Are you misjudging redundancy? As the cost-of-living crisis rolls on and the UK economy teeters closer towards recession, the pressure of escalating costs and rising inflation continues to put business owners under pressure.
As businesses feel the pressure to reduce costs, it’s inevitable that wage costs and staffing levels will come under scrutiny. It’s vital that employers don’t make rash decisions under financial pressure and end up making employees redundant only to find themselves on the receiving end of costly unfair dismissal claims.
One way employers find themselves falling foul of the legal redundancy process when it comes to making staff redundant is to apply the definition of redundancy to a situation incorrectly.
In this article, we explore 5 common scenarios where employers think they have a redundancy situation but, in reality, they do not.
What is Redundancy?
Redundancy is one of the 5 fair reasons for dismissal and occurs when a role has either ceased in its entirety or has been reduced in some way. Examples of redundancy situations are:
- A business is closing down, fully or partially.
- The number of roles required to carry out a certain type of work is no longer required.
- Work of a particular kind is ceasing at a particular location.
- A role/s is being reorganised or restructured in some way so that the original role no longer exists.
5 common scenarios where employers think they have a redundancy situation but, in reality, they do not:
1) Poor conduct or capability
It may be that an employer has a genuine case for workplace redundancy facing their business, and given the unenviable task of having to make the tough decision to reduce their workforce, it’s understandable that when carrying out employee redundancy, the employer will want to retain the best-behaved and best-performing staff.
This is why selection criteria are used to help an employer understand how to make an employee redundant and make a decision as to which employees are going to be selected for redundancy in circumstances where there are a group of employees at risk of redundancy. Selection criteria are used to ensure that the redundancy process is carried out fairly and that employees are not selected for workplace redundancy for discriminatory or biased reasons.
There are a variety of selection criteria for making an employee redundant, including disciplinary records and essential skills and qualifications. However, it’s vital that employers don’t fall into the trap of using the redundancy process to disguise a dismissal for another reason because it feels like a ‘kinder’ way of dismissing a poor-performing employee or is a good excuse to remove the most troublesome employee.
REMEMBER! It is the role that is redundant, not the person, and making staff redundant is always due to business reasons, not personal ones!
2) Preferring the ‘temp’ to the permanent staff member
This is a situation that tends to crop up a lot.
The employer has taken on a temporary member of staff to cover long-term sickness absence or maternity leave, and it turns out that the temporary member of staff is something of a star player.
The employer can’t keep both employees due to insufficient funds or workload, which triggers thoughts of making an employee redundant. On the one hand, this is understandable:
- You don’t want to lose a good member of staff.
- There are two people and one job; this meets the definition of redundancy, right? Wrong.
There are not two employees and one role. There is one role that belongs to the original postholder, and they have every right to return to their job.
This is especially important for an employee on maternity leave who has the right to return to their original role. The temporary staff member should have been given a temporary or fixed-term position on the understanding that their contract would end on the return of the original postholder.
Though it’s not uncommon for the needs of the business to change during an employee’s long-term absence, this situation is doubtful to trigger a genuine case to make an employee redundant, and the situation should be approached with caution and advice from Avensure.
3) When the role is still there
It seems an obvious point to note, but for a role to genuinely be redundant, it does have to have ceased or diminished in some way.
If you know at the point of making staff redundant that you intend to re-recruit into the position either immediately or shortly afterwards, then this is not a redundancy.
Employee redundancy can’t be applied because you have a temporary shortage of work; perhaps there has been a flood, and you need to close for some time before resuming operations, or a contract that was due to start has been delayed by a few weeks. You don’t have enough work to occupy the entire workforce in the interim.
These are examples of where layoffs or short-term working can be used.
- Layoff is where you have the option to keep your employees away from work without their contractual pay or salary while maintaining their employment.
Layoffs can be for their full contractual hours or 1 day a week.
Contractual pay is not payable during layoffs, but statutory guarantee pay (SGP) is payable where at least 1 day of work is lost. The current rate (2023) is £31 per day for a maximum of 5 days in a 3-month period.
Depending on the individual circumstances, an employee may be entitled to employment benefits during a period of layoff.
- Short-term working involves an employee’s contractual hours being temporarily reduced.
It is still used for the same reasons as layoff, but in this instance, no full days are lost, and therefore SGP is not payable. Instead, employees are paid only for the hours that they work.
Please note: You are only able to use layoffs or short-term working where your contracts of employment or employment handbooks allow. It is also vital that you seek advice from our experts before doing so.
4) When a business is being sold
If your business is being sold or taken over, this is likely to be a TUPE situation,not a redundancy.
TUPE stands for Transfer of Undertakings (Protection of Employment). A TUPE transfer occurs when an organisation, or part of it, is transferred from one employer to another. This can include a sale, a takeover, or when a service or contract is transferred to a new provider.
So, for example, if you are selling your restaurant and the new owner is also running the business as a restaurant, they will need to take your staff as well (whether they want to or not)!
If you carry out the redundancy process when they should have been afforded the right to transfer, this will be an automatic unfair dismissal.
5) When an employee asks for it
Perhaps you’re addressing someone’s poor performance, and they suggest that you ‘just make me redundant’.On the one hand, this seems like a good solution for all involved, except the role is still there, so redundancy for employers is not an option, and despite the employee’s request, if they have over two years’ service, making an employee redundant under these circumstances could still leave the employer exposed to the risk of an unfair dismissal claim.
The above scenario is another example of a sham workplace redundancy and should not be confused with voluntary redundancies, which can be offered to employees when a business is facing a genuine situation that requires employee redundancy.
However,even under the circumstances of a genuine redundancy, for employers, it’s worth noting that voluntary redundancy is not a resignation. You must understand how to make an employee redundant, as this is still a termination of a contract, and there must be a genuine reduction in work affecting the role of the person who wishes to volunteer.
Contact Avensure at the earliest opportunity, even if you are merely contemplating making staff redundant, so we can advise on redundancy for employers and how to plan for the situation and allow you sufficient time to meet your consultation responsibilities.
For support, please contact our employment team. Simply click here: Avensure Contact!