Does your business need to restructure or make redundancies?

Redundancies can be difficult no matter what end of them you find yourself on. They can be extremely daunting for employers who find themselves in a position where this business decision is necessary. It may be due to a restructure, a downturn in business, or simply being unable to continue with their existing business model. At Patch Law, we specialise in employment law and deal with restructures and redundancies on a frequent basis, this means we know that careful planning is key and a strong initial strategy can ease the overall process and reduce risk.

Patch Law solicitors work with employers and business owners to guide them through all stages of a redundancy. Our guidance is designed to help you achieve a smooth transition to a smaller workforce whilst avoiding costly legal mistakes.

• Is there a genuine redundancy situation?

Although it may seem obvious, this is the first question to consider. Whilst redundancy is a potentially fair reason for dismissal, masking a dismissal with the redundancy label when it is in fact due to capability, performance or any other non-redundancy reasons, is not.

Where you are uncertain as to whether the dismissal would fit the statutory definition of redundancy, we’re here to offer our expert advice.

• What planning do we need to do?

It’s important to cover the groundwork before announcing to your employees that you plan to make redundancies.

Taking the time to plan in advance is crucial to the overall success of your redundancy exercise or restructure. The initial meeting will be the first opportunity that the employee will have to discuss the situation with you, and so it’s vital that before this takes place, you have a sound knowledge and understanding of each stage of the process.

➣ Alternatives to Compulsory Redundancies

During this stage, you may consider calling for volunteers for redundancies and/or early retirement, in order to assess the need and volume of compulsory redundancies.

This can be an effective way of minimising any demoralising impact on the workforce, whilst allowing some willing employees the opportunity to exit without the guilt.

If you decide to offer both or one of these options, you will need to make several points clear beforehand e.g., that you retain the right to not accept particular volunteers, and that not all areas of the business will need volunteers if they are not directly affected. It is also important to bear in mind that any reason behind rejection will need to be non-discriminatory and objectively justified. Your communications will need to be carefully drafted to ensure that you are not increasing the risk to the business by offering this route, and we can advise you on this approach.

• How do we ensure we select the right people?

Firstly, consideration needs to be given to whether a selection ‘pool’ needs to be identified or whether the role(s) being removed is genuinely self-standing…

➣ Selection pool

The parameters of a selection pool will need to be identified and given careful consideration.
However, there is no single right answer or definition of who you should be placing in the pool. It may include a number of employees doing the same or similar roles but may also include a range of employees with similar or transferable skill sets. It will be for you to justify the decision based on rational considerations. Once a pool has been identified, you will turn to applying your selection criteria.


➣ Selection criteria

The most common method of selection used today is to compile a ‘matrix’ in which employees are awarded marks or grades against a number of criteria, each of which may be given different weightings dependant on your business needs.
Whilst there is no legal requirement as to the precise criteria that ought to be applied, it should be aimed at producing a fair measurement that is not discriminatory, and as objective as possible.
Personnel employee records are a useful source to form the basis of assessment against some selection criteria, such as attendance and timekeeping and appraisal scores.
For advice on preparing selection matrices and examples you can work from, get in touch.


➣ Scoring

Once the selection criteria are established, you can begin scoring each employee on the chosen factors.
Where possible, it is better if two assessors are available to apply the criteria to the employees in the selection pool, as this will reduce scope for accusations of subjectivity, favouritism or discrimination.

• What consultation process needs to happen?

➣ Collective consultations

If 20 or more employees are facing dismissal at the same time in one establishment, then you will need to consult collectively with either a union or employee representatives.

Where you recognise a trade union for collective bargaining purposes you must consult with the TU reps regardless of the numbers.

A number of statutory obligations arise including minimum timeframes, therefore legal advice is strongly advised if you are facing the likelihood of needing to collectively consult. There is a risk of additional compensation – called a Protective Award – if collective consultation is not carried out correctly, and being up to 90 days’ pay per employee, it can be a costly one.


➣ Individual consultations

If you are proposing to make fewer than 20 redundancies, and you do not recognise a union then you are not bound by the statutory consultation rules. Even so, you should consult any affected employees to protect the business from unfair dismissal claims.

It is paramount that any consultation taking place is genuine. This will mean taking into account the concerns, challenges and input of the affected employee(s), including how the redundancy may be avoided.

• What do we need to do before terminating employment?

➣ Alternative employment

Before an employee is dismissed, you must make reasonable efforts to find alternative employment for the employee within the business or group.

If an offer of suitable alternative employment is unreasonably refused, then the employee may lose their right to a statutory redundancy payment. If, after searching, there are no vacancies, then this should be relayed to the employee

- Priority rights

With alternative employment, certain employees will have priority rights over other employees. This means that they are entitled to be offered an alternative role ahead of other affected employees who are also at risk of redundancy. Such rights are a rare example of lawful positive discrimination.

Employees to consider for such rights:

○ Those on maternity leave
○ Those on shared parental leave
○ Those who have a physical or mental disability (as defined in the Equality Act 2010)

Maternity Leave

• The duty to offer suitable alternative employment arises once the vacancy is deemed to be ‘suitable and available’.

Shared Parental Leave

• An employee who is on SPL at the time the priority right is engaged, will benefit from the right.

Employees with disabilities

• When considering alternative employment for disabled employees, you must ensure such employees are provided with the same opportunities and in some cases, reasonable adjustments may need to be made to the suitable vacancy.

• What payments do we need to make?

Employees will have the right to statutory redundancy pay if they have 2 or more years of service with you. The amount of redundancy pay an employee can expect to receive will depend on a range of factors i.e., pay, age and length of service.

As this is a statutory requirement, it is vital an employee receives the correct amount due to them. If you need guidance on how redundancy payments should be calculated, please do contact us.

Alongside this payment, there are likely to be other contractual payments that the employee is entitled to. Such as:

○ Payment in lieu of any unserved notice.
○ Payment in lieu of any untaken accrued holiday
○ Other payments e.g., benefits, allowances, commission, bonuses.

• Are there any ways to avoid redundancy?

It may be worth considering ways in which you can avoid redundancies. A variety of alternatives may prove more or less effective dependent on your specific business situation and what your end goal is… Are you looking to reduce headcount? Do you want to minimise the amount of work taking place? Or are you simply needing that wage bill to come down?

Once these questions have been looked at, you can begin to think about which alternatives will be suitable. For example, delaying new starters or offering secondments will be an effective way of reducing headcount. However, pay cuts or flexible working may be more successful in minimising payroll costs.

Although you may be hoping to side step any lengthy process by looking at other options, alternatives are likely to come with issues or potential problems of their own and it will be worth seeking our advice to assess the best options for your business.

• When might a settlement agreement be appropriate?

In some situations, particularly where employers are offering an enhanced payment, a settlement agreement may be a route to consider.

Settlement agreements are optional of course, and employers should prepare for following their redundancy plan through if necessary. However, with suitable financial incentive, offering settlement agreements allows both parties the benefit of short-cutting the process. They are also an effective way of ensuring that a ‘risky’ employee cannot bring claims (including discrimination and/or unfair dismissal) against you by waiving their employment rights in return for an enhanced package.

Settlement agreements have to be proposed in a careful and specific way, in order to ensure that such offers cannot be used against you. We can provide you with guidance on dealing with such conversations as well as drafting suitable tailor-made agreements for employees.

For expert advice on all aspects of redundancies, restructures and settlement agreements from our specialist employment law solicitors, please either call us on 0117 290 0905 or complete a Free Online Enquiry and we will soon be in touch with you.