Voluntary redundancies – how to manage the process

Voluntary redundancy generally describes situations where an employer decides it needs to make redundancies and asks for volunteers. Usually, if there are insufficient numbers,the employer willdecide who to make redundant on a compulsory redundancy basis.

In limited circumstances it is possible for employment to be terminated by mutual agreement between employer and employee, which would mean that there is no a dismissal at all.However, in practice such cases are rare; the safer approach is to regard termination of a volunteer for redundancy as a dismissal rather than termination by mutual agreement.

This means that staff dismissed after volunteering for redundancy will be entitled to the greater of their statutory or contractual notice period or to payment in lieu. Those with two complete years’ service will also be entitled to a statutory redundancy paymentat least.

Also, those aged over 18 with one complete year of service will be eligible to claim unfair dismissal – the fact that an employee volunteered does not prevent a tribunal from hearing an unfair dismissal claim. But realistically,provided the employer has provided all the relevant informationto inform their decision on whether or not to volunteer, an employee who does so and later claims unfair dismissal is unlikely to succeed.

Information

Information that should be provided includes the reasons behind the redundancy situation; the affected pool; the selection method that will be used for compulsory redundancies; the number of redundancies anticipated; and how redundancy payments and other entitlements will be calculated.

There is no one set of procedures that must be followed for seeking volunteers, but it is a process that should be handled carefully. This is because of the eligibility to claim unfair dismissal, and also to ensure that nothing that happens in the voluntary redundancy process impacts on the fairness of any later compulsory redundancies.

Those at risk of redundancy should be given as much warning as possible. A good starting point in a voluntary process is to notify all of the staff in the pool from which compulsory redundancies are likely to be made that they are at risk, and to ask for volunteers from that pool.

There is no reason why the individual or collective consultation process required for compulsory redundancies cannot occur during the same period that volunteers are asked to come forward – in fact this is common practice. Potential volunteers should be given the same opportunity for consultation as all other ‘at risk’ staff.

Discrimination

It would not be sensible to offer voluntary redundancy only to those within the pool who are likely to be selected for compulsory redundancy if there are insufficient volunteers. Doing so would give those who do not take up the offer and are then selected an easy argument on unfair dismissal. They could say their selection was predetermined, and that the selection and consultation exercise prior to their compulsory redundancy was not a genuine one.

Subject to any indirect discrimination arguments (see above) there is no legal principle preventing an employer from offering accepted redundancy volunteers an enhanced redundancy payment, but those who are selected for compulsory redundancy their statutory and contractual entitlements only. Offering enhanced payments as a sweetener may well remove or reduce the need for compulsory redundancies.

Any enhanced redundancy payments must be calculated in the same way as statutory redundancy payments to avoid age discrimination claims. It may be sensible to ask outgoing staff to sign compromise agreements in exchange for enhanced redundancy payments – the additional cost of compromise agreements is often more than balanced out by the benefit of the clean break that they provide.

Indirect discrimination is a potential pitfall if, through a process of seeking volunteers and then making compulsory redundancies, a disproportionate number of employees in a protected group are disadvantaged. Discrimination is unlawful on the grounds of sex, race, disability, sexual orientation, religious belief, and age. The best way to tackle this is to review the process for both voluntary and enhanced redundancies before you start and, while it is ongoing, to try to identify whether there is a disparate impact on a protected group, and ways to alleviate or justify it.

Communications

Communications about voluntary redundancies should clarify that volunteering means that an employee will be considered, but does not have an automatic or contractual right to redundancy. There is no need to offer the right to appeal against a refusal of voluntary redundancy.

Finally, if an employee volunteers and then changes their mind before notice is given, this should be acted on by not making the employee redundant on the basis of their previously having volunteered – but they could still be selected in any subsequent compulsory redundancy selection exercise.

David Brown is an associate at Simpson Millar

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