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Avoid expensive redundancy mistakes

03 Jun 2011

Neil Dwyer, partner & head of the employment team at Hay & Kilner Solicitors, offers advice on managing a redundancy programme.

Recent research shows that more than 60% of small and medium sized businesses are now suffering financially due to the credit crunch and the move towards recession. Those not suffering are relying on savings and overdraft facilities to fund cash flow.  Certainly, redundancies are on the increase. During a redundancy programme, employers need advice and support in carrying out what can be a complex and emotive process.

Like Sat Nav, the best journey involving redundancies is one where the employer has plotted each milestone in the journey and knows where the road ends.  Potential problems that damage later milestones need to be addressed at the outset so that the process can be well thought-out, objective and successful. 

At the outset, a business will calculate the bill for contractual and statutory payments – statutory redundancy pay and any payment for notice if the employee is not required to work the notice. It is important to ensure that this bill for the obligatory payments is not increased two or three fold by making expensive mistakes in the journey which will result in the business making additional compensation payments.

Potential potholes could come from:

  • Not informing employees ahead of any necessary period of consultation about any redundancy proposals and failing to ensure that they are mere proposals at that stage and not final decisions.
  • Failing to allow a 30 day consultation period before any notice of redundancy is given when more than 20 employees are to be made redundant.
  • Drawing the pool for selection too narrowly and keeping staff out of a pool just by reference to job title and failing to conduct a comprehensive analysis of their duties.
  • Failing to ensure that the selection criteria is objective and verifiable by reference to data such as records of attendance and efficiency and failing to ensure that it is not discriminatory.
  • Including unpopular or difficult employees in a redundancy process unfairly.
  • Using “last in, first out” as a basis for selection when this can discriminate against staff by reason of their age or sex.
  • Misapplying employees who are on maternity leave by not including them in pool, (this could be prejudicial to those in the pool) or selecting them for redundancy because they are pregnant, have given birth or are on maternity leave. This would make the dismissal automatically unfair and amount to sex discrimination.
  • In advance of any final meeting, at which dismissal will be considered, failing to provide notice of the meeting in writing together with any provisional scoring for selection of redundancy and ensuring that there is evidence to objectively justify the scoring.
  • Give employees an opportunity to state their case before any final decision is made and then a right of appeal.

These are some of the potential pitfalls which should be identified and addressed correctly at the outset of any redundancy procedures to avoid costly mistakes. 

For further advice from Hay & Kilner’s employment team email neil.dwyer@hay-kilner.co.uk 

Please note:
This article is not legal advice; it is intended to provide information of general interest about current legal issues. Please contact us to discuss how the contents of the article may affect you.