You can seek employees’ agreements to pay reductions on a temporary or permanent basis to avoid or reduce redundancies. If you have a contractual clause to place staff on short time working that may also provide you with a way to reduce your payroll costs on an interim basis. In the absence of agreement or contractual right, employers who impose pay reductions could be liable for claims by employees including breach of contract and/or unlawful deductions from wages.
Each case will depend on the circumstances but the test for redundancy is set out under section 139 of the Employment Rights Act which defines a redundancy situation, typically as meaning a reduction in the needs of the business for work of a particular kind. This test should be applied at the point at which the decision to make an employee is redundant is confirmed. If circumstances change and an employer wishes to re-hire we recommend seeking legal advice as there may be implications of doing so, particularly if an alternative role is offered before their current employment ends.
Every employer is different and may have different options available to reduce or avoid redundancies, and which may also depend on the reasons for the redundancy situation. If there is a need to save costs employers may consider a range of options including inviting volunteers for redundancies, putting bonuses on hold, pay freezes, cutting other costs and expenditure. However, a failure to apply an alternative costs saving measure to avoid redundancy will not necessarily render a dismissal for redundancy unfair.
The stages of a redundancy process will depend on the type of business, reasons for redundancy, and numbers involved. If 20+ redundancies special collective consultation rules apply and the decision to make redundancies must be notified to the Department for Business, Energy and Industrial Strategy. There would then follow, a process of organise the election of employee representatives would be consulted for minimums of 30 to 45 days depending on the numbers of staff involved, along with some individual consultation before redundancies are declared. For less than 20 staff affected, there are no set timescales but a requirement for meaningful consultation. Typically this can include inviting volunteers and consulting on ways to avoid redundancies, and proposed selection criteria, application of those criteria, and then, for those selected, consideration of any potentially suitable alternative roles available.
This will vary from one employer to another. Care should be take in applying subjective criteria to ensure that any opinions can be substantiated. Objective criteria might include attendance, time keeping, work output. Take care to avoid discriminatory criteria or applying criteria that would be discriminatory. There may be a need to make reasonable adjustments for employees with a disability.
Yes, subject to due consultation and their role being redundant.
A settlement agreement can provide a good way for the parties to draw a line under the employment relationship whether by redundancy or otherwise, but are not mandatory and employers should use these where appropriate with advice from their solicitors. The Employees will be signing away their rights and the agreement can capture other terms for instance on confidentiality and post termination obligations – non bad mouthing, non solicitation etc. However to be binding the employee(s) will need to consult solicitors and may not be appropriate if the redundancy is straightforward and unlikely to be challenged and/or in circumstances where employees are only offering basic redundancy pay with no incentive for the employee(s) to sign away their rights.
There are specific rules and procedures to follow where employees are contemplating 20+ redundancies within a 90 day period at one establishment with significant fines of 90 days uncapped pay per employee for failure to inform and consult if the correct procedures and timings are not followed (including election of employee representatives and minimum consultation periods prior to redundancies being declared (30 days for 20-99 and 45 days for 100 or more staff). We recommend seeking advice as soon as possible if you are contemplating collective redundancies.
There is an expectation of meaningful consultation for individual redundancies, and requirement to consult with employee representatives collective redundancies are contemplated which should, again, be meaningful and with a view to seeking agreement if possible. This would normally entail face to face meetings. If that is not possible we recommend employers and employees (and their representatives where applicable) seek to agree ways to undertake consultation in a meaningful and safe way.
Whilst it may not be a mandatory requirement to offer employees who are made redundant a right of appeal, it is good practice to do so and will assist employers to address any procedural or other issues to ensure due consideration of all relevant factors and, may assist employers to defend any subsequent Tribunal claim.