During these stressful and uncertain times, a number of businesses will face a significant reduction in revenue and will be looking to reduce costs where possible. One option some may consider is restructuring and redundancy. It is important to remember that even during these unusual times, employment law, and your obligations in employment agreements, have not changed. This article will give a brief overview of what employers need to consider and the steps they need to take when making an employee position redundant. However, each situation is different and specific legal advice should be obtained before you proceed. RSM Law has an expert team of Employment Law specialists ready to help. Please call us on 0800 RSM LAW (0800 776 529).
There are two fundamental requirements that must be adhered to when considering redundancy, that if not followed will justify a personal grievance:
1. The redundancy is justified; and
2 A fair process is followed.
The reason for a redundancy must be genuine and it must be justified. Employers are required to show the analysis, evidence and documentation that they relied on when deciding to make a position redundant. So, it is important that employers carefully work through and understand their financial position and where possible seek expert advice. Employers will be required to show the grounds for the redundancy and how the redundancy and the restructured organisation will remedy the issues that they are facing.
It is also important to remember that redundancy cannot be used as a way of removing unwanted employees. It is not the person that is being made redundant but the position. As such, the performance of the particular employee or whether that employee fits within the organisation, is irrelevant when considering redundancy.
It is important to note that if you applied for the Government wage subsidy scheme after 4pm on 27 March 2020, you are required to retain staff during the 12-week subsidy period. This is not the case for applications before 27 March, but employers in this situation must still use their best endeavours to retain staff.
A Fair Process
Genuine consultation with employees is key to a redundancy process. This means that before any decisions are made, the redundancy proposal must be given to employees in sufficient detail to enable them to consider the proposal. The employee's feedback must then be listened to before any decision is made. Usually consultation will be via face-to-face meetings, however in some unusual circumstances, other methods will be sufficient.
The redundancy process must be undertaken in good faith. This means that every employee must:
- Be given a copy of the proposed restructure and redundancy processes;
- Be informed of the motivation for the restructure and redundancy;
- Be made aware of how this will affect them personally;
- Be made aware of their right to legal advice;
- Be given an opportunity to seek legal advice;
- Be given an opportunity to provide feedback; and
- Have feedback genuinely considered by the employer.
It is recommended that, during consultation, employers also discuss and consider redeployment within the business where possible.
If you have followed a fair process and can justify making an employee role redundant, it may be possible to terminate the employment relationship with an employee. Notice of termination must be made in writing and in accordance with the employment agreement. If the employment agreement is silent as to how much notice is required, then reasonable notice must be given relative to the particular industry and circumstances. All entitlements should be paid to the employee up until the end of the notice period, which is specified in the employment agreement. Employee entitlements may include unused leave, and salary. Redundancy compensation is only payable if provided in the employment agreement.
WHAT IF I CANNOT JUSTIFY A RESTRUCTURE AND REDUNDANCY?
If you cannot justify a restructure and redundancy, you may wish to consider making changes to the terms and conditions of employment. We have another article on our website that addresses what you need to consider before changing an employee’s terms and conditions and the steps to follow.