Legal

How to avoid expensive mistakes in the redundancy process

23 Nov 2021 By Chris Cuckney

The current economic uncertainty suggests businesses are not out of the woods just yet and may find themselves needing to reduce their workforce, says Chris Cuckney

For many organisations the need to make employees redundant was mercifully put on hold by the Coronavirus Job Retention Scheme (CJRS). However, with furlough no longer an option since the scheme closed at the end of September, an increasingly uncertain economic outlook, and the looming prospect of repaying Covid loans, many businesses are understandably reviewing their staffing requirements going forward. 

It is worth reminding ourselves of some of the common pitfalls, as redundancy is a delicate process that can prove costly if done incorrectly. Generally, we are all aware that redundancy is a fair reason for dismissal, and occurs where businesses or workplaces close, or more commonly where the requirement for an employee to carry out work of a particular kind has ceased or diminished. 

However, where most employers trip themselves up is in the redundancy process. In the absence of any contractual procedures, there is no mandatory redundancy process set out in law and it is that flexibility that can get some employers unstuck. Typical problems lie in identifying an appropriate selection pool, and carrying out a fair and meaningful consultation with at-risk employees. 

Identifying selection pools

When selecting who to make redundant, employers need to ensure they are making their choice from an appropriate selection pool. Generally, employers have flexibility to determine the limits of the selection pool, but this flexibility must be used reasonably. Employers must be prepared to explain their reasoning. 

While tempting to choose as small a selection pool as possible to minimise disruption to the workforce, this is not always advisable as it can carry some risks if the selection pool is unreasonably narrow. For example, a redundancy selection pool made up of only furloughed employees, ignoring non-furloughed employees doing a similar type of work, risks making the process unfair. 

Consultation

Once a business has decided to proceed with redundancies, it can be tempting to rush straight to the finish line to put people out of their misery. This is rarely a good idea as failing to carry out a meaningful consultation with the affected employees will risk making the entire process unfair. 

To be meaningful, going into the consultation employers must have an open mind that is capable of being changed. The consultation must therefore take place before any final decisions have been made.

Employers must remember to always consult with each individual employee in the selection pool, and to also consult collectively with appropriate representatives where an employer is considering making 20 or more redundancies from one workplace within a 90-day period.  

Once the pool has been identified and employees consulted, employers must carry out an objective selection process to decide who will be made redundant. Selection criteria should not be based on protected characteristics, or the fact an individual is a part-time or fixed-term employee. At-risk employees should be notified of the criteria in advance and given an opportunity to comment. 

Finally, up until the last day of employment, businesses must consider what alternatives there are to redundancy. Affected employees should be kept informed of whether such alternatives exist, including whether there are any suitable alternative positions they might wish to apply for. 

While the end of furlough hasn’t been the doomsday scenario many were predicting, the current economic uncertainty suggests businesses are still in line for a fairly torrid time in the next few months. Before starting a redundancy process, taking time to plan and familiarise yourself with the legal and practical obligations will pay dividends in the long run. 

Chris Cuckney is an employment solicitor at Devonshires

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