REDUNDANCY

The material in this handout is not a full statement of the law. it is intended for guidance only, and is not a substitute for professional advice. no responsibility for loss occasioned as a result of any person acting or refraining from acting can be accepted by OCVA or Gill Taylor. up to date as at 11/11/10

1MY KEY ISSUES ON REDUNDANCY?

2TYPICAL REDUNDANCY PROCESS



3SECRETS OF SUCCESS

  • Manage expectations
  • Use the `R’ word
  • Train key senior staff and MAKE them ask you the correct answer
  • Write every piece of advice down carefully
  • Talk with staff in as many ways as possible til you are blue in face
  • Have key messages delivered from one source
  • Update FAQs daily
  • If a letter from an individual contains across the Board info then put on FAQs
  • Have a lawyer on tap and follow any `insurance’ advice to the letter – ask them awkward questions though if necessary.

4RISK MANAGEMENT

Avoidance of Redundancy
Short time working/reduction in salary / Only if staff agree – cant be imposed on them unilaterally. Can cut salaries for new posts in restructured orgn
= Potential Breach of contract
Consultation period / Have key messages and FAQs
Write everything down
Have formal meetings and open door policy
Expect cross employees. Train managers to not be coy about saying `redundancy’ Have scripts ready for them
Genuine consultation / Everything has to be a proposal until end of consultation
Collective consultation / MUST be done if 20 posts + and that includes postsmade redundant not people lost see later
Individual consultation / Must be done with all individuals losing posts including those on long term sick and materntiy
Issuing notice / Not supposed to be done until consultation is ended and especially not during collective consultation. I might sometimes do something different or PILON
Deliberately targeting poor performers / Very Dangerous
Selection pool / Must include same posts in different locations. Carefully define. One third arguments about this.
Could put most of organisation in selection pool
Slotted in posts / Be very clear why! No `percentage’ variation. No rule of thumb. Second third of arguments about this.
Selection criteria / Ensure Fair and non discriminatory Last third.
Do managers have the evidence? Can be a big issue
Suitable alternative employment / What is it and why? Be very clear
If in doubt about who can apply offer competitive interviews
Leaving during notice periods / Got another job? Don’t pay them redundancy. Evidence? Might ignore – have to be consistent.
Refusing an offer of suitable alternative employment / Hmm. Should not get a redundancy payment. In practice usually fudged if any money available. Depends a bit how many people involved. Got to be consistent.

5KEY LEARNING POINTS ON REDUNDANCY

1Is this a real redundancy?

The legal definition of a redundancy is that work has ceased or diminished; the organisation is closing down or part of an organisation closes down.

Most of the situations where funding ceases for a project will come under the first part of the definition, ie work has ceased or diminished.

A post is not redundant if an employer immediately advertises for a replacement

It is very important to ensure that all redundancies are fair and not just used as a way of getting rid of poor performers.

2What about the ending of a fixed term contract?

The ending of a fixed term contract of one year or more has to be a fair dismissal; so the employer has to provide written reasons for dismissal. If there is suitable alternative work the person should be offered the chance to be slotted into it. If there are more than one ftc ending at the same time and fewer new posts available competitive interviews might have to be held. Employees on ftcs of over 2 years are also entitled to statutory redundancy rights.

3Avoiding Compulsory Redundancies

There are a number of things that can be done to avoid having to make redundancies, or at least minimise the number of redundancies that have to be made, and these should be discussed with the Trustees as soon as redundancies are on the cards and then agreed options consulted with employees during the consultation period:

Freeze vacant posts. If a project has a number of posts that are vacant then it may be possible not to fill these posts in order to avoid making staff redundant.

Reduce numbers of temporary staff.

Reducing hours of work Instead of losing staff the workers could all agree to work less hours instead. This is only a solution where all the workforce are consulted, as it would involve a change in the contract of employment of each employee.

Asking for salary reductions. Variation of contract see above

Voluntary redundancy: Make time limited offer and retain right to refuse

4What does the contract or policy say about redundancy?

Employers must follow their own contracts and or policies if they are better than the statutory minimum. Even if there is nothing in writing, is there custom and practice from recent times in handling redundancies that might need to be taken into account?

5Are the Trustees up to speed?

As the Trustees are the employers they have to be informed and involved in making the decisions about posts and process. Make sure minuted.

6Does Project have legal insurance? DAS/Peninsula?

If project has – then must follow their advice to retain protection at tribunal. (Can argue back though)

7Is there are Trade union agreement covering redundancy or are more than 19 to be made redundant at one establishment at one time?

Employers have a statutory duty to follow a particular redundancy process.

1-19 staff

  • Fair selection
  • Individual consultation
  • Consider alternatives to dismissal
  • Notice of dismissal
  • Right of appeal

20 + staff at any one establishment

  • All the above AND
  • Collective consultation with any recognised union or employees reps

Establishment definition is very Broad

Includes Employees proposing to redeploy

Voluntary redundancy

Expiry of FTCs

Overseas employees

NOT workers who are not employees

NOT those on contracts of less than 3 months

8Ensure selection criteria are fair

In order not to unfairly select employees for redundancy, the employer must adopt objective criteria, precisely defined and capable of being applied in an independent way in determining which employees are to be selected for redundancy. Once the criteria have been adopted they must be consistently applied

What are the common selection criteria for redundancy and how should they be applied?

The key aspects of selection criteria for redundancy is that they must be objective and applied consistently.

Pool for selection

The first stage for an employer in carrying out a redundancy exercise is to identify the 'pool' of employees from which the candidates for redundancy will be selected. If the wrong pool is identified it could make any resulting dismissal(s) unfair.

Selection criteria

There may be a collective agreement with a recognised trade union which identifies the selection criteria to be used. All criteria should be completely objective and the overall test is one of reasonableness. Common criteria used in selection for redundancy include:

  • length of service (Cant be used on its own)
  • skills or experience
  • formal appropriate qualifications, advanced skills and other aptitudes
  • attendance records (but excluding any absences which were due to pregnancy or disability, to avoid discrimination claims)
  • disciplinary records (current offences)
  • performance (there should be objective evidence to support selection on this basis, for example by reference to the org’s existing appraisal system).

Once the selection criteria have been identified, you need a relevant scoring mechanism. And need to be able to explain scores to affected staff.

If attendance or disciplinary records are to be used as a basis for redundancy selection, they must be accurate. Before selecting on the basis of attendance it is important to know the reasons for and extent of any absences. Absences relating directly to an employee's disability should be discounted when using attendance as a selection criteria.

The period of continuous employment is normally the one used to calculate length of service. This should be whether full-time or part-time, as to only take account of full-time service might be indirect sex discrimination. Even though the criteria may be objective the selection will still be unfair if they are carelessly or wrongly applied.

9Write to the employee Individual consultation

This is an example of the sort of letter that could be used and would inevitably have to be altered to fit the circumstances of each situation. It is representative of the type of letter that would be issued at the beginning of the consultation period, before a final decision on redundancy has been made.

Letter 1 nvite to the first Individual consultation meeting 3-5 days notice

Risk of Redundancy and Individual Consultation

Dear Date

The outcome of a review of the organization and our overall financial position at the end of the last quarter has led to the senior management team and the Board of Trustees to propose a new structure for the organisation. The reasons behind this and the proposed organisation structure map is attached. Unfortunately it looks like Project will have to make up to 16 posts redundant and only have 6 potential redeployment posts.

I’m really sorry to say that your post as Y has been identified as at risk of redundancy.

I would like to invite you to attend a meeting on [date] at [time] in [venue] to discuss the proposed redundancy. The meeting will be conducted by me as (post), and Z will be in attendance to take notes. This is a formal individual consultation meeting and you have the right to be accompanied by a trade union representative or a work colleague at this meeting.

At this Individual consultation meeting on the [Date] I will go through the reasons for the proposals, the options, listen to any altenative proposals you may have and discuss any further questions you have. I will also discuss your redundancy rights and other possible options for re-deployment should the post be made redundant.

The posts that have initially been identified as posible suitable alternative employment for your post are ( ).

The consultation period will be for 30 days, and I will be talking to you again on the [date] to hear your response. You do not of course have to wait til the [date] to give me your considered response, but please do so in writing.

I would be grateful if you could confirm your attendance (and your reps attendance at the meeting as soon as possible

In the mean time if you have any questions about the contents of this letter please come and see me straight away, and at any time. FAQs will be updated and continue to be posted on the intranet.

Yours sincerely

Person Post Enclosures: Business reasons; map; FAQs

Hold Individual consultation meetings with the right amount of notice.

All employers must meet with all potentially redundant employees individually, even if there is to be collective consultation. Employers must be able to demonstrate that the employee has had an opportunity to discuss in the meeting the reasons for the redundancy, the pool for selection, the criteria, and any alternative employment. Get their counter proposals in writing.

10Respond in writing to any suggestions and conclude the consultation period.

Get the Board of Trustees to consider any counter proposals and agree the final proposal and write to staff with the final shape of organisation, and offers of SAE’s

11Offers of suitable alternative work

Employers should consider whether employees likely to be affected by redundancy can be offered suitable alternative work. Whether alternative work may be considered suitable depends on a number of factors involving pay, status, location, working environment and hours of work.

The offer

It is the employer’s responsibility to show that an offer of alternative employment has been made and therefore any offer should be put in writing, providing enough detail to give a clear idea of what is being offered. The offer should show how the new employment differs from the old and by law must be made before the termination of the job from which the employee is being made redundant. The new contract must take effect within 4 weeks from the old contract terminating. Employees who unreasonably refuse an offer of suitable alternative employment may lose any entitlement to redundancy pay. Unreasonable refusal may arise where the differences between the new and old jobs are negligible. (Or cos they are being antsy)

Competitive interviews

If you are reducing posts at a level you should give those being made redundant the option to apply for posts in that level and the level below. Do interviews in a tranche by tranche basis, cascading down levels in the organisation. Those in more senior posts can apply down, those in more junior posts cant apply up unless you failed to fill the more senior tranche by this first route. Then might open up to internal applicants at a more junior level. (first) and then external advertising.

Trial Period

An employee who is under notice of redundancy has a statutory right to a trial period of four weeks in an alternative job where the provisions of the new contract differ from the original contract, and this period can be extended by agreement in writing. If the employee works beyond the four week period (or any agreed longer period) any potential redundancy entitlement will be lost if they say they are leaving becaue it is not suitable because the employee will be deemed to have accepted new employment.

12Giving notice to employees

A general warning that there will be redundancy dismissals at an unspecified time in the future is not notice. Dismissal notice must at least specify the end date. If the employee's statement of terms and conditions of employment give a longer notice period than the statutory minimum then that would be the employee's contracted right.

Pay in Lieu of Notice

Employers may want to consider offering employees payment in lieu of notice, and indeed this possibility in a redundancy situation may be written into employee's contract of employment. If you offer your employees payment in lieu of notice, this means they do not have to work out their notice period.

13Time off & Additional Assistance

Employees served with a redundancy notice, who would qualify for statutory redundancy payments, are entitled to take reasonable time off with pay during the notice period to seek work or retraining.

Good practice

The employee's statement of terms and conditions of employment may extend this right and it is good practice to allow ALL employees the right to time off and not to unnecessarily restrict the amount of time off. Check through the statement to see what terms and conditions you offered your employees when they were appointed.

Additional assistance

Employers should consider if they can give any other assistance to employees who will be made redundant, e.g. access to professional counselling, help with making job applications, interview techniques, and advice on benefits.

14Redundancy Payments

Employers faced with a loss of funding should take into account the costs which will be incurred in making employees redundant when assessing the organisation's financial situation. The Employers will need to know what their legal liability is towards employees for redundancy payments and salary during notice. Before considering any other payments over and above those legally required, i.e. exgratia payments, or enhanced employers need to be certain that the organisation can afford these payments. (And that they meet Age disc regs – see end of notes)

Statutory redundancy payments

If a person being made redundant refuses a reasonable offer of redeployment or unreasonably leaves during the statutory trial period, then they lose the redundancy payment. The amount of payment is dependant on the age of the individual, the length of service up to a maximum of 20 years and the average weekly wage up to a maximum of £380 per week as at Nov 2010. (May change Feb 2011)

Scale of payment

For each completed year of service (at the end date) up to a maximum of 20 years, eligible employees are entitled to:

age up to 21 half weeks pay;

age 22 or over but under 41 one weeks pay;

age 41 or over one and a half week's pay

Holiday pay

If employees have not taken the paid holiday to which they are entitled by the date their employment terminates then they should receive holiday pay.

Tax and National Insurance liability

Statutory and contractual Redundancy Payments up to £30,000 are not subject to tax or National Insurance.

Holiday Pay and PILON should be treated as a normal salary payment and are subject to tax and National Insurance.

Confirmation of Redundancy letter

Dear Date

RE: Confirmation of Redundancy

As you know X Project has been through a very difficult period and the Board have now finalised proposals for the new stucture of the organisation.

This letter is to give you the confirmation that sadly and reluctantly Xproject has to make your post of XXXXXXXXXXXXXXXXXX redundant as of 31st October 2010. The reasons for this have been detailed to you in the business document you received at our full staff meeting on 26th August 2010 and discussed during your individual consultation meeting.

As discussed during our meeting on XXXXXXXXXXXXXXX I am sorry to confirm that there is currently no other suitable post vacant at X project that I can offer to you.