Redundancy risks: what you need to know

REDUNDANCY RISKSWe support businesses of all shapes and sizes with redundancy and restructure programmes and unfortunately, it’s a process that many organisations have to go through more regularly than they might like. However all too commonly, we also see many organisations that really need to go through a restructure but choose to avoid doing so for fear of upsetting the apple cart, even though the business really needs it and often can ill afford to carry the extra costs of carrying individuals who are no longer needed.

In this Blast, we have put together our most frequently asked questions from clients to help you navigate redundancy smoothly and in a way that will help to minimise the disruption to your business and staff.

What are the real risks of dismissing someone on the grounds of redundancy?

  • It is essential that this is a true redundancy or restructure, if you have dressed up a performance or conduct issue as redundancy this could lose you the respect of other employees as well as risk a Tribunal claim.
  • If you have acted in haste and not followed the proper procedure you would be at significantly increased risk of a Tribunal claim.
  • A lack of paperwork is likely to leave you exposed and unable to demonstrate you followed the right procedure, had sound business reasons for the dismissal etc.
  • If you have failed to pay attention to the details, communications and so on, bad PR could adversely impact your business.
  • If badly/clumsily handled, you might find valuable staff choosing to leave your business in response to a downturn in staff morale, employee engagement, respect for management etc.

Do I need a redundancy policy?

The law says no, but best practice is ‘yes’! We would recommend that you have one as this is great for ensuring you (and your managers) do things the ‘legal’ way – take the right steps, manage people fairly, have fair selection criteria etc.

Putting all these things down on paper should minimise the likelihood of an employee claiming they have been picked on or treated unfairly and so bringing a Tribunal Claim against you. If needed you can get a redundancy policy plus all the redundancy letters you need for this process for just £249(+VAT) from our sister site Docs Wizard.

If the employee has less than two years service can I just text or email them to say please don’t come back into work you’re being made redundant?

Although in theory staff with less than 2 years’ service have far fewer rights and in particular cannot make an unfair dismissal claim against you, we wouldn’t ever recommend this! To avoid any potential discrimination claims, grievances and so on, as well as the potential impact of poor employee relations, we recommend that you include them in the usual consultation process.

Can I use a last in first out policy when choosing who should go?

We wouldn’t recommend this unless you can demonstrate that this approach does not in any way result in age discrimination i.e. if the age profile of your new starters in recent months is younger than the age profile of your more established work force, then last in first out (LIFO) is not an approach that you can justify legally.

When creating my selection criteria, can I include absence and then select the individuals for redundancy who have taken the most time off sick in recent months?

Yes, you can certainly include absence in your selection criteria, although we would always recommend that you consulted over the selection criteria and solicited feedback before finalising it (rather than presenting it as a finalised document). Just be very careful about what absence you include, please don’t include any absence that’s related to a disability or any absence due to emergency domestic leave. If you’re not sure what a ‘disability’ is in the eyes of the law then as a quick guide it’s about an illness or injury that has already or is likely to last more than 12 months and that has a significant adverse impact on someone’s ability to carry out their day to day activities. This definition is always open to interpretation so be very careful about making a quick assumption that your employee does NOT have a disability.

Can I include staff who are off on long term sick or maternity leave?

Yes, please include them in the consultation process! Individuals on maternity leave are particularly protected and have additional rights, so please give us a call so that we can support you when managing these employees through a consultation process.

Once I have confirmed the redundancy do I have to pay the employee for their notice or can I ask them to work their notice?

You can ask them to work their notice, or you can ask them to work some of their notice and then pay the remainder in lieu if in the contract it says ‘we reserve the right to pay notice in lieu’, or you can pay all in lieu provided the contract gives you this right (or the employee agrees to it).

Can I pay any notice pay tax free?

This is now illegal. (Effective April 2018). Only the redundancy payment can be paid tax free (up to a maximum of £30,000).

If my employee has a lot of outstanding holidays – do I have to pay notice and pay holidays as well?

  • Ideally in your contract it says that you have the right to require an employee to take holiday during their notice period. If you have this clause then you can get your employee to use up any accrued holiday during their notice period, meaning you only have to pay the balance of holiday still outstanding when they leave you (if any accrued holiday remains). This approach can substantially reduce the cost of making someone redundant.
  • If your current contract doesn’t allow you to require this then you can still make them take some of their holiday providing that you give them notice double the length of the holiday that you are requiring them to take i.e. if you want them to take 1 week holiday you need to give them 2 weeks’ notice.

We recommend that you use this as an opportunity to put a good contract in place that doesn’t just deal with the legal requirements, but that protects your business well too.

You can download contracts (e.g. zero hours, permanent, fixed term, annualised hours etc) here for a small annual fee.

If I make someone redundant today but they still have 4 weeks’ notice to work, can I disconnect them from our server now so that the business isn’t exposed to them stealing any information?

This is a risky thing to do, unless your contract provides you with the right to put individuals on garden leave, which would allow you to require them to stay at home without work or any access to work systems for the duration of their notice period.

Can I make an extra payment, to ensure that the employee won’t bring a Tribunal Claim against my business?

  • You can certainly do this, in the case of redundancy we would recommend making an enhanced redundancy payment, which has to be done carefully to ensure that you are avoiding any risks of age discrimination.
  • Please give us a call (01425 479888) and we can support you to put a Settlement Agreement in place so that they sign to confirm they are receiving the extra pay and in return they agree not to make a claim against you.

Don’t sweat the small stuff – If you’ve sweated over drafting redundancy documents, then give yourself a break and log onto www.docswizard.co.uk where you can download a policy plus all the template redundancy letters you might need.

If its starting to feel complicated, pick up the phone (01425 479888), email help@jaluch.co.uk or go on line to chat with us (www.jaluch.co.uk) and we can give you some advice so you’re clear on what to do and how to do it – we operate a pay as you go system so no complicated contracts or signing your life away!

The information contained within this article is for general guidance only and represents our understanding of employment and associated law and employee relations issues as at the date of publication. Jaluch Limited, or any of its directors or employees, cannot be held responsible for any action or inaction taken in reliance upon the contents. Specific advice should be sought on all individual matters.

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