Publish date

2 July 2020

Restructuring and redundancies: your questions answered

The easing of lockdown and the winding down of the furlough (CJRS) scheme on 31 October means that we could see many businesses looking to implement redundancies.

Any restructuring and redundancy process is difficult for employers and employees alike. Employers are required by law to consult extensively not just on the need to reduce workforce roles or create new ones to better align with the business feature needs, but also pools for selection, selection criteria and application of that criteria and suitable alternative employment. Getting the process wrong can be expensive, very time consuming and harm the reputation of any employer.

Here, we answer some common questions around the restructuring and redundancy process.

What does it mean to restructure rather than make redundancies?

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 they cannot do another job instead.  You may be looking at adapting the business model with less management and less administration functions, or people could be taking on more duties for the same or less money.

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 employ fewer people to do certain jobs, then this is job redundancy.

How does the consultation process work?

Failure to conduct a proper consultation process could result in claims of unfair dismissal and even discrimination, so it is important to get it right. You must consult with all employees who could be affected by redundancy, although there are different considerations to factor in depending on how many redundancies you plan to make. It is also important to remember that you must not present your final (decided upon) redundancy plans at the start of the consultation process as a fait accompli.

Consultations can take place face to face, using video conferencing or over the phone and should involve explaining the situation to employees and the business’s proposals getting their feedback, which should be worked into final plans.

If you are planning to make 20 or more employees redundant within 90 days, you must inform and consult with any trade unions or employee representatives over 30 days. 45 days if 100+ are at risk of redundancy.

Don’t forget that you must also consult with any employees who are currently on maternity leave.

In collective redundancy cases, you can only have redundancies take effect once the consultation process has finished and a minimum time period has elapsed since the start of the consultation process – 30 days for between 20 to 99 redundancies and 45 days for 100 or more.

In collective redundancy cases, employers must complete an HR1 form and submit to the Department of Business Enterprise Innovation and Skills (BEIS).

How do I select employees for redundancy?

It is very important to select employees for redundancy in an objectively fair way and not discriminate on grounds of a protected characteristic. For example, you must not select employees because of e.g.  their age, disability, race, sex, religion or part-time employment status.

Instead, it is best practice to base selection criteria on standards or output of work, attendance record and disciplinary record. Giving increased weighting to the selection scores where necessary.

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 where people falling below that 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 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 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 suitable alternatives?

Having scored and consulted over the scoring, you will need to consider suitable alternatives and there will often be genuine vacancies, but also may be vacancies in the future. This is very important to consider, because an Employment Tribunal will assume that if you give an individual notice and it is of three months’ duration and a position appears in the future,  they should be considered for that role 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 second employee out.

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.

What needs to be included in a dismissal letter?

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, 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.

What if a dismissal is challenged?

Depending on the circumstances, 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.

How much notice do I have to give?

Notice can only be given once you have finished consulting everyone and in cases of collective redundancies, the relevant minimum period has passed.

The length of notice will depend on how long the employee has worked for you, as well as the individual terms of their contract.

How do I calculate redundancy pay?

Again, this will depend on how long the employee has worked for you, their age,  weekly pay and other terms of their contract. You can use our redundancy pay calculator to help you.

This article appeared in theHRDIRECTOR

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