end, their statutory redundancy entitlement, remembering the maximum statutory redundancy pay (SRP) is £16,140, their holiday pay entitlement and whether any benefits will continue after their employment has come to an end, such as private medical insurance.

You will certainly need to give them the right of appeal which means that you will need to ensure that one of your board members, if not you as chair, will need to be reserved for the appeal process.

Finally when challenging a dismissal, you may want to consider the use of settlement agreements, particularly if you are prepared to provide an ex gratia payment.  Often we see the practice of people applying under voluntary redundancy schemes being expected to sign settlement agreements because this avoids the potential challenge later.

If you have any questions about this topic, please get in touch

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