Redundancy: top 10 pitfalls for employers

There’s more to making someone redundant than handing them a letter and waving them off. Here are our top 10 redundancy pitfalls.

1. Defining the pool for redundancies incorrectly

The first danger here is that the employer can define the redundancy pool too narrowly. This was shown in Highland Fish Farmers v Thorburn, where the Employment Appeal Tribunal (EAT) ruled the former had acted unreasonably in treating two fish-farming sites separately for the purposes of redundancy selection.

Employers also need to guard against ‘bumping’ redundancies – where an employee whose job is not at risk is dismissed. This can lead to discrimination, as seen in Leung and another v Elements Oriental Buffet House, where two employees were successfully bumped out of their jobs ‘in favour of men from another workplace who were in their 30s’, as the employment tribunal notes.

They successfully claimed unfair discrimination and unfair dismissal.

2. Not offering suitable alternative employment

Employers are obliged to identify suitable alternative employment for the redundant employee, and to avoid expecting them to accept an alternative, but unsuitable, role.

In Sturdy v Leeds Teaching Hospitals NHS, an employment tribunal found the employer unlawfully discriminated against senior NHS manager Linda Sturdy during a reorganisation, by failing to appoint her to a new position for which she was well suited. The trust was also found guilty of victimising Sturdy when she persisted with complaints about her treatment and refused to take up a post at a significantly lower level. She ultimately won £33,500 for injury to feelings.

Another potential pitfall is failing to give preference to an employee on maternity, adoption, or additional paternity leave when there is suitable alternative employment available.

3. Absence of a genuine redundancy situation

Less principled employers may see an economic downturn as a great opportunity to get rid of underperforming staff. This is to be avoided at all costs – an employer failing to prove there is a genuine redundancy situation could end up facing a charge of unfair dismissal.

4. Failure to carry out a fair selection procedure

To prove a role is genuinely redundant, employers must carry out a fair selection procedure, using transparent, consistent and objective redundancy selection criteria. They should avoid choosing an individual for redundancy because of a characteristic such as pregnancy, age or length of service.

5. Failure to consult properly on collective redundancies

It’s not enough just to carry out consultation. It must be done correctly, and employers should take particular care to consult on collective redundancies in a timely manner.

6. Failure to inform and consult on an individual basis

The individual obligation to consultation arose out of the statutory right not to be unfairly dismissed. Under section 98(4) of the Employment Rights Act 1996, an employer must act reasonably when treating redundancy as a sufficient reason to dismiss an employee – consultation is almost always an integral part of the process of acting reasonably. An employer failing to inform and consult could face an unfair dismissal claim with compensation of up to £65,300.

7. Failing to consider alternatives to redundancy

Employers leaping onto the redundancy bandwagon leave themselves at real risk of being left ill-equipped for the upturn. By failing to consider alternatives to redundancy, they may end up losing skilled and valuable employees, maybe even finding themselves short-staffed.

8. Not training managers in how to carry out the redundancy exercise

While HR can slink off to its own department once a redundancy announcement has been made, it is up to line managers to cope with redundant staff in the run up to their departure.

Lacking the skills and experience to do so effectively and compassionately will make the situation worse for all concerned – including ‘surviving’ staff.

Communication is key – employers must make sure everyone involved, particularly those being made redundant – hears the news in a timely and appropriate fashion, through the right channels. This is especially important today when so many people use social media for instant communication.

9. Not accounting for the extra costs and resources involved

Redundancy does not begin and end with breaking the news. Employers should be very careful to allocate resources – both time and money – for the duration of the consultation period, and often beyond. It’s worth also considering the potential for challenges to the redundancy in employment tribunal.

10. Failing to account for the wider effects of the redundancy exercise

It’s inevitable the staff left behind – the survivors – will suffer from low morale, lower productivity and possibly even increased absence.

They may even suffer ‘survivor guilt’. Employers should never underestimate the impact redundancies can have on remaining staff.

Brand reputation is another intangible that is, nevertheless, as important as any of the more visible factors – as is employer reputation. Will suppliers want to continue to do business with a company they feel has mistreated staff? Will potential employees want to work there? A damaged brand is very difficult to repair.

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