Redundancy
is a challenging, emotionally-charged process that no business leader or owner
wants to face. However, the Coronavirus pandemic has brought challenges to all organisations
from large corporates to the smallest SMEs, and for many, restructuring and
redundancy may be the only option.
In
times of crisis, businesses go through three phases – Survive, Reset, Thrive.
The
survive phase saw us all getting by day by day to get the job done, in many
cases supported by the Government’s COVID-19 furlough scheme to keep staff in
employment.
Most
businesses will have now moved on to the Reset
phase. This is where plans must be developed, and very difficult decisions
made, to put the organisation in the best possible position to thrive in the
future.
Unfortunately,
there may be a need for fundamental changes to staffing – and support from
expert redundancy HR specialists can be required to achieve this. Even large
companies with their own HR teams may require specialist
restructuring and redundancy HR support, particularly if they are
preparing to make a large number of redundancies.
Before
taking any action, it is crucial to understand what redundancy means, the legal
process required, and the pitfalls that can be encountered along the way.
What are
restructuring and redundancy?
This
may sound like a straightforward question, but many employers struggle to
understand it. First of all, there is no legal definition of restructuring and
redundancy and the term restructuring may in fact cover a range of options such
as reduced hours, lay-offs and changes to pay and contracts that stop short of
redundancy.
As
many businesses seek to cut staff costs due to the impact of Coronavirus, it’s
important to understand that businesses do not make a ‘person’ redundant
– it is the role they perform that is now no longer required. This means in
order to make a job redundant, there must be a reduction in the requirement for
the work to be carried out, a business closure, or the closure of a workplace.
You should also consider alternatives to restructuring and redundancy before
you begin.
What
are the alternatives to restructuring and redundancy?
Redundancy
should be a last resort, and there are a number of alternatives that should be
considered. Many will require the agreement of employees, but in the difficult
circumstances we all face because of COVID-19 you may find that staff are
agreeable to change if it means they remain in employment.
Not
every solution will be right for every business but you may consider pay
freezes or cuts, a temporary deferral in pay, a cut in hours, and unpaid
sabbaticals. When considering restructuring or redundancy you should also look
at whether it is possible to redeploy one or more employees to another part of
the business. Sometimes an external eye – such as an outsourced HR provider –
can help with identifying these alternatives and spot opportunities you may
have missed.
If
there are no viable alternatives or employees do not accept the offer of a
change to hours, pay or terms, then redundancy may be a fair reason for
dismissal. It is crucial that fair and legally sound processes are followed –
again, an employer or in-house HR team may need support from an external HR
provider to support with this.
A fair
redundancy process – consultation is key
From
the largest corporates to the smallest businesses, the same rules of redundancy
apply. In large companies which may be making a significant number of redundancies,
it is essential that a thorough consultation process – including collective
consultation where relevant – is carried out meticulously and fairly. Getting
this process wrong can be expensive and risks exposure to employment tribunals
and reputational damage.
If you
intend to make 20 or more employees redundant within any 90-day period at a
single place of work, then you must follow collective consultation rules which
require a consultation period of 30 days (45 days if the number of employees being
made redundant is 100 or more). There is no set consultation period for
employers proposing to make fewer than 20 redundancies but it is good practice
to consult, and a tribunal could decide that a member of staff has been
unfairly dismissed if they were not consulted or if the consultation was not
adequate.
When
selecting employees for potential redundancy, you must be scrupulously fair. Of
course, selection must not discriminate on the grounds of any protected
characteristics such as age, race, religion, sex or sexuality.
Usually
candidates are “scored” on performance – their output or quality of work,
attendance, and disciplinary records. This can be a complex process and may be
subject to a challenge by an employee – so often to ensure complete compliance,
objectivity and impartiality, this process is run by an external HR provider
that specialises in restructuring and redundancy.
Restructuring
and redundancy for employees on the Coronavirus furlough scheme
Staff
who are on furlough may
still be dismissed on the grounds of redundancy. However, businesses should be
wary of making redundancies as soon as the furlough period ends as HMRC may interpret
that the intention was to make the redundancies all along.
It’s
important to note that despite the existence of the furlough scheme, all normal
employment rules, including the need for redundancy consultation, are still in
effect.
If
furloughed staff are not at work then meaningful consultation must take place –
either bring them safely into the workplace, or carry it out by phone or video
call.
If you
do make an employee redundant, then you will need to calculate their statutory
redundancy payment. This is based on a number of factors including their pay,
length of service and age. Redundancy payments are based on the employee’s full
salary – not the reduced amount paid through the furlough scheme. An employer
must meet the cost of this payment – it cannot be claimed through the job
retention scheme.
External
HR support for restructuring and redundancy
Restructuring
and redundancy is a complex process, especially taking into account the
additional factors of Coronavirus and the furlough scheme.
Even for
very large companies, it may be that internal HR teams need support from an
external HR team which specialises in redundancy. An external team can view
your workforce with an objective eye, identify alternatives to redundancy,
ensure consultation is carried out legally, fairly and sympathetically, and
advise on any potential issues your business may face as a result of the
process.
This
article was produced in association with Reality HR which
delivers bespoke HR services including restructuring and redundancy support to
a range of organisations through its team of CIPD qualified specialists.
