The threat of having to make compulsory redundancies is sadly becoming a reality for an increasing number of employers. The Chartered Institute of Personnel and Development forecast record levels at the beginning of the year. In its latest Labour Outlook Survey it warns that more job losses are likely to be triggered by falling confidence in the economic recovery. Faced with this prospect it is it important for HR to plan ahead.
An effective redundancy process will ensure that the organisation avoids the legal pitfalls. Equally important, it will help to minimise the psychological damage, both to affected employees and surviving staff. Following a correct procedure is a prerequisite but good communications will also make a significant difference. What to say, when and how to say it are the three golden rules of redundancy preparation.
Care needs to be taken over the wording of the initial announcement. It should provide sufficient information to demonstrate the need for redundancy but at the same time it should not create insecurity for those in unaffected areas. Employees should not be left hanging and details should immediately follow on how you intend to manage the process and the timescales involved. Employees will be more accepting of the situation if it is shown to be genuine and felt to be fair. Providing information on how you propose to select for redundancy, by using objective and non-discriminatory criteria, will foster a sense of fairness. Try to reassure employees by explaining the financial and non-financial support that will be offered, especially if you can do more than is legally required. As a minimum you will have to make a statutory redundancy payment to employees with two or more year’s service and provide them reasonable time off to look for alternative employment.
To get the details of the communication right you will need to have planned the exercise in advance. The process you adopt must ensure adequate consultation takes places with each individual before any dismissal is confirmed. Prior to this, you will also need to take into account any collective consultation arrangements, either through trade union or employee representatives, where the statutory obligation is triggered, or in accordance with your information and consultation agreement, if you have one. In addition, you will need to incorporate each of the three steps of the statutory dismissal procedure (SDP). Whilst this is not required if you are proposing collective redundancies of 20 or more employees within a period of 90 days, it is good pactice to have a period of individual as well as collective consultation. In particular it should minimise the risk of unfair dismissal.
There is never a good time to make redundancies, but timings can be crucial. Avoid unnecessary delay in communicating the reality of the situation when it becomes apparent. Burying your head in the sand and carrying on as normal will only mean that employees will be shocked by the news when the time comes. This can lead to a loss of trust and confidence, which will undermine the exercise and your relationship with staff. It is far better to be open and honest. Acting on early indications will allow for more meaningful consultation to take place on ways to avoid compulsory redundancies, and give employees advance warning. The need for job security is likely to cause some employees to take up employment elsewhere, which may absorb the redundancies through natural wastage. However, as this can present additional risks to the business, it is important to control natural wastage and put in place retention strategies to ensure key skills are not lost.
When you make the announcement and commence consultation will also have a bearing on the effective date of redundancies. If individual consultation only is required you should ideally consult for at least 7 days. Tribunals will look less favourably on shorter periods and will expect the employer to justify the reason for this. In a collective redundancy exercise you need to consult for at least 30 days before giving notice. This period will increase to 90 days if you are proposing to dismiss 100 or more employees. In this situation a tribunal can award compensation of up to 90 days pay, uncapped, for an employer’s failure to inform and consult.
As past headlines have emphasised, informing your employees by text message is not the best policy. Following a face to face meeting, you should confirm the redundancy situation and the process in writing. Circulating with this a prepared handout of FAQ’s should answer most questions and reduce the strain on your HR department. Managers who are involved in individual consultation meetings should be trained to handle redundancies in a sensitive and sympathetic manner. You should keep a written record of all consultation meetings. In order to comply with the SDP you will need to set out the reason why you are contemplating redundancy in a letter prior to a meeting and confirm any subsequent dismissal in writing. Employers are legally obliged to provide a written statement setting out the calculation used to determine the amount of statutory redundancy pay. Non-compliance carries a fine of £200.
Redundancy is becoming more common place but that does not make it any less stressful. Through careful preparation and responsible handling employers can reduce the likelihood of claims and instil confidence in those who remain.
If you want to learn more about the legal and practical implications of managing change in your organisation we would love to see you at our seminar “Restructuring, Reorganising & Revitalising your Business” on 19 June in Reading, 26 June in London, 2 July in Cardiff or 9 July in Swansea. For more details and how to book click here or email lleonard@clarkslegal.com quoting reference ‘BUDDY’.