On establishment of the Scottish parliament in July 1999, employment rights and duties and industrial relations were matters which were reserved to the UK government and this remains the position for the foreseeable future.
Accordingly, both before the creation of the Scottish parliament and since, the vast bulk of the legislation which forms part of the body known as ‘employment law’ applies to Scotland as it does to England and Wales. Therefore, when managing a redundancy process the same principles and consultative stages should be applied.
What are the key elements of the redundancy process?
Establishing if a redundancy situation exists
The statutory definition (in Section 139 of the Employment Rights Act 1996) states that:
“…an employee who is dismissed is taken to be dismissed by reason of redundancy if the dismissal is wholly or mainly attributable to:
(a) the fact that the employer has ceased, or intends to cease, to carry on the business for the purposes of which the employee was employed by him, or has ceased or intends to cease to carry on that business in the place where the employee was employed, or
(b) the fact that the requirements of that business for employees to carry out work of a particular kind or for employees to carry out work of a particular kind in the place where they were so employed, have ceased or diminished or are expected to cease or diminish.”
Consequently, there are three potentially fair reasons for redundancy:
- closure of business
- closure of the employee’s workplace
- a diminishing need for employees to do work of a particular kind
In short – if fewer people are needed, there is a redundancy situation.
When it is proposed that 20 or more employees are to be made redundant at one ‘establishment’ within a period of 90 days or less, the Company has a statutory duty to consult and inform employee representatives of the proposals before any dismissal notices are issued (a minimum of 45 days if there are 100 or more redundancies, 30 days if there are 20 to 99 redundancies).
The employer is also required to notify the Secretary of State about the proposed redundancies by completing a Form HR1 available from the Department of Business, Enterprise and Regulatory Reform. Failure to do so, may lead to criminal proceedings and a fine of up to £5000.
The Company is obliged to consult with the trade union if one is recognised. Where no trade union in respect of the affected workforce is recognised, the Company must consult with elected, appropriate representatives.
Where there are less than 20 employees to be made redundant, a ‘reasonable’ consultation should be undertaken on an individual basis, albeit that there are no specific timescales set down.
The overall purpose of the consultation (whether collective or individual) is to discuss the reasons why the redundancies are being proposed and to pursue enquiries with a view to avoiding or minimising the number of redundancies which may be required.
Document all activities
All steps taken must be documented carefully to help ensure compliance with the various statutory obligations as follows:
The process of consultation should begin as soon as possible to be of sufficient length and depth to be meaningful and to provide as much warning of the redundancy as practicable.
The employee should be invited to attend an initial meeting where the employer provides the background to the impending redundancy, advises that the position may be made redundant and discusses what the options are. If it is proposed to use selection criteria (this may not be appropriate if only one specific type of job is to be made redundant) the process should be explained at this meeting.
The employee should be invited in writing to attend a further meeting following a reasonable period of time. The letter should explain the fact there is a redundancy situation, why it has come about and that the employee’s position is at risk. It should also explain that the purpose of the meeting is to consult with the employee, to answer any questions and to consider any alternatives he/she may have. The employee should be informed of the right to be accompanied at this meeting.
Following the second meeting where consultation has not led to any viable alternatives being proposed or suitable employment being identified, the redundancy should be confirmed in writing. The employee should be offered the right of appeal in this letter.
During the consultation process, information bulletins should be sent out to all affected employees to keep them up to date together with details of any vacancies that may exist.
No public announcements should be made before employees have been informed.
In order to show that proper consideration has been given to alternative work, the Company should search throughout the organisation and, if appropriate, make enquiries of other organisations in the same group.
All offers of alternative employment should be put in writing, even if rejection is likely. The Company should not assume that a potentially redundant manager will not take a shop floor position. All applications for and considerations of potential jobs must be documented.
An employee who accepts an alternative position is entitled to a four week statutory trial period. A longer trial period can be agreed if the position requires it.
Employees may be entitled to redundancy payments if they have been continuously employed for at least two years. A statutory redundancy payment should be made based on either the employee’s weekly pay or the statutory week’s pay of £489 (whichever is the least), based on the following calculation:
- ½ week’s pay for each full year of service while the employee was under 22
- one week’s pay for each full year of service while the employee was 22 or older, but under 41
- 1.5 week’s pay for each full year of service while the employee was 41 or older.
Employees can only count a maximum of 20 years’ service and the ‘weekly pay’ is subject to an upper limit.
What to watch out for…
The four most common examples of an organisation being faced with a claim of unfair dismissal in relation to redundancy are:
- when a redundancy situation is not genuine
- where a fair selection procedure has not been applied
- where there has been a lack of, or insufficient, consultation
- where there has been a failure to seek alternative employment on the part of the employer
To avoid extra costs and unnecessary redundancy payments, it is important that organisations consider and follow the steps pointed out above before effecting any dismissals. However, it is important to note that each redundancy situation is different, and these steps are only general guidelines on how to manage a redundancy exercise.
Author: Karen Moffett
DISCLAIMER: This article should not be regarded as constituting legal advice in relation to particular circumstances. This article is merely a general comment on the relevant topic.