Personnel redundancies aren’t personal – but what are the legal requirements?
Register for free to read more of the latest local news. It's easy and will only take a moment.
Sponsored Editorial
This year we have seen a rise in the Scottish unemployment rate. With the cost of living crisis and high overheads, some sectors are warning that there may be a need to consider workforce redundancies.
Redundancy occurs when an employee's job is no longer necessary due to changes in a business. It's important to note that redundancy is about the position, not the person. In other words, it's the job role that becomes redundant, not the individual's worth or skills.
Identifying the appropriate procedure
When considering what procedure to apply, employers should be mindful of any redundancy policy or procedure in place, whether contractual or not, and any obligation to pay enhanced redundancy pay.
Also, if the employer is proposing to dismiss 20 or more employees, collective consultation rules will apply. When considering this number, employers need to be mindful of any employees dismissed (or to be dismissed) within a 90-day period for a reason unrelated to the individual’s conduct.
What steps should an employer consider prior to entering into a redundancy process?
Prior to commencing any redundancy procedure, employers should consider ways of avoiding compulsory redundancy altogether. Although there is no set list of points to consider, employers usually look to avoid compulsory redundancies by taking steps such as asking for volunteers or attempting to implement other cost saving measures.
What does a redundancy process normally look like?
Employers are legally required to consult with employees who might be affected by redundancy. The purpose of this consultation is to explore alternatives and discuss the potential impact of redundancy.
This will usually mean communicating and consulting with staff as well as determining a fair way to select those that are unfortunately at risk of redundancy.
In addition, employers are expected to consider alternative employment and offer an appeal against any decision.
If an employee believes they have been unfairly dismissed, subject to qualifying criteria, they may present a claim to the Employment Tribunal. In such circumstances, it is not for the Employment Tribunal to ask itself whether or not it would have made the same decision but rather if the process followed was fair.
Redundancy is not always a cheap option
In considering the overall cost of a redundancy exercise, employers should be mindful of:
- How long the consultation process will take (during which the employees will continue to be paid)
- Notice and annual leave (either to be used at conclusion of the process or paid in lieu)
- Statutory redundancy payment costs for those employees who will be entitled to such a payment (broadly those with at least two years’ qualifying employment).
The amount of each statutory redundancy payment payable will vary (from £643 to a maximum £19,290) depending on each affected employee’s salary, age and length of service.
A statutory redundancy payment is calculated as follows:
- One and a half weeks' pay for each complete year of employment in which the employee was not below the age of 41
- One week's pay for each complete year of employment between the ages of 22 and 40 inclusive
- Half a week's pay for each complete year of employment in which the employee was under the age of 22.
A week's pay is capped by statute at £643 and a maximum of 20 years’ of employment are taken into account for each employee.
What is enhanced redundancy?
Employers can opt to pay more than the statutory requirements.
In such circumstances, an employer may choose to offer this package in exchange for the employee entering into a settlement agreement (under which they would waive their rights to bring claims against the employer).
If a settlement agreement is entered into, each employee will need to obtain independent legal advice and it is customary for the employer to meet the reasonable cost of that advice. Settlement agreements can also be time and cost effective for employers, particularly in larger scale exercises, as they can allow employers to bypass consultation and have the certainty that claims will not result.
Conclusion
Redundancy is a difficult situation for both employees and employers.
Legal requirements are put in place to ensure that employees are treated fairly during uncertain times whilst attempting to be sympathetic to the needs of employers.
