As England enters a second lockdown and the Coronavirus Job Retention Scheme is extended the prospect of a return to normal business seems distant for many companies and, regrettably, employers are having to contemplate redundancies if they are to keep their business afloat.

‘Getting the redundancy procedure right is crucial, as mistakes can open the door for an employee to bring a claim before an employment tribunal’ explains Paula Stuart, Employment Partner in the employment team: ‘There has already been an increase in claims, particularly in regard to unfair dismissal relating to redundancy.’

Here are some common misunderstandings and mistakes for employers to avoid:
The obligation to inform and consult with recognised trade unions or employee representatives kicks in when you are proposing to dismiss as redundant 20 or more employees at one establishment.

Pitfall 1 – Failing to count voluntary redundancies towards the trigger for collective consultation

If any employees have volunteered for redundancy, they must still be counted.

If you omit them from the calculation and do not collectively consult when you should, you could face claims for up to 90 days’ actual pay for each affected employee.
An essential element of a fair redundancy is individual consultation, so do not forget about employees who are not in the workplace due to furlough leave, sickness absence, maternity/family-friendly leave or homeworking.

Pitfall 2 – Failing to consult with employees out of the workplace

You must still consult with them, even if you have concerns that they may find it too stressful. We can help you find the most appropriate way to do this, and can advise you on how to handle the discussions.

You may need to schedule more time in your redundancy process and may need to adjust your scoring, for instance relating to recent performance, to ensure that absent employees are not at a disadvantage.

You may also need to make adjustments to your process for disabled employees.
The approach of ‘last in, first out’ was once seen as a fair and uncontroversial selection criterion but it now carries the risk of age discrimination claims as younger employees are more likely to be the last ones in.

Pitfall 3 – Believing that ‘last in, first out’ is a fair selection approach

Another reason to avoid this approach, is that it is a blunt tool and may result in losing your best performers.
Making an employee apply for their own job is a risky way to select employees for redundancy when you are just reducing the number of existing posts and the remaining jobs remain largely the same.

Pitfall 4 – Holding interviews instead of selection assessments

An employment tribunal is likely to find this selection process to be unfair. Instead, you should use selection criteria and an assessment process.

However, it may be safe to use an interview process where the available jobs are new or have been significantly redesigned.
One area for individual consultation is the employee’s assessment scores. To ensure that this consultation is meaningful, the employee needs to know:
Data protection rules only prevent you from disclosing these if individuals could be identified from the anonymised scores.
Having selected employees for redundancy, you must offer them any suitable alternative roles in your business.

Pitfall 5 – Concealing assessment scores

• their own scores;
• the break point (the score above which their job would be safe);
• within which quartile they scored; and
• the anonymised scores of the other employees in the pool.

Pitfall 6 – Treating employees on family-friendly leave equally

Make sure that you give priority to any employee you are making redundant while on maternity, adoption or shared parental leave. They have the right to be offered first any suitable alternative roles, so long as the terms of the job are ‘not substantially less favourable’ than their current job. If the job meets these conditions and you do not offer it, the redundancy dismissal will be unfair.

You must actually offer them the job; they do not have to apply, even if other redundant employees would make better candidates. The job must then be held open for the employee until they return to work.
For many employees, statutory redundancy pay is calculated using average pay figures from the last 12 weeks.

Pitfall 7 – Using furlough pay to calculate notice and redundancy pay

Under new rules introduced on 31 July 2020, employers cannot base statutory notice and redundancy pay on reduced pay received during furlough leave. Instead, employers must calculate these payments using the full pay an employee would have received if they had not been furloughed. A week’s pay for these payments is currently capped at £538.
Speak to us as soon as you are considering making any employees redundant to ensure that you follow the correct procedure from the outset. We can advise you on tricky issues such as what is ‘an establishment’ for purposes of collective consultation and when is a job a ‘suitable’ alternative? With our advice, you can avoid jeopardizing your business with a costly and disruptive employment tribunal claim.

How we can help

For further information, please contact Paula Stuart on 07887 998799 or email pstuart@geoffreyleaver.com or Stuart Snelson on 07715 110425 or email ssnelson@geoffreyleaver.com