Making staff redundant

16 August 2005
Making staff redundant

Getting rid of staff can be a legal minefield. Polly Botsford, an assistant solicitor at Charles Russell, offers some advice.

The problem
You run a successful restaurant but have seen a recent lull in business so that you have one too many employees in your front-of-house team and are looking at making one of them redundant. About six months ago, you recruited a highly skilled employee with a degree in management. Do you have to make him redundant?

The law
Employment law dictates that if you want to dismiss an employee, it must be for a fair reason, and you must dismiss them in a fair way. Employees with more than one year's service will be entitled to claim unfair dismissal if you don't.

A genuine redundancy situation is a potentially fair reason. This involves the following:

  • Issuing a warning of the proposed redundancy.

  • Consulting with the employee.

  • Fairly applying objective selection criteria if there's more than one potential candidate for a redundancy.

  • Considering the possibility of alternative employment for the employee selected.

Since the introduction of statutory disciplinary and dismissal procedures in October 2004, an employer must also fulfil a three-stage process:

  • Provide the employee with a written statement of the proposed redundancy.

  • Hold a meeting about the redundancy.

  • Inform the employee of the decision and provide that employee with the right of appeal.

In addition, in a redundancy situation, full- and part-time employees who have been with your business for two years or more are entitled to a statutory redundancy payment. The amount of the payment is set down in law.

Expert advice

The warning
You should notify an employee about the likelihood of a redundancy and reasons for it.

The selection It's important to understand that it's a role and not a particular person that is redundant. If more than one employee performs a role which is to be made redundant, then you will need to create a pool of employees from which one will be selected.

There is flexibility in choosing the pool and what criteria you choose in selecting from that pool, but a tribunal must be satisfied that you acted reasonably in deciding on the pool and the criteria.

In this scenario, you have recently recruited an employee who you believe has great management potential. However, as he does a job which could be made redundant, he will be in the redundancy pool.

One common selection criterion is what is known as "last in, first out".

If this is your chosen selection criterion, then you would have to select him for redundancy and that employee would be lost to your business. To avoid this, you should choose a combination of criteria such as performance and quality of work, conduct and attitude, relevant skills and competencies, customer focus, versatility and adaptability, qualifications and experience.

What criteria you choose is up to you as long as they're objective and can be supported by personnel records wherever possible.

The consultation You have an obligation to consult the employee selected for redundancy. This means, broadly, discussing with them the reasons for the redundancy, what the process will be, and any possibility of alternative employment. They should have an opportunity to query their selection.

Alternative employment You should consider whether, instead of dismissing an employee, you could offer alternative employment within your business. If there's an alternative post, you should offer it even if it's a more junior job and you doubt whether the employee would want to accept it.

It's safer to leave the choice to the employee.

The three-step process As part of the redundancy process, you should also ensure that you have written to the employee clearly outlining the reasons for the possible redundancy (this is best achieved when warning the employee or when inviting them to a meeting), have had a meeting with the employee (this will happen at the consultation stage), and have given them the opportunity to appeal any final decision.

Failure to follow the three-step procedure may result in a finding of automatic unfair dismissal and may, as a result, lead to an increase in any compensation awarded of 10-50%, although this is still subject to the statutory cap of £56,800.

Polly Botsford, Charles Russell, 020 7203 5208

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