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Redundancy

by Niall McSorley, employment lawyer at Carson McDowell.

Before jumping in and reducing staffing figures through a redundancy programme, managers must not only ensure that a genuine redundancy situation exists, but they must also cross their 'ts' and dot their 'is’ when it comes to the process itself in order to limit legal action from disgruntled ex-employees. Redundancy procedures: The redundancy process can be divided into the four ‘cs’: • Circumstances • Criteria • Consultation, and • Calculation Circumstances Firstly, the employer must ensure that there is a genuine redundancy situation. A redundancy situation arises if the employer: • Has ceased or intends to cease carrying on business; • Has ceased or intends to cease carrying on business in the location where the employee works; or • Has a reduced requirement to carry out work of a particular kind, or to carry out particular work at a particular location. If any of the above arises, then a genuine redundancy situation exists. Criteria Once a redundancy situation exists, the employer will have to establish objective criteria to use when selecting employees for redundancy. Prior to establishing the criteria here, the pool from which an employee should be selected for redundancy should be established. The pool • Must be objectively identified • If possible, it should be agreed with employees/ employee representatives • It may not be necessary to select a pool if all employees are being made redundant, or if a unique role no longer exists. If there is a redundancy policy in place, the selection criteria in the said policy should be followed. If not, then the employer will have to draw up appropriate criteria. The criteria should be objective and verifiable. Examples of criteria could include individual performance, attendance record, service, the needs of the business etcetera. Criteria for selection should be communicated to affected employees. Consultation Employers should consult with affected employees (employees in the pool), or employee representatives, if appropriate. In terms of timing, where there are; • Less than 20 employees to be made redundant within 90 days, the employer must consult with staff in good time • 20 to 99 employees to be made redundant within 90 days, the employer must consult with affected employees at least 30 days before the redundancy is to take place • 100 or more employees to be made redundant within a 90-day period, consultation must commence at least 90 days before the redundancy is due to take effect. Employers should meet with staff and inform them of the selection criteria. Thereafter the selection should be made, and the following three steps should be adhered to; Step 1: Write to the employee who has been selected for redundancy, informing him of the reasons upon which the dismissal is being contemplated and invite him to a meeting, advising him of the date, time and location for the meeting. Advise the employee of his right to be accompanied to this meeting by a work colleague or trade union representative. Step 2: Redundancy meeting. Meet with the employee and representative. At this meeting, inform the employee of the reason for his/her selection for redundancy, consider suitable alternative employment and any representations heard by the employee. Write to the employee informing him of the outcome of the meeting, and advising him of his right to appeal. Step 3: The appeal hearing. Again the employee has the right to be accompanied. Another member of the management staff, if appropriate should hear this. Calculation An employee is only entitled to a redundancy payment under statute if the employer has continuously employed him for at least two years. If so, the calculation is based on the employee’s weekly gross pay, subject to a maximum of £330 per week. • One and a half weeks' pay for each complete year of service after reaching the age of 41. • One week’s pay for each complete year of service between the ages of 22 and 40 inclusive. • Half a week’s pay for each complete year of service under the age of 22.• Gross weekly pay (subject to the statutory maximum of £330). • Period of continuous employment (subject to a maximum of 20 years*). • Age (at the date of termination). • Redundancy pay is not to be subject to tax/NIC (subject to a maximum £30,000). Conclusion In a redundancy exercise, it is important to conduct the process fairly, objectively, and in accordance with recognised procedures. Failure to follow a reasonable process may result in tribunal claims by disgruntled employees. * The 20 years service should be calculated back from the date of termination.

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