If you are one of the latter, then it’s imperative you follow the required steps. For example, consultation about redundancies must take place for at least 90 days before dismissals where 100 or more employees are to be made redundant at a particular establishment, and at least 30 days where lesser numbers are involved.
Where unions are recognised for the particular grade(s) affected, that consultation must be with the union if not, it must be with elected representatives. They may be people appointed for other purposes, such as a standing works council or employee forum. If there are none, such elections must be held, which will take at least two weeks.
Failing to comply with these consultation provisions can be expensive since the Court of Appeal in a recent case – GMB v Susie Radin – decided that tribunals should generally award the maximum of 90 days per employee, and only award less if there are genuine mitigating circumstances.
There is a general exclusion of liability where it is not reasonably practicable to consult, but this is interpreted very narrowly. For example, impending receivership has not been held to exclude the liability to consult. Even where there are special circumstances, the employer must do its best in the circumstances.
Many employers in the financial sector rely on compromise agreements which contain repayment mechanisms for those who bring claims. But these agreements cannot waive collective consultation claims as such, so this practice is risky.
Many employers seek voluntary redundancies and only make compulsory redundancies as a last resort. This is the preference of trade unions as well, but there are pros and cons to such a scheme. The advantage is that the dismissals may be less fraught the disadvantage (which have made such schemes scarce in the private sector) is that the employer will lose staff they wish to keep, and keep staff they want to lose.
Another method is to use a matrix awarding points for certain attributes, such as conduct, attendance and length of service. The latter could fall foul of ageism regulations, but can often be justified because of the link between experience and expertise. It is also important to test any such points systems for indirect discrimination on grounds of race, disability and sex.
There is a high risk of unfair dismissal claims when redundancies are made. To ensure the employer acts reasonably, they should consult at both a collective and individual level, apply a proper selection criterion, and offer suitable alternative employment if it is available. There is, however, no duty to create a job specifically for the redundant employee.
Needless to say, an employee who is made redundant is entitled to a statutory redundancy payment, and it is common in the financial sector for enhanced redundancy payments to be made.
As an alternative to redundancies, the employer may wish to alter terms and conditions, although this requires employee agreement. If they do not accept, the employer may terminate existing terms and offer new ones. That gives staff the right to claim unfair dismissal. The employer will have a defence of “some other substantial reason”, but the employee will not be entitled to a redundancy payment.
- Employers must consult with employee representatives 90 days before dismissals if 100 or more staff are to be made redundant
- If unions are recognised as representatives for those affected, employers must consult with them
- Compromise agreements do not waive employees’ consultation rights
- Beware of basing redundancies on a points system as this may breach discrimination regulations
- Employers can alter terms and conditions, but these need employee agreement.