Pundits have been queuing up over recent months to offer views on how deep and far the recession will run. The real answer, of course, is that no-one really knows, but what is certain is that many employers are now, or will soon be, considering making redundancies.
A sign that businesses are already shedding staff at a faster rate than any time since the early 1990s came last month when the National Audit Office published the latest unemployment figures. They showed the number of people out of work in the UK soared in the three months to August by 164,000 compared to the previous quarter – a number that represents the biggest rise for 17 years.
And if a recent CIPD/KPMG Labour Market Outlook survey is to be believed, it is probable this bad news will continue for at least the next year. The survey of 721 UK employers revealed that 26% have contingency plans to make new or further redundancies in the next 12 months in addition to those already planned.
It is in this climate that a number of law firms and consultancies have been promoting new services aimed at supporting organisations preparing to make redundancies.
For example, in September, law firm HBJ Gateley Wareing launched an advice line to help clients handle redundancies. The service includes a telephone advice line supported by a Q&A document that, according to head of the firm’s employment team Jacqueline McCluskey, “sets out the structure of a redundancy process”.
She says: “We’ve launched this service now because we’ve been contacted by an increasing number of clients who may potentially be making staff redundant. With companies looking to balance their books, it’s inevitable they will be looking at reducing their wage bill, usually a company’s largest cost.”
McCluskey says HBJ’s service is geared at employers making 20 or fewer employees redundant because beyond this figure there are many additional legal requirements, such as collective bargaining. She says the Q&A document provides a starting point after which employers can decide how much legal support they require.
“Some will read through the document and after half an hour on the phone be happy to manage the process themselves. Others may want a longer conversation or to set up a meeting,” she adds.
According to McCluskey, a potential sticking point for employers may be their obligations under the Employment Act 2002 (dispute resolution), which came into force in 2004. Having enjoyed more than a decade of economic growth, many employers may not have had to make redundancies in that time, and so may be unsure what their legal duties are under the relatively new Act.
She says the Act brought about two main changes to the way the redundancy process is managed: one involving the start of the process, and the other, the end. First, when informing staff they are going to be made redundant, McCluskey says employers are now required to lay out in writing the background to the decision and to be more specific as to why this particular role has been chosen.
Second, staff chosen for redundancy now have a right to appeal, preferably to someone more senior than the person who made the initial dismissal.
At law firm Langleys, partner Nick Sheppard says there is “a lot of potential for employers to get the redundancy process wrong”. He says that’s one reason why the firm has launched a legal support service called HR Assure to help clients avoid unnecessary and potentially costly employment tribunal cases.
“A service such as this becomes more pertinent in a downturn. If people are made redundant and know they may struggle to find work for a while, they might be more prepared to bring a speculative claim for unfair dismissal or discrimination – especially if they suspect the process hasn’t been carried out correctly,” he says.
The HR Assure service offers employers three levels of support, starting with access to an extranet, where they can download contracts and procedure documents that have been prepared for their own situation. A second level of support gives them unlimited access to a telephone helpline for a pre-paid fee, which Sheppard says should help “take away any nervousness about the clock ticking”.
A third option is an offer for Langleys to broker insurance protection against any possible tribunal claims, providing clients “have taken advice and have a reasonable chance of success”.
Sheppard says a standard package for bespoke online documents and advice starts at a one-off payment of £1,850 for a business with fewer than 50 employees.
But Right Hand HR, an HR outsourcing specialist, says it charges from £399 plus VAT for a series of three packages that offer redundancy advice to customers. The basic one is for employers making five redundancies or fewer and includes phone-based advice, a process plan, a written guide to redundancies, and advice on how to calculate pay-offs. Other packages are far more complex.
Likewise, the size of the insurance premium is assessed by “the size of the business and its claims history”.
Businesses considering these options are obviously advised to pin down the charges upfront and check there are no hidden extras.
But Mike Emmott, employee relations adviser at the Charted Institute of Personnel and Development, believes these services are only likely to appeal to a small number of businesses.
“Most employers – both large and small – already need legal advice about a raft of employment issues, from contracts and holidays to discipline and grievance, and are likely to already have advisers, be they a large City law firm or the local accountant,” he says.
But smaller businesses without an HR department may find these schemes attractive. “If you have an internal HR function, you are unlikely to want insurance against tribunal claims because HR is your first line of defence in these circumstances,” Emmott adds.
And while it is important to ensure the legal process is watertight when it comes to redundancies, employers should also put as much emphasis on ensuring the right corporate communications are in place and that employees are treated with respect, says management consultant Peter Vreede.
A former HR officer, Vreede launched his service Redundancy Assist in September with the aim of “helping employers through the tough bits of the redundancy process.” These tough bits, he says, are not the legal procedures but the emotional aspects of letting people go.
“Lawyers can be unattached and emotionless when it comes to redundancy. They aren’t about talking to people but about process,” he says. “Without a human touch, the people who are made redundant feel upset, and those left behind feel uncertain.”
For Vreede, the key is employers taking time to consider their approach to redundancy, and for bosses to be prepared to sit down with employees and explain why they are being let go, so both parties “can recognise it [the redundancy] has been done professionally”.
But this is easier said than done.
“During redundancies, my objective has always been to get directors out onto the floor, explaining the reasons to people and giving them the same answer over and over again – if that is what it takes,” Vreede says.
“Not all directors like to talk about subjects that may be upsetting, but employees much prefer truth to rumour. People can work with the truth.”
Advice on redundancies and dismissals
At law firm HBJ Gateley Wareing, head of the employment team Jacqueline McCluskey advises employers to think carefully about how they select the pool of staff from which the redundancies will come.
She recently worked with an employer in the manufacturing sector that was planning to lay off 10 machinists and informed employees that the redundancies would come from the people working in a specific section.
“But during the appeal process, the employer was urged to look at the criteria he had chosen and widen the pool of people to include those with comparable skillsets working in another section,” said McCluskey.
As a result, the employer pulled back and extended his pool of candidates. When the redundancies were finally announced, some came from this new group.
“When it comes to employee pooling, broaden your outlook and if you are challenged, remember you do have the opportunity to go back to the drawing board and widen your criteria,” added McCluskey.
-Employers must be upfront about the documentation they plan to use at any disciplinary hearing or risk facing a claim for unfair dismissal, according to Nick Sheppard, a partner at law firm Langleys.
This advice follows a recent case Sheppard was involved in where there had been an allegation of gross misconduct against an employee.
He says the employer made two major mistakes. First, because of the size and nature of the business the person who carried out the investigation also carried out the appeal. Second, documentation was used at the appeal hearing that hadn’t been disclosed prior to the meeting.
As result of not following due process, the dismissal was deemed unfair and the employer was fined.