For step-by-step guidance on adopting a fair procedure when planning to make one or more employees redundant, contact our employment team at [email protected].
With the uncertainties regarding Brexit, and with the deadline for a deal to be made looming, our employment team consider what an employer’s duties are if they are in the unfortunate position of having to make redundancies.
After the news that Schaeffler, which supplies automotive and industrial parts all over the world, was set to close its Llanelli site, due to ‘uncertainty surrounding Brexit’, other businesses have considered their contingency plans before and following Brexit, with the likelihood that other businesses will need to make redundancies.
Making redundancies is always a difficult position for everyone involved and each redundancy situation differs.
The statutory definition of “redundancy” encompasses three types of situation: business closure, workplace closure, and reduction of workforce. There is no mandatory statutory procedure for fairly dismissing an employee for redundancy; however, dependent on the number of employees affected, there may be a duty to collectively consult and also inform the Department for Business, Energy and Industrial Strategy (BEIS) of the proposed redundancies.
The sanctions for failing to comply with these obligations are severe and so it is really important that you seek legal advice as soon as you become aware you may need to make redundancies.
In any event, employers must follow a fair procedure involving individual consultation and make decisions that are fair and reasonable in the circumstances.
For a dismissal to be fair, the employer must have:
- A potentially fair reason for dismissing the employee. There are five potentially fair reasons for dismissal set out in section 98 of the ERA 1996, one of which is redundancy; and
- Acted reasonably in treating that reason as sufficient to justify dismissing the employee.
A redundancy dismissal is likely to be unfair unless the employer:
- Identifies an appropriate pool for selection;
- Consults with individuals in the pool;
- Applies objective selection criteria to those in the pool; and
- Considers suitable alternative employment where appropriate, subject to a trial period.
If a redundancy dismissal is unfair, an employee will normally be entitled to (in addition to the redundancy pay and notice entitlements):
- An unfair dismissal basic award; and
- An unfair dismissal compensatory award, to compensate for financial loss arising from the unfair loss of their job.