Letting staff go seems to be straightforward enough for Sir Alan, at least on his TV show. When planning redundancies, however, his methods aren’t recommended. EN reports.

More than a quarter of UK employers expect to shed staff in the foreseeable future. A recent survey of 1,200 businesses by the Chartered Institute of Personnel and Development found that the proportion planning redundancies had increased from 22 to 27 per cent between the second and third quarters of this year.

The results of a similar survey by KPMG, this time polling 200 senior executives at larger firms, was even more sobering – with more than half planning lay-offs. Of course “planning” and “doing” are two very different things, but the trend is clear.

And when redundancies are prompted by an economic downturn, dismissed staff will find it harder to find another job
than if the difficulties had been limited to your company. Which means they’re more likely to sue you – and to be granted higher compensation by a tribunal if you’re found to have got it wrong.

Of course, the other side of this is that redundancies usually mean you’re on a cost-cutting drive, so for all thatlawyers keep saying you should “seek expert advice” at every step, the known outlay for doing so will often lead companies to risk the unknown cost of getting things wrong.

So what is that cost? Quite a lot, as it turns out. The maximum compensation for unfair dismissal is currently set at £63,000 per individual – but this limit does not apply to successfully-fought discrimination cases.

So, what is likely to get you into trouble? The lawyers to whom EN spoke agreed on four key areas in which businesses get caught out:

• Definition of redundancy
• Consultation
• Selection of the pool to be considered for redundancy
• Selection criteria to determine who is actually made
redundant

REALLY REDUNDANT?
What exactly is a redundancy, and what isn’t? In order to count as such legally one of three situations must apply:• Business closure
• Reduction of work
• Closure of the place of business

According to Will Clayton, employment partner at law firm Hill Dickinson, “If you try to dress anything else up as redundancy, it will be unfair dismissal. One of the most common mistakes is assuming that reorganisation of a business will inevitably result in redundancies. If, for instance, a job loss is due to a change in the method of doing a job then that’s a training issue, not a redundancy.”

Sarah Clayton (no relation, as far as we know), partner and head of employment at Heatons law firm, points to a related pitfall when you lose a particular member of staff as a result of a reorganisation that doesn’t actually leave you with a different number of employees: “If you don’t reduce numbers and have the same amount of people doing the same jobs it could be seen as restructuring not redundancy.

Restructuring is often not about redundancy but performance. Don’t try to dress up performance issues as redundancy.”

So, are you genuinely making a position redundant or just looking for a less painful way of dismissing an underperforming member of staff? It is permissible to use objectively verifiable performance criteria to determine who is selected from a pool in cases of genuine redundancy, but sadly this doesn’t work the other way around.

If a member of staff is not performing to an acceptable level, they should be dismissed as such. In order to do this you will need to have complied with usual dismissal requirements, including raising any performance issues with the member of staff in question during appraisals and reviews and, where appropriate, issuing warnings.

Even in cases where performance is legitimately being used as a selection criterion for redundancy, a tribunal will usually expect to see evidence of such steps. If they have not, then a thorough (and objective) time and motion study is advisable.

Meanwhile, Russell Brown, partner and employment specialist at Glaisyers, points to another pitfall for firms with complex ownership structures: “If any suitable alternative positions are available, you need to offer them to affected staff – and if you’re part of a larger group, that means positions within the group, not just the individual company.”

Nor should you make assumptions about which alternative positions will be “suitable”, says Neeta Laing, head of employment law at Lewis Hymanson Small solicitors: “Don’t assume, for example, that people won’t go down a grade.”

If you offer a member of staff who is effectively redundant a suitable alternative job, then you don’t usually need to give them a redundancy payment if they turn it down. If it is at a different location, however, this will depend on the wording of their contract of employment. This can also be a problem if you want to move a group of employees wholesale from one location to another.

Judith Watson, head of employment at Cobbetts solicitors, explains, “If you are considering requesting that employees move, you need to check whether you have a mobility clause, which means they may be required to move within certain limits – this will give them little choice other than to travel to the new location.

“If there is no such clause in their contracts, whether you offer redundancy pay would depend on whether employees have unreasonably refused an offer of suitable alternative work.

“There are no strict guidelines as to the distance that will be considered ‘reasonable’ for relocation purposes. If a move involves a difficult journey and may disrupt factors outside work, such as children’s education, workers are within their rights to turn down the offer and still be entitled to redundancy pay even if the move is not particularly far.”

It’s highly unlikely, in any case, that manyentrepreneurs would dive straight into a programme of redundancies without
considering alternatives like overtime bans, reduced hours, recruitment freezes and voluntary redundancies.

Another tool that can be particularly useful at times like this, says Andrew Moore, employment lawyer at Clough & Willis, is a “layoff” clause in employees’ contracts. “Where you have a downturn in work over a short period, this enables you to lay people off temporarily, just giving them statutory guarantee pay,” he explains. This pay is set at £24.40 a day or the employee’s day rate, whichever is the lower, and guaranteed by law for up to just five days (for an employee who usually works a full working week) in any rolling three-month period.

Staff become eligible for redundancy after spending four weeks in a row, or six weeks out of any 13-week period, laid off or on short time (less than half their usual hours). Employers can, under these circumstances, offer a guaranteed period of work as an alternative to redundancy.

SHALLOW POOL?
In most cases you aren’t making an individual redundant but rather the position that they hold. This means, says Laing, you need to, “Think outside the box when choosing the selection pool.

“You’ve got to look at employees doing similar work. Are their jobs interchangeable? If so, you need a bigger pool.”

In deciding of the pool, and determining the criteria used for the final selection, consultation is important. While many employers will be tempted to present a fait accompli in order not to spook staff and start the rumour mill running
within the company and beyond, every lawyer to whom EN spoke said lack of a thorough consultation process at every stage is a sure-fire way of queering your pitch at any employment tribunal.

This means speaking to any staff who might be considered for redundancy before you decide what criteria will be used to determine which are for the chop, to explain to them which criteria you have decided upon, and also to explore alternatives to redundancy.

One common misperception, however, is that you have to offer people voluntary redundancy if you’re shedding staff. “Be very, very careful,” says Sarah Clayton. “Case law says that you should consider requests, but you can refuse them from people that you don’t want to let go.”

Clayton says you don't have to offer redundancy

If you are making fewer than 20 staff redundant in any 90-day period then you need to consult them individually. Above this limit, though, it is obligatory to carry out a collective consultation with trades unions or – in non-unionised workplaces – elected employee representatives.

In cases of 100 or more dismissals this process must began 90 days before, and where fewer than 100 employees are affected 30 days before, the first termination. The subject matter of this consultation is prescribed by legislation, and includes discussion of alternatives such as redeployment. The penalties for getting this wrong are severe: up to 13 weeks’ pay per employee.

In cases of collective redundancy (more than 20 in 90 days) you also need to notify the Department for Business, Enterprise and Regulatory Reform. Fail to do so and you’re looking at a fine of £5,000.

HOBSON’S CHOICE
The issue most likely to get employers into trouble is the final selection of employees for redundancy. This has to be done by scoring those in the selection pool against a range of criteria of your deciding.

These criteria must not only be fair and objective but also not discriminatory. Last year’s age discrimination added a new level of difficulty to this process.

Naeema Choudry, employment law partner at law firm Eversheds, says, “In the past it was not uncommon for employers to use redundancy situations as a means to offload older and more expensive employees. Often, older employees would have been likely to have been the first to be selected.

“Now, since the regulations came into force, employers are no longer able to discriminate against workers on the grounds of age. Terminating an employee’s contract because he or she is considered too old may therefore be directly discriminatory.”

But if you plan to get rid of young workers just because they’ll qualify for less redundancy pay than older workers, think again. And you don’t just need to worry about direct discrimination.

As Choudry explains, “The practice of selecting those employees with the least service for redundancy, known as last in, first out will also be under closescrutiny. This arguably singles out younger workers who have had less opportunity to build up their service and may therefore also be in contravention of the age discrimination regulations.”

Brown takes a similar view. “The only time last in, first out is advisable is in a tie-break situation after the objective criteria have been applied. And even then be very careful – any decision that unfairly prejudices someone’s situation based on their age is discriminatory.”

This can also, Laing says, be discriminatory against women, who are more likely to take career breaks and thus have shorter service records.

And, while someone’s sickness record can be a legitimate criterion for selection, this is not the case if that sickness was related to a disability.

As well as being nondiscriminatory, criteria need to be clear and unambiguous, as Will Clayton explains: “Using a criterion as a means to remove somebody is clearly wrong – for instance focusing on their health record when it has no bearing on the business going forward.

“Others like ‘commitment to the company’ or ‘attitude to the job’ are just too subjective. It’s important to have objective
criteria and objective scoring. We recommend using more than one manager to score employees – and ideally those should be different from the person taking the decision.”

Laing, meanwhile, recommends that the highestranked manager involved should not carry out the initial dismissal meeting. “You need to have a more senior manager available to consider any appeal,” she says.

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