• By Sam Cook
  • In
  • Posted Tuesday March 10, 2015

Considering Redundancy? Make sure you understand the risks involved

Redundancy can often be seen as a quick and easy way to exit people from a business or reduce costs. However, redundancy is one of the most complex areas of employment law and can result in costly unfair dismissal or discrimination claims if it isn’t done properly.

The following are a few tips to consider before you go down the redundancy route – although they by no means cover the full redundancy process.

Establishing a reason for redundancy

Redundancy is often used as an ‘easier’ and less emotional way of removing troublesome staff. However, it can expose organisations to claims of unfair dismissal due to the incorrect process being used.

In order to qualify for a redundancy situation, it would normally be a result of cessation of business, cessation of business at the employee’s site or a reduction or cessation of work.

Examples may include:

  • A business need for a reduction in staff to save costs
  • The organisation or part of the organisation has stopped operating or gone bust (insolvent)
  • The organisation is failing
  • The owner of the organisation dies
  • The employer’s business, or the work that is done, moves to another location
  • Specific skills are no longer required
  • Systems or technology introduction means certain jobs are no longer required
  • A restructure or reorganisation means that certain jobs are no longer required/can be merged
  • The organisation is taken over

An example from the Tribunals from last year (TNS UK Ltd v Swainston) shows the risk of removing a role in order to save money. Whereby a drive to reduce costs does not coincide with the three redundancy reasons mentioned, a tribunal may find that the dismissal is unfair.

Other examples include unfair dismissal where a less senior role is created to replace a role to save costs but there is no ‘reduction in work’, and where a redundancy situation is manufactured to manage out poor performance or conduct.

Selection Pool

Discrimination and unfair dismissal claims can result from being too narrow with the selection pool. Where different sites or departments do a reasonably similar role, placing just the site where work has diminished at risk can result in claims. On the other hand, the use of ‘bumping’ where an employee is made redundant whose job is not at risk - as a result of other employees being given their roles - can equally result in unfair dismissal claims and even discrimination claims if the employees protected are of a particular age group or gender (Leung and another V Elements Oriental Buffet House).

Selection Criteria

The selection criteria can be a tricky decision as you do not want your top performers to leave and you want to be left with staff who have the necessary skills to continue operating going forward. However, the criteria has to be fair and objective.

Standard selection criteria may include:

  • Performance levels
  • Attendance levels
  • Qualifications
  • Disciplinary records
  • Skills and experience

To reduce legal risk and the risk of not being left with the best employees, a mix of selection criteria would be recommended.

Some criteria come with risks:

Age discrimination  

Length of service, especially when used in isolation can often be viewed by Employment Tribunals as Age Discrimination. It is viewed that younger employees are unable to compete with older employees as they have not been of working age as long in order to have an equal chance. ACAS advise against this as a method of selection and although not explicitly prohibited by law, cases such as Cathchpole and others V DB Schenker Rail (UK) Ltd where length of service was included as part of the selection criteria have resulted in successful age discrimination and unfair dismissal claims. Consider whether length of service is really an indicator of experience and expertise? Is there another way?

Disability discrimination

Under the Equality Act 2010, employers have a responsibility to make reasonable adjustments and not to discriminate against individuals with disabilities. Where a selection criteria puts a certain group at disadvantage such as including attendance records where the reason for absence is disability related or where certain skills are required such as ‘communication skills’ and the employee has a social anxiety disorder, disability discrimination claims can arise.

Identifying suitable alternatives

It is a requirement for employers to identify and offer suitable alternative (where available) employment for the employees who are made redundant. Due to maternity regulations, employees on maternity and paternity leave, adoption and Shared Parental Leave should be given preference over other employees – even where other employees are seen as better performers.

One case involves a successful claim where a redundant employee identified a suitable alternative position (a new role which she had the relevant skills and experience for) and the Organisation failed to offer her this (Sturdy v Leeds Teaching Hospitals NHS).

For specific queries regarding employment issues contact advice@firstpracticemanagement.co.uk where you question will be treated in confidence and will normally be answered (by email) within 2 working days of submission.

Alternatively, members can visit the FPM policies and procedures library for more information on redundancy.

 

 

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