Reorganisations and Redundancies: A Five Point Guide to Getting It RightPosted in : HR Updates on 19 September 2017
This article will give you some key guidance to help you mitigate against the risk of things going wrong during your reorganisation and redundancy process.
Redundancy: not part of the plan
Redundancy, in simple terms, is a lawful dismissal that occurs when an employer needs to reduce the size of its workforce. According to the Employment Rights (NI) Order 1996, an employee may lawfully be made redundant where the following are satisfied:
- the employer has ceased, or intends to cease, continuing the business for the purposes of which the employee was employed; and
- the requirement for employees to perform work of a specific type, or to conduct work at the location in which they are employed, has ceased or diminished.
It is important to remember that it is the job being made redundant and not the individual. The individual should only be affected due to the fact that the job no longer exists and therefore poor performance, absence or conduct are not a valid reason for making a role redundant.
Redundancy should be seen as a last resort and all other alternative avenues should be exhausted before making a role redundant. Employers should take reasonable steps to avoid redundancies as part of their long-term planning, such as natural wastage, recruitment freezes, “alternative to redundancy” schemes, offering existing employees sabbaticals and secondments, retraining or redeployment.
Nonetheless, despite the best-laid plans, redundancy is sometimes an unavoidable necessity. Certain business and economic events may make workforce reductions necessary and individual redundancies may also be required when a job is simply no longer needed.
The potential for roles to be made redundant can have an adverse impact on the mood, morale, productivity and motivation of your employees. It is extremely important that you develop a comprehensive plan prior to any redundancy announcements in order to mitigate the adverse effects redundancy may have on the employer, those made redundant and the remaining workforce. Here are some key considerations
1. Identify ‘pools of selection’
Employers should identify so-called “selection pools”. These are the groups from which employees will be selected for redundancy. Any redundancies made without the careful and correct consideration of selection pools may be deemed legally unfair. Selection pools generally consist of:
- those who undertake a similar type of work;
- those who work in a particular department;
- those who work at a relevant location;
- or those whose work has ceased or been reduced (or is expected to do so).
Grouping employees into such selection pools is not always plain sailing. Where a role or a function disappears, identifying a selection pool is normally straightforward; everyone is redundant as all similar roles are no longer required. However, what if similar roles exist in different departments or in different teams? All such considerations must be taken into account.
2. Can you offer voluntary redundancy?
Offering voluntary redundancy and seeking willing volunteers can avoid the need for compulsory redundancies. Whether this is a feasible or appropriate option will depend on the circumstances of the given employer.
NB: Organisations have the right to decline a request for voluntary redundancy on the basis of business need or cost.
3. Meet your obligations for consultation
You should consult all employees individually regardless of the number you plan to make redundant, including those who may not be currently at work. The consultation must take place within a sufficient timescale to be meaningful in the individual circumstances. If you fail to do so, any subsequent dismissals may be unfair.
Collective redundancy is when an employer plans to make 20 or more employees redundant at one establishment within a 90 day period. There are a number of collective redundancy legal requirements:
- Employers must complete Form HR1 which can be found on the Department of the Economy (DfE) Website. DfE must receive the notification on form within set time periods depending on the number of staff being made redundant. Late notification, or failure to notify, is an offence and you may be liable to a fine up to £5,000.
- Failure to carry out collective redundancy consultation can result in affected employees claiming a protective award from an industrial tribunal.
- Consult with workplace representatives. These may be either trade union representatives and/or elected employee representatives for those employees not represented by a union. If your employees choose not to elect employee representatives, you must give the relevant information directly to each individual.
4. Carrying out fair and non-discriminatory selection
After the consultation period is complete, you will need to select individuals for redundancy from within the selection pool. These choices must be based on objective criteria such as work experience, performance records, disciplinary records, skills, competencies and qualifications, ‘Last in, first out’ (LIFO) and attendance records.
‘Last in, first out’ (LIFO) has been described as an unsatisfactory method of retaining the most competent employees. It's also a risky selection method as those with less service are likely to be younger employees so this approach could result in potential age discrimination claims. LIFO may be relevant as part of a wider range of selection criteria, but it must not be used as the sole method and the employer must be able to justify its use.
The Employment Tribunals favoured method of selection appears to be those based on a point system, which scores each employee against the relevant criteria. That being said, focusing on some of the criteria, namely the attendance record and length of service criteria, may be discriminatory. Employers must tread carefully when dealing with employees who are pregnant, part-time or returning to work.
Remember that Northern Irish employment law requires employers to follow the statutory dismissals procedure during any redundancy process where a selection for redundancy has been made.
5. Looking at alternatives
An employee is not entitled to a statutory redundancy payment if he/she unreasonably refuses suitable alternative work. Employees are entitled to a four-week trial period within the new role, if however, the employer and employee agree that the role is not a suitable alternative, the employee reverts to being redundant.
The law requires employees who have at least two years’ service to be given paid time off to look for work during the final notice period.
Redundancy can be a very traumatic time for individuals. As an employer you have the responsibility to implement redundancies fairly and respectfully. Carrying out a well-planned and carefully considered process will reduce the risk of successful unfair dismissals claims. You must be mindful of scenarios that increase the risk of discrimination claims and ensure your process does not indirectly discriminate against any protected group.
One thing is certain: taking the time to do things correctly will protect your reputation as an employer and provide you with a stronger case should you be challenged on the dismissal.
Even the most planned out process will encounter obstacles and issues as it moves through, it is how these issues are dealt with that will impact any potential liability over time.
Note: Gareth Walls from A&L Goodbody provided a 13-Step Redundancy Checklist
More on Redundancy & Reorganisation
- If a seconded employee can't return to their role due to a downturn, are others at risk of redundancy?
- Does probationary period law and practice apply to staff redeployed for ill-health or organisational change?
- In a redundancy situation, are workers with less than one year’s service counted for the purposes of triggering statutory collective consultation obligations?
- If an employee on maternity leave is made redundant, does her former employer have a continuing obligation to pay her statutory maternity pay?
- If redundancies are likely in Factory A, can the employer transfer employees to Factory B?
The information in this article is provided as part of Legal-Island's Employment Law Hub. We regret we are not able to respond to requests for specific legal or HR queries and recommend that professional advice is obtained before relying on information supplied anywhere within this article.