Staff fallout
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If you are forced to make staff redundant make sure you follow the rules—or face the consequences.
FFvery haulier has to face the fact that some day he may have to give an
employee the sack. When it's a case of theft, violence or some other gross misconduct the procedure may be unpleasant for everyone concerned, but at least it should be pretty straightforward.
But sometimes loyal members of staff have to be laid off simply because of a downturn in business. In the UK, redundancy is governed by laws which define the rights of employer and employee alike.
For example, The Employment Protection (Consolidation) Act 1978 (EPCA) states that an employee is dismissed through redundancy if an employer has ceased or intends to cease the business or intends to move that business, or if the need for the employee to do his or her particular type of work reduces or ceases. These definitions are particularly relevant to unfair dismissal claims.
The employee is entitled to a redundancy payment under the EF'CA if he has been dismissed, laid off or kept on short time for reasons consistent with the Act's definition of redundancy. Employees with at least two years continuous service are entitled to a compensation payment, based on length of service, weekly pay at the calculation date and the employee's age.
Written notice
In larger companies the Department of Trade and Industry demands written notice of planned redundancies. Employers are also required to consult recognised trade unions and/or elected employee representatives. Notification must be made, and consultation initiated, 90 days before the planned redundancies if 100 or more employees are involved, or 30 days for 20-99 employees. For smaller numbers no notification is required and there is no formal consultation period.
The law accepts that consultation is not always practicable, but only in genuinely exceptional circumstances—insolvency, for example, will not suffice if it could reasonably have been foreseen. If the requirement to consult is unreasonably ignored, a tribunal can make a "protected award".
Employees also have a right to reasonable E time off to look for new ..: jobs while under notice
F.,
E r of redundancy.
_t Industrial tribunals § look for evidence that g the employer has set s objectives and = reasonable criteria when choosing who is to be made redundant.
Before choosing which employees are affected, the pool from which they are to be chosen must itself be defined reasonably. For example, if other employees' work is interchangeable, if only a single shift is chosen or if a pool is defined to target a particular group of employees, it has little chance of passing muster.
When individuals are chosen from the pool, tribunals will generally abide by the traditional policy of "last in, first out" (LIFO). However, other factors often have to be taken into consideration. For many businesses LIFO may not be at all suitable: it might simply be unfair; or it might deprive the business of some of its key skills. Performance and ability, attendance and attitude, and age can legally be taken into account, as long as they are considered objectively.
Legal precedent suggests that a points systems, weighing several factors, might well be accepted as a fair framework.
The consultation procedure should involve a discussion of suitable alternative work. This must provide similar earnings and be of similar status. It must be within the employee's capability and should not involve unreasonable inconvenience, such as much more travelling time. If the work is even slightly different the alternative job carries a mandatory fourweek trial period. If the trial is unsuccessful, the employee is treated as having been made redundant when his original job ended.
All employees involved in the redundancy process should have a right of appeal. This procedure must be properly explained and the appeal should be heard by a senior member of management who has not been involved in the selection process.
Any breach of the procedures can lead to an action for unfair dismissal., and employees with two or more years' continuous service can take their case to a tribunal.
This action might be designed to enforce payment of their statutory lump sum, or they might be seeking compensation if they feel they have been made redundant unfairly. When an employee wins a case for unfair dismissal before a tribunal, the award is equivalent to the statutory redundancy payment, but one cancels out the other so the amount will not be paid twice. However, employees who win a case for unfair dismissal may also win additional compensatory awards.
Marital status
Some redundancies are automatically unfair. It is unacceptable to dismiss on grounds of trade union membership, marital status, gender or ethnic origin. This can extend to unfair proportions of minorities being laid off because they happen to form a large part of the pool selected. Any attempt to dismiss employees because they assert a statutory right, or have raised legitimate health and safety issues, will also flounder.
Following the rules will help mitigate any potential damage to the continuing business. However, there are a range of management issues that need to be faced if redundancy is to be dealt with professionally.
First, alternatives should be examined before raising the spectre of redundancies.
It might be possible to retrain staff, to make some savings by ending overtime, or ending temporary contracts. Early retirement can be an attractive option for some older workers, but it can leave the unwary employer in a legal and pensions maze, and could risk the km of key skills.
If redundancies are unavoidable, most employers try to find volunteers. To avoid the possibility of a rush on the one hand or a drought on the other (potential volunteers might fear that an expressing interest will lead to pressure to resign), such a search for candidates must be carefully designed and should certainly involve an initial consultative stage.
17 by David Harvey David Harvey is a senior technical officer at the Chartered Association of Certified Accountants.