HM Insights

Redundancy and restructure considerations for employers

For employers who are considering making employees redundant or carrying out an organisational restructure, it is important that steps are taken to ensure that their employees are treated fairly and lawfully throughout. At the most basic level, this involves ensuring that there is a genuine redundancy situation and, thereafter that a fair process is followed with staff consulted throughout.

Each redundancy situation should be considered on its own facts, and different considerations will apply in almost every case. That said, in our experience, there are some factors which prove more problematic than others, and are commonly overlooked by employers. These are:

• Consideration of alternatives to redundancy;
• Bumping;
• Scoring matrix; and
• Employee counter notice

Coronavirus-legal-updates-2020v5.jpg

What is redundancy

Redundancy is a form of dismissal and may arise where the requirement for employees to undertake work of a particular kind has diminished. The process which employers are required to follow varies depending on the number of potentially affected employees and the total number of intended redundancies.

Specific advice should be sought in relation to any given redundancy situation.

For example, where only one employee out of many is potentially affected, employers will want to be sure that their selection for redundancy is fair, and that they have reduced the risk of an unfair dismissal and/or discrimination claim being presented. Where 20 or more employees are potentially at risk of dismissal, specific statutory requirements need to be met within prescribed timescales.

Regardless of the numbers involved and the process required, there are a number of considerations which remain the same. We have detailed some key points which can prove problematic if not given due consideration by employers.

Consider alternatives to redundancy

In order for an employer to fairly dismiss an employee by reason of redundancy, there is a requirement to show that they have acted reasonably. It has long been established that an employer will not act reasonably in dismissing an employee on the grounds of redundancy unless it can be shown that consideration has been given to what, if any, alternatives to redundancy exist.

Alternatives to redundancy could include asking employees to work reduced hours, retrain and/or implementation of a recruitment or pay freeze. Employers are also required to ascertain if there are any other roles which could be considered as alternative employment for an otherwise redundant employee.

Care must be taken to not limit the offer of alternative positions to roles that the employer may think are "suitable alternative" roles. The employee should be informed of all vacancies, notwithstanding, of course, there may be vacancies that they would not contemplate. This should be the employee's decision, however.

The parameters and relevance of whether a role is viewed as suitable alternative role is actually very limited in a redundancy situation. If a suitable alternative role is identified and the employee unreasonably refuses to accept this role, they may lose their entitlement to a statutory redundancy payment.

It is for a Tribunal to objectively consider if a role can be considered as suitable alternative employment in any given situation. In making this assessment, the Tribunal will consider all aspects of the role, including: the tasks to be performed; the skills required; the salary and perks; and hours, as well as the responsibilities; status and location of the role. No single factor is decisive and all must be considered as a package. Even if a role is viewed to be a suitable alternative, the Tribunal must then consider the subjective test (from the employee's perspective) as to whether rejection of that role was reasonable or unreasonable.

There is a substantial amount of guidance from case law on what will, and will not, be considered as suitable alternative employment. If this is something which appears relevant to a redundancy situation, we can consider the factors and advise on the specific roles involved.

However, we would encourage employers, in most circumstances, not to focus on "suitability", but rather on the offer of alternative roles.

Bumping

'Bumping' relates to the process whereby an employee whose role within an organisation is at risk of redundancy is redeployed into an alternative role, and the individual who previously undertook that role is dismissed as redundant instead.

This can often strike employees and employers as unfair, given it culminates in the dismissal of someone whose role was not actually deemed to be potentially redundant. However, not only is bumping a legitimate option in redundancy situations, it is considered to be best practice for employers to consider it as part of their assessment of any redundancy situation.

Bumping is often an unattractive offer for potentially redundant employees as it most commonly involves a more senior member of staff bumping into a more junior role, and as such a loss of seniority and a reduction pay.

The requirement on employers is only to give consideration to the possibility of bumping and there may be a sensible and justifiable reason not to implement it. If an employer can show that they have considered it, this can be helpful evidence in a defence against any subsequent unfair dismissal claim.

Selection process/scoring matrix

In redundancy situations involving a selection pool, where several employees doing the same or similar role are put at risk of redundancy, a fair selection process must be undertaken when identifying the individuals ultimately made redundant.

A scoring matrix is often used as part of a selection process, and this involves the assessment of what criteria should be within the matrix. The relevant criteria will likely differ slightly from role to role, but in general should involve a consideration of the standard of work and the skills, qualifications and experience of each employee, together with their disciplinary record and their absence record (but excluding any absence relating to disability, pregnancy or maternity).

Each employee in the selection pool should be scored against this matrix, with those scoring lowest then provisionally selected for redundancy – provided there are no other considerations to be taken into account.

It is best practice to have two separate managers carry out the scoring process independently, with both scores then collated and averaged out. This process, (as opposed to allowing one manager to carry out the process with another manager moderating the results), will best protect against any potential allegations of improper behaviour or any suggestion of collusion between the managers.

That said, particularly for small employers, it may not always be possible for two managers to carry out this process. In such circumstances qualifications, appraisals and interview processes can be used instead, with the most appropriate method depending on each specific circumstance.

Counter notice

An employee who has been served with notice of their dismissal for redundancy may wish to begin searching for a new role while they are working out their notice period.

Clearly this could lead to a situation whereby the employee is offered a new job but wishes, or is required, to start this new role before the end of their notice period. In such circumstances, the employee has the right to approach their current employer and serve counter notice to bring their employment to an end at an earlier point, without impacting on their entitlement to receive a statutory redundancy payment. In order to benefit from this provision, there are a number of statutory conditions which have to be satisfied.

If counter notice is served by an employee, it will then be for the employer to consider whether or not they wish to contest this. It will often be in the employer's interest to accept the counter notice given it will reduce the amount of notice pay which would be due to the employee. If accepted, the employment terminates on the earlier date and a redundancy payment is due. Notice pay will only be due up to and including the earlier termination date.

In some cases however, an employer may wish to object to the counter notice, perhaps because a full handover is required. Where this is the case, the employer must then serve further written notice on the employee requiring the counter notice be withdrawn and the full notice period worked. If the employee then refuses to withdraw their counter notice, their entitlement to a statutory redundancy payment would be lost, with the employee required to raise an employment tribunal claim to seek to recover this on the basis that it would be just and equitable that a redundancy payment be made.

Get in touch

If you've any queries about this, or any other employment related matter that could affect your business, our team of specialist employment lawyers can assist. Please contact us to discuss further.

Glasgow: 0141 227 9680                            Inverness & Highlands: 01463 795 042

Edinburgh: 0131 247 2534                          Shetland01595 695 583 

Elgin: 01343 542 623

Useful links

EMPLOYMENT LAW FOR EMPLOYERS