Making someone redundant is likely to be one of the most difficult and emotionally charged decisions you will make as a business owner. Unfortunately, the impact of the COVID-19 pandemic has meant that it is something businesses of all sizes, sectors and geographical locations are having to face every day, many for the first time.
We speak to many business owners who are struggling to understand and get to grips with a process, that if done wrong, has not only a significant financial risk but creates undue stress for all concerned.
We have therefore pulled together some information and pointers in a series of blog posts to help business owners begin to understand what is involved, how to conduct a fair redundancy process and help them avoid some of the common pitfalls.
In this first post we look at the things you need to take into consideration before undertaking a redundancy process, the implications of getting it wrong and some additional things to think about in relation to COVID-19.
What is redundancy?
Redundancy is when you, as an employer dismiss one of your employees because you no longer require an activity or job role to be done. It is important to remember at this early stage that it is the role and not the person that is being made redundant. The “redundant activities” must also be those that they are actually doing, not simply those detailed on a job description (this is referred to as The Means Test).
What is the risk of getting it wrong?
When looking at redundancy, whilst there are naturally implications for the business, for us the human element should always be the first consideration.
Making someone redundant will have a significant impact on them and their family not only financially, but emotionally. Putting them through an unplanned or poorly executed process will make it considerably more difficult and stressful for them as well as those having to manage the process on behalf of the business.
For the business itself, the financial risks of making a mistake are significant, with a maximum compensation for unfair dismissal of £89,493 or 52-weeks gross salary, whichever is the lower (April 2021).
In addition, it is estimated that an Employment Tribunal will cost in the region of £8,500 taking into consideration expert witness, legal fees plus time preparing and attending as well as remedy costs.
Add to the above the impact of a very public process witnessed by employees, competitors, customers, suppliers and even the press, ensuring that everything is managed correctly can be critical to the survival of the business and the well-being of all involved.
Establishing the need for Redundancy
The first step in any redundancy process is establishing whether there is a genuine need for redundancy – economic, technical or organisational reasons (ETO).
To ascertain this, you need to ask the right questions internally; Is there a diminishing of the need for the work being done? Is it likely to be permanent or short term? What alternatives have been considered?
If short term, as we are seeing at the moment with lockdown restrictions, then redundancy may not be the right answer. Consider first whether the position could be managed with a short-term reduction in hours or a temporary change in role.
Another common pitfall we regularly see is redundancy being used to remove an employee with long-term performance issues, to manage misconduct or a breakdown of the employee / employer relationship. Redundancy in these situations can be perceived as an easier route to take, however this is not a genuine need for redundancy and could leave you open to a potential claim.
Performance management or misconduct issues should be managed using the correct processes rather than using redundancy as a quick fix. Other common areas where redundancy can be used incorrectly include:
- Changing the nature of a role or working hours – depending on the nature of the changes this can be handled through consultation with the employees
- Relocation of the business or a role – depending on the distances involved this is not an automatic redundancy situation
- The sale of the business – TUPE regulations need to be considered in such situations
Once a genuine need for redundancy has been established, step 2, the preparation and planning can begin. This needs proper attention to ensure that it follows the correct legal process, will provide clear communication to all impacted employees and results in a fair process for all involved.
Redundancy during COVID
All of the above considerations are important for considering any redundancy situation but when you add the current pandemic and impact of COVID-19 some additional things need to be included into the thought processes.
Remote Working – along with meeting social distancing requirements many businesses have continued to utilise a remote working model which makes the redundancy process considerably more difficult. Holding a virtual meeting to tell one or a group of your employees that they are at risk of redundancy is very different to sitting down with them in person. Not only is it incredibly difficult to gauge body language but you are encroaching on their home environment, giving them difficult news in a “safe” place and potentially in front of their family members.
The impact of this needs careful consideration when planning how communication regarding the redundancies is managed.
Benefits of seeking external HR support
The financial and reputational risks of getting a redundancy process wrong are great and so getting external HR support from a consultant, that understands the legal process in detail as well as having practical experience of managing redundancy situations, can be incredibly helpful not only to prevent mistakes but give support to internal teams.
There are a number of other reasons why you might consider getting external help some of which are detailed below:
Time – they are solely focused on the task and not trying to juggle other responsibilities such as running the business. They can therefore devote the proper time to planning and implementing the process.
Independence – redundancies can result in highly charged emotions for all concerned. An independent consultant is removed from the personal relationships making it easier all around and can often enable employees to be more open when it comes to their feelings etc.
Additional support – they can often help provide additional services to the business and employees including outplacement support to help redundant employees get back into the job market.
Further help and advice
If you are considering making some of your employees redundant and would like a no obligation and confidential conversation with one of our HR consultants give us a call on 01454 538 888 or email us.
Alternatively, download our free Redundancy Checklist to help ensure you are fully prepared and don’t miss any important steps.
