Redundancy

Managing redundancy

What is redundancy?

This is not just the straight forward concept of there being less work or a company closes, there are technical definitions of redundancy as specified by the law and any dismissal must fit into one of these.

Legal Definitions

• The employer has ceased or intends to cease carrying on the business either generally, or specifically in the place where the employee is employed
• The requirement of the business for employees to carry out work of a particular kind has ceased or diminished, or is expected to cease or diminish.

These legal definitions are the relevant ones for the employees’ entitlement to statutory redundancy pay, and for the purpose of determining whether there is proper and potentially fair reason for dismissal. This covers three main redundancy situations:

1. The closure of the business as a whole.
2. The closure of the business at a particular workplace or site.
3. A diminishing requirement for employees to perform work of a particular kind.

The first two situations are the commonly understood redundancy situations. In addition to closure of the whole business they cover the business no longer pertaining in the geographical area in which the employee is employed.

The second one is a difficult concept but the key phrase is “work of a particular kind”.This could be because orders have reduced or there could be as much work as before but the business needs to cut costs. Both these would trigger a redundancy situation as the employer needs fewer employees for that kind of work. In this second case, the work is then distributed amongst the remaining staff. It could also cover just one department closing.

It is not always necessary for there to be financial difficulties to trigger redundancy. It could be that due to a reorganisation or the introduction of new technology or processes. The key is the that the employer needs fewer employees to do that kind of work.

The Wider European Definition of Redundancy

The second definition of redundancy is: “dismissal for a reason not related to the individual concerned or for a number of reasons all of which are not so related”. This is the wider definition that applies for the purposes of the requirement for collective consultation and means that there is no fault attributable to the individual but the organisation has changed around them.

What an Employer must do when Contemplating Redundancies

An employer has a variety of obligations if it proposes to dismiss employees as redundant. Employers are under a duty to:

• provide formal notification to the Secretary of State for Trade and Industry where 20 or more employees are to be made redundant
• consult collectively with appropriate representatives if 20 or more employees are to be made redundant
• consult with individual employees to ensure dismissals are fair, even if there is collective consultation
• use objective criteria for selection and apply the criteria fairly and consistently
• give redundant employees proper notice under their contracts of employment
• try to find suitable alternative employment elsewhere within the organisation for employees whose jobs are to be made redundant
• grant reasonable paid time off work to redundant employees to help them seek new work
• pay redundancy pay to those who qualify for it.

If an employer does not follow the correct procedure then they will almost certainly lose any subsequent tribunal claim for unfair dismissal.

The law expects employers to consult with employees as soon as they are contemplating making redundancies. This is fine in large unionised organisations but is less practical for smaller companies or where only one or two redundancies are needed. However, it must be seen to be done if a procedural fault is to be avoided.

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