Policy clinic: redundancies and underperformers

Many observers believe the British economy is in the midst of the most severe downturn since the recession of the early 1990s. However, the old saying “make the best of a bad situation” still rings true.

Consequently, now is a good time for HR professionals to consider whether it is possible to legally part company with underperforming or incompetent employees, citing as the reason for redundancy the economic downturn.

What legislation to turn to

It is relatively simple to use an economic downturn to clear out underperforming employees, with far less risk of having to face a successful tribunal claim. The route for doing this is through the Statutory Redundancy Procedure, under Section 139 of the Employment Rights Act 1996. This section prescribes that redundancy can occur in three situations:

  • The actual or anticipated closure of the whole business
  • The actual or anticipated closure of the business at a particular workplace
  • The actual or anticipated reduction in the need for employees to carry out work of a particular type.

During an economic downturn it is not inconceivable that there is going to be an actual or anticipated fall in work for employees, or a revised need for employees to carry out a particular task. In that case, a redundancy situation will have arisen.

So, how would an employer manage this redundancy situation to clear out underperforming employees?

The process and criteria

There will most likely be a pool of candidates who face being made redundant. This pool will contain both good and poor performers. As in all redundancy cases, these candidates will be judged against measurable and fairly applied criteria, which objectively target the entire pool.

Here lies the solution to weeding out underperforming employees. As an employer you decide which selection criteria to use. But they must be applied fairly and the criteria must be measur­able. Such selection criteria may include absence and sickness records, skills, productivity skills and targets met and disciplinary records.

Considering that your aim is to target underperforming employees, make sure the performance-related criteria are weighted by a percentage factor. The final result will be that the failings and shortcomings of underperformers will be given additional priority – thereby making their selection for redundancy more likely from the initial pool of candidates. This would be acceptable to a tribunal.

In managing this process, it is important to restate that the selection criteria must be measurable and fairly applied if you want to avoid interference from an employment tribunal.

Things to avoid

A word of caution is needed when scoring on criteria such as absences. Employers must not count absences that might be connected to a disability either suffered or claimed by the employee. Nor should they be connected with a reason such as pregnancy. If you were to include such absences you could face a discrimination allegation as well as a claim that the employee was unfairly dismissed.

It is clear that just by using existing legislation, employers have the opportunity to refine their workforce and ensure only those adding value to their business operation remain employed.

The economic slowdown does in effect provide the perfect alibi to let go of anybody whose performance is not up to scratch.

Fair handling required

To make sure no successful unfair dismissal claims arise from a redundancy, the employer must handle the process correctly and follow fair procedures. The employer must show that the employee(s) concerned have been given as much advance warning as practicable, that they have been consulted individually and the selection for redundancy has been made against a set of fair and objective criteria – as set out above.

What if the underperformer you want to target is working in a role not affected by the redundancies? In this situation it might still be possible to have recourse to ‘bumping’. Suppose you wanted to target a supervisor who was underperforming but the redundancy situation applied to a different category of employee, say a foreman. You could move one of the existing foremen to the supervisor’s position and make the underperforming supervisor redundant instead.

A word of caution here: bumping is not always safe as it looks obviously manipulated. However, tribunals do recognise that it is a practice used in the workplace and will regard it as a redundancy or at least as a dismissal for some other substantial reason, so long as redundancy consultation procedures have been followed.

In-house policy issues

There are a number of issues HR professionals should be aware of. First, some larger companies have redundancy selection policies and criteria in their employee documentation. If these are correctly drafted, they should already be tailored to select weak employees. If not, and you wish to apply slightly different criteria, you should be able to do so because employee handbooks are usually stated not to be contractually binding. However, you will get off on a bad footing with the tribunal because the process will look ‘stage managed’. You could also create difficulties with the unions if your workforce is unionised.

If your company does have a stated policy for dealing with redundancies, this highlights the importance of ensuring that the criteria are drafted properly and weighted to select underperformers. Good times or bad, it always makes sense to target underperformers.

Redundancies are becoming increasingly common and every indication points to a likely increase over the coming months. Employment tribunals are getting used to the idea that in the economic climate there are likely to be a number of genuine redundancy situations, and that employers are likely to want to target underperforming employees through this process.

As long as there is a statutory redundancy situation and measurable criteria are used and consistently applied, employers will have a strong hand. It is therefore going to be a lot more difficult for employees to claim they were made redundant unfairly.

Consequently there is at least some good news for HR managers in this economic downturn.

David Malamatenios is an associate in the employment department of Colman Coyle

  • Sorting the chaff from the wheat
  • Redundancies

Policy Guidelines

Your policy should address the following considerations:

  • Setting out transparent and fair criteria for measuring staff performance
  • Appropriateness of criteria
  • Measuring all relevant staff against set criteria
  • Whether to use sickness and absence records
  • How to generate percentage scores against set criteria
  • How to stay on the right side of disability and sex discrimination legislation
  • How to abide by statutory redundancy procedures
  • When and how to use bumping.

Key points

  • Section 139 of the Employment Rights Act 1996 can be used in redundancy issues of this type
  • All criteria must be measurable, fairly applied and objective
  • If the above point is satisfied, so is the tribunal
  • If considering bumping, remember to satisfy redundancy consultation procedures
  • Check your organisation-wide redundancy policy – this could end up being your biggest headache.

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