Getting difficult decisions right

Adam Bernstein
Monday, April 9, 2018

It’s unfortunate that just as firms prosper, they can also fail. While creditors lose out, so do employees who become redundant.

Print has had to cope with technological change, increased competition as well as the move away, in part, from physical print towards online publication. Inevitably, redundancies have followed. Stacey Bromley, the BPIF’s HR Adviser in the South West, knows from experience how the process has become entwined with restructuring “as businesses have had to ensure that their solutions remain pertinent and their business models relevant”.

The term ‘redundancy’ can be very emotive and while redundancies are no longer the most common reason for dismissal, they do still occur, and employers must get the process right or they risk potentially large claims for compensation.

Further, as Bromley points out, redundancies are rarely received well unless firms are able to seek volunteers. “However,” she says, “if companies engage in the process, follow the procedure and what is required of them, it can be a smooth restructuring.”

Chloe Themistocleous, an Associate at Eversheds Sutherland (International), says to fairly dismiss an employee firms should bear in mind that there must be a fair reason to dismiss, there must be a fair procedure and the decision to dismiss, when considering all the circumstances, must be reasonable. “It’s important to remember that redundancy is just one of five potentially fair reasons for dismissing an employee. Employers must prove there is a genuine redundancy situation.” This could arise where a business has closed, a site has closed or relocated, or where the requirement for certain work has reduced, such as outsourcing design work.

Says Themistocleous, “quite simply, if there is not a genuine redundancy situation an Employment Tribunal claim of unfair dismissal would probably succeed.” The importance of getting the process right has become more acute since the quashing of tribunal fees last July (2017).

And it’s for this very reason that Bromley says firms should have a redundancy policy in place while recording at board level any proposals regarding redundancy and the reasons for it: “Remember, until the entire process has been completed any redundancies are potential, not actual.” She adds that before the process starts firms should consider the redundancy costs and the impact it will have on the business; can the required amounts be afforded?

Duty to consult

As might be expected, making redundancies means following a defined process and the advice from Themistocleous is to approach affected employees early on – “prior to a formal decision being made, to inform them about possible redundancies and give them the chance to suggest ways in which redundancies could be avoided.” 

Taylor Bloxham chief executive Robert Lockwood, who instigated a turnaround and restructuring programme when he joined the business a decade ago, emphasises the need for communication: “It is generally a shock to the individuals potentially affected and talking with our staff enables us to explore all reasonable options – the process we are having to go through is about trying to preserve the maximum number of jobs.”

For small-scale redundancies of under 20 people (at one site) best practice is a one-to-one discussion with affected staff. But the rules for large-scale redundancies – 20 or more employees – mean that the employer will have to undertake collective consultation with the appointed trade union or, if no union is recognised, the body of elected employee representatives.

Bromley suggests that employers keep an open mind until the entire consultation procedure has been completed: “More than one meeting with each individual concerned is likely to be necessary as redundancy dismissals require consideration of a wide and varied range of issues.” She adds that if unions are recognised it is advisable to always include them in consultations “to demonstrate reasonableness, regardless of the numbers”. Similarly, she says to ensure that accurate notes of all consultation meetings are kept on file and copied to the employees going through the redundancy process.

While redundancies often become necessary, they can harm a business’s ability to compete. Lockwood says: “The company loses skills and experience that can be difficult to replace if there is a recovery in the future.” Consultations, however, can help address this. Helen Robinson, a guidance writer for the government’s conciliation service Acas, says firms that consult “stand a better chance of finding alternative jobs for staff, will see increased employee morale by involving them in the process, will have new ideas and options presented that haven’t been considered.”

Next comes the need to fairly select employees. As Themistocleous notes, if someone is in a unique role, or an entire team of employees undertaking a certain role are to be dismissed, selection is less of an issue. “However,” she adds, “where teams are being reduced in size or employees’ skills are interchangeable, businesses must take care to ensure they fairly select employees for dismissal.”

The first step is to identify a pool of employees at risk. Here Themistocleous gives the example of a printer employing designers, machine operators, sales and accounts staff. The firm decides to outsource some of the design work to freelancers due to a downturn in business. Here all of the designers would be placed in the pool of employees at risk of redundancy. The others would not be placed in the ‘at risk’ pool of employees as their jobs are different and are still required. 

“Critical to the process is having a fair and reasonable way to select those design staff that are to be retained and who will be made redundant,” says Themistocleous. It’s for this reason she cautions that the redundancy selection criteria should be objective and capable of independent verification. “Essentially,” Themistocleous says, “selection on purely subjective grounds is likely to be unfair. An employee should not be selected due to personal animosity or unfair and discriminatory reasons such as pregnancy, age, disability or being a whistle-blower.” The same goes for criteria that are too vague or subjective. And in the eyes of the law what those in the ‘at risk’ group are each paid is not generally fair selection criteria. Firms should also not lose sight of attendance – using time off sick could lead to claims of discrimination if it’s related to disability or maternity, for example.

Bromley says she sometimes has difficulty in getting employers to recognise it is the role that is being made redundant and not the employee – “we’re often still asked can I use ‘last in first out’ scenario, as this is seen as a cheaper option to someone who has been employed for 20 years”. 

For Robinson, choosing the right criteria is “always a tricky area” and suggests trying to agree what the selection criteria should be with affected staff.

One option is to rank and score people against the criteria. But Bromley says “managers undertaking the scoring should base it on solid facts and not subjective personal opinions.” She thinks there should be training here because “an employee challenging the scoring of the selection matrix can be a problem if managers are not trained to deal with the challenge.” She adds that if firms have to re-score an individual, if they are persuaded that the score is inaccurate, they should do so.

Morale is important to Taylor Bloxham and Lockwood says that when people can see the positive outcomes it is easier for them to buy in to the process: “The way that people who are exiting view the business is also important as they are the friends of those you are seeking buy-in from.” He also says that when it’s been decided that there is no alternative to redundancy move rapidly so everyone knows what is happening as “the disruptive impact of a workforce expecting a redundancy that takes months to materialise saps morale and starts to transmit to clients.”

However, it’s worth noting that there are rules regarding the length of the consultation period: if there are 20 to 99 redundancies, then the consultation must start at least 30 days before any dismissals take effect, and if there are 100 or more redundancies proposed then the consultation must start at least 45 days before.

But the decision to dismiss isn’t simple. The law says employers must consider if there are other jobs that the employee could do to avoid being made redundant. “Of course,” says Themistocleous, “the employer does not have to create a new job for the employee, but the employee should be offered reasonable alternatives that are available.” Interestingly, she says that this can include reasonable alternatives available in group companies and, importantly, if a suitable role is unreasonably refused by an employee, they can lose their right to a redundancy payment.

Another complication to note is the need to offer dismissed employees a right of appeal. And for those employers wanting to avoid expensive discrimination claims, Themistocleous says to remember, that “employees currently on maternity leave at risk of redundancy have a right to be saved from redundancy by being given alternative employment before other employees at risk who are not on maternity leave.”

At what cost?

Losing staff is not without cost. In basic terms, employees should be paid as per their contract or, where there is no contract or does not meet the minimum notice periods required, the statutory minimum.

Employees with two years’ service are also entitled to a redundancy payment. There are statutory minimums that must be paid but contracts may stipulate higher rates. Statutory redundancy payments are calculated by considering the employee’s age, the number of each full years of service and their weekly pay up to a maximum of £508 per week.

If a redundancy payment is not paid where it’s due, an employee can issue proceedings in the Employment Tribunal. And if the employee believes their dismissal is unfair they can also issue proceedings for unfair dismissal, seeking compensation to cover salary losses up to a maximum of a year’s gross pay or £83,682, whichever is lower. If an employer is making large-scale redundancies and fails to collectively consult with trade unions or elected bodies properly, employees can also make a claim for up to 90 days’ pay for a failure to consult, referred to as a “protective award”. 

There is an obvious question here: would ‘fake’ redundancies pass undetected? Bromley thinks not, saying that a tribunal would see through these situations. From an official standpoint, Robinson says that if “there isn’t a genuine redundancy situation they run the risk of the employee making an unfair dismissal claim against them.”

That said, Bromley finds that many members “are family-run businesses or smaller, close-knit teams so they do not take the decision to dismiss lightly and certainly don’t relish the process.”

Clearly, mistakes can be costly and firms without an experienced HR advisor should seek independent advice. Any redundancy process is going to be traumatic. And it’s for this reason that the story ends with a comment from Robinson. She says “It’s important for an employer to realise the redundancy process doesn’t finish when a decision has been made. Employees made redundant may need support in searching for alternative work, and those who have been offered alternative work within the organisation may need training and support to ensure a smooth transition.” 

Remember – it’s those that are left that will keep the business going.

What to do next...

Employers must learn to think in terms of roles being made redundant, not individual employees. This can help avoid leapfrogging stages and making the exercise procedurally unfair.

Consider the need for redundancies. Companies ought to consider if there are any alternatives to redundancy. This might include, for example, reduced working or cutting down on overtime. Is there any appetite for agreed (as opposed to imposed) pay cuts, wage freezes, reduction or removal of other benefits – especially if put forward by staff? Employers are not obliged to accept any of these suggestions, but consideration must be given, and the business must be able to demonstrate why it is not workable. Also, are there any who would willingly volunteer for redundancy? This can also minimise the disruption to the business.

Be open and explain the need for the restructure. While employees may not like what they hear, they will be more likely to accept it if they understand the reason. If your firm is going through a tough time and needs to downsize, this is likely to be apparent to your team before any formal restructure is announced. Inform employees what the restructuring will do for the firm – you must give hope to those who will remain.

When constructing the selection matrix, it is a good idea during the initial consultation to give affected employees sight of a blank matrix so they can comment on the criteria before it is applied to them. 

Use of the wrong selection criteria can wreck the whole process. The criteria must be as objective as possible or adequate safeguards put in place if the criteria are more subjective. Once individuals have been provisionally selected a discussion can be held about their own matrix results, but without sight of the results for others in the ‘at risk’ pool.

Employers who see problems on the horizon should not ignore the situation. If they are aware there is a downturn in work that could lead to redundancies, they should be proactive and consider what changes could alleviate the issue and reduce the risk of redundancy later on. Again, talking to staff and seeking their views can provide valuable insight into ways to improve the business. Waiting and hoping the problem will go away is likely to be futile.

Losing a job can be likened to a bereavement and it can leave staff demoralised, anxious and desperate to find a new job. Staff are very likely to need time (off) to come to terms with it.

The impact of redundancy process on the staff that remain can lead to lower levels of productivity and a general malaise. Managers will need to take action and staff need to be given an opportunity to vent with the opportunity to talk about their future, and importantly, how they’re going to get there. One of the most common complaints from staff in redundancy situations is that they don’t feel they’ve been listened to.

Management should lead from the front and show that they are sharing in the pain burdened upon others. Ostentatious spending should be cut and pay cuts for those at the top should be actively considered and made public. Remember that staff may feel battered and will want a sense of collective belonging. Remaining staff need to be able trust management - if they cannot they will look to leave because if nothing else, they’re likely worry about the workload being placed upon fewer shoulders.

When faced with redundancy, employees will need to take proactive steps to look for a new opportunity – visiting the job centre, recruitment agencies, looking at study courses, rewriting their CV, filling out application forms and attending job interviews. Employers need to remember that the law allows employees reasonable time off during working hours to look for a new job or make arrangements for training for future opportunities. This applies to those who have been given notice of redundancy and who have worked for the company for at least two continuous years by the date their notice expires.

The law does not provide a definition of ‘reasonable’. It will depend on the individual circumstances of the case – the needs of the employer and the interest of the employee to find work. The employee should give notice and provide details about how they intend to use the time off.

Time off cannot be unreasonably refused. However, if the employer has a well-founded suspicion that the employee is being dishonest about the time off, it may be reasonable to refuse.

There are some situations where an employer might want to consider offering a ‘settlement agreement’ to employees being made redundant. This may apply where all agree that this is the best way to end the employment relationship, but no one wants to go through the process, which usually takes about a month. For an employer this ensures those made redundant do not bring claims against the company for unfair selection/dismissal. In exchange, the employee will receive an ex-gratia payment over and above their statutory redundancy payment as an incentive for them to waive their rights to bring a claim.

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