Managing redundancy

Managing redundancy

Contents

Our approach 1

Managing redundancy: definitions, constraints and basic practices 1

Ready reckoner for statutory redundancy payments 9

Redundancy consultation flowchart 10

Large-scale redundancy planning – vital action points 11

Large-scale redundancy – actions for the day of announcement 12

Outplacement 12

Name of the document

1

Our approach

Collinson Grant supports clients in managing redundancy exercises by insisting

on meticulous planning before any announcement is made. This is intended to

ensure that the legal issues are understood and that the communication of the

news of the redundancies is as effective as possible.

Specifically, we offer skills and experience in:

� creating an action plan and timeline for a redundancy exercise

� calculating likely and actual severance costs

� briefing managers on their responsibilities and necessary actions

� drafting communications to representatives, employees, customers

and external agencies

� framing strategies for formal dialogue with employees’

representatives and consultation with individual employees

� arranging election of employees’ representatives, running meetings

with them and ensuring follow-up actions take place

� developing criteria for selection for redundancy that are legally

compliant and support the needs of the business

� conducting consultative meetings with individual employees

� organising appropriate support for outplacement

� assisting in planning and implementing transfers.

Managing redundancy: definitions, constraints and

basic practices

The nature of ‘redundancy’

For most legal purposes, redundancy occurs when:

� the employer has ceased, or intends to cease, business, overall or in a

specific location, or

� requirements have diminished, or are expected to diminish, for

employees to do work of a particular kind, overall or in a specific

location.

‘Redundancy’ is not separate from ‘dismissal’: it is simply a reason for

dismissal. In many cases, employees may not only be entitled to a redundancy

payment but may also have the right to claim unfair dismissal. This is one

important reason why there are certain procedures and practices to be

observed by managers when communicating and implementing redundancies.

2

Statutory redundancy payment

Eligibility

Employees should have two years’ continuous service. There is no upper age

limit.

Payment

Payment is based on a scale, working back from the date of dismissal:

� per year of reckonable service from age 41 - 1½ weeks' pay

� per year of reckonable service from age 22 to 40 - 1 week's pay

� per year of reckonable service below age 22 - ½ week's pay

Cut-offs and maxima operate, so that a statutory redundancy payment cannot

exceed a certain amount:

� a maximum of 20 years’ reckonable service and, therefore (in

conjunction with the scale above), a maximum of 30 weeks’ pay (see

the ready reckoner at section 3 below);

� a maximum value on ‘a week’s pay’ (reviewed annually in February).

It is permitted to pay enhanced redundancy payments which exceed these

cut-offs and maxima.

Alternative work

When an offer of ‘suitable alternative employment’ is made but the employee

rejects it, the employee’s entitlement to a redundancy payment is only

maintained if the refusal is ‘reasonable’. The reasonableness or otherwise of a

refusal is judged primarily by reference to the employee’s personal and

domestic situation.

An offer of another job that matches the employee’s skills on the same terms

(pay, et cetera) in the same place would normally be ‘suitable’. So, unless the

employee has quite compelling personal considerations for refusing it, doing so

would quite probably be ‘unreasonable’ and would disqualify the employee

from receiving a payment.

An offer on inferior terms or in a different place will often cast doubt on the

‘suitability’ of the employment. Any reduction in pay that is more than trivial

will definitely make the offered employment unsuitable. In such

circumstances, the reasonableness or otherwise of a refusal is irrelevant.

Trial period

There is provision for a trial period of at least four weeks in any new job

(whether ‘suitable’ or not – see above) that an employee undertakes on the

redundancy of the original job. The employee is deemed to have accepted the

new job when the trial period expires. If, during the trial period, the employee

terminates, for whatever reason, or the employer terminates the employment

for a reason arising out of the change, the employee is treated, for redundancy


3

payment purposes, as dismissed from the original job for redundancy (so

receiving a redundancy payment, unless the new job was suitable and the

termination unreasonable). However, the original dismissal may still be

unfair.

Notification of, and consultation about, ‘mass’ redundancies

When is consultation with representatives about ‘mass’ redundancies

required?

Collective consultation with the representatives of the affected employees is

required when 20 or more redundancy dismissals are proposed to take effect

at an establishment within 90 days or less.

An employer’s failure to comply with this obligation attracts a ‘protective

award’ of up to 90 days’ pay per affected employee.

The appropriate representatives are those of the trades union recognised for

the group or category of affected employees or, if employees are not covered

by recognition, elected colleagues. So, it is quite common to consult at an

establishment with a ‘mix’ of representatives.

For this purpose, the definition of ‘redundancy’ is broader than that for

redundancy payments. It extends to proposed changes to terms and conditions

of employment as well as the outright elimination or reduction of jobs and

employees.

In deciding whether or not there are 20 or more dismissals proposed, the

employer should disregard the prospect of ‘volunteers’ or of affected

employees agreeing to changes – the key is whether, in the absence of

consensus, contracts would have to be terminated in order to effect the desired

change(s). In this context, the number of proposed redundancies does not

need to include fixed-term contracts that would be expiring in any event.

Prerequisites for consultation

Consultation can only commence once:

� any necessary representatives for ‘non-union’ categories have been

elected and

� all representatives have been supplied with prescribed information

about the employer’s proposals, the reason(s) for them and the

planned process for implementation (a ‘section 188’ letter).

With regard to the provision of information, the representatives must also be

given a copy of the Form HR1 that, under a separate statutory provision, the

employer is required to send to the Insolvency Service of the Department for

Business, Innovation and Skills to notify it of the planned cutbacks.

When should consultation commence?

Consultation should commence at least 30 days before the planned date for

the first of the proposed dismissals.

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This increases to 45 days if 100 or more redundancies are proposed.

Nature and implications of consultation

Consultation should be ‘with a view to reaching agreement’ (actual agreement

is not obligatory) and should cover ways of:

� removing the need for the proposed redundancies

� reducing their number

� mitigating their consequences.

The first two of these objectives entail the likely need for the employer also to

debate with representatives the business considerations that underlie the

proposal for redundancies and, sometimes, to consider alternative business

solutions put forward by the representatives.

Because of this subject-matter for consultation, neither the redundancies

themselves nor the underlying business ‘drivers’ should initially be described in

terms that suggest that a definitive decision has already been made.

And the very need to consult with representatives about larger-scale

redundancy exercises also means that an employer that quickly acts

inconsistently with that notion and indicates that decisions have been made,

whether by proceeding to deal with individual employees or through

operational measures, runs the risk of being held to have breached the duty of

collective consultation.

So, although it is not necessary to continue consulting with representatives for

a full 30-day or 45-day period, observance of the statutory duty will generally

mean a need for some restraint in moving ahead with at least the visible signs

of change. Sometimes, this causes frustration for employers. Almost always,

it has implications for establishing timelines and action plans.

The completion of consultation with employees’ representatives, whether with

agreement or not, does not remove the need for subsequent consultation with

the individual employees affected.

Unfair dismissal

The law on unfair dismissal can impinge on an individual employee’s

redundancy in the case of:

� unfair application of the selection process for redundancy

� no, or insufficient, consideration of alternative employment

� an absence of, or inadequate, consultation with the employee.

The following sections deal with basic procedures and practices to avoid

difficulties with the points above.


5

Selecting the people for redundancy

Pools of selection

Sometimes a redundancy exercise leads to the complete removal from the

organisational structure of a specific type of job, regardless of how many post-

holders there are. Subject to an employer’s satisfaction of the other

considerations (alternative employment and adequate consultation), this

situation in itself tends to cause few legal problems.

But an exercise may also entail the reduction in size of a section or group of

employees with similar or transferable duties – a ‘pool’. Here, there is a need

to select for redundancy some employees rather than others. Pools of

selection should, in principle, be as broad as possible. They should comprise

employees who have similar jobs and could undertake each other’s duties. The

pool should not be designed to exclude particular employees or jobs without a

valid reason.

Seeking volunteers for redundancy

There is no obligation on an employer to request applications for ‘voluntary

redundancy’.

But finding volunteers has the advantage of avoiding much of the antagonism

and the exposure to dispute or litigation that can arise from ‘compulsory’

redundancies.

Against that has to be weighed the likelihood that many volunteers may have

long service and, therefore, entitlement to large payments on severance, and

that some may still be of great value to the business.

For these reasons, any voluntary redundancy scheme should feature a clear

right of veto or rejection by the employer. Of course, that right should be

exercised sparingly and for demonstrably good reasons. Excessive, tenuous

reliance on it may well increase the chance of a successful claim for unfair

dismissal from somebody who has been made redundant because a volunteer

has been turned down.

Setting criteria for selection for ‘compulsory’ redundancy

It is necessary to set criteria so that the requisite number of employees can be

selected from the pool as being at risk of redundancy. The criteria should be

as objective as possible. Typically these would include relevant job experience

and knowledge, volume of work, accuracy of work, range of skills, flexibility,

co-operation and initiative, attendance (of course excluding any absence

related to a disability or pregnancy/maternity) and length of service.

It is important to define the scope of each criterion (in part, to ensure that its

‘components’ do not overlap with those of another criterion, so that a

particular attribute or deficiency is not considered twice for the same

employee).

6

Within each chosen criterion, there needs to be a grading or rating

mechanism. Generally, this is expressed numerically, but it is important that

the level attached to each number or grading should be defined in some way.

Application of the selection criteria

Every employee in a selection pool should be independently assessed or scored

under the chosen criteria, and without reference to extraneous considerations,

on a standard form or matrix. The evaluation should be done by a superior

who is reasonably familiar with the work and record of the employees

concerned. Consideration might be given to the use of two assessors or scorers

with such familiarity (if so, the assessors should complete the assessment

separately and then come to a joint conclusion).

In any event, all documentation should be retained, both for the purposes of

internal consultation and possible appeals (see below) and for use in any

subsequent legal proceedings.

When all the assessments have been done and a final assessment figure for

each employee has been arrived at, every employee in the pool should be

ranked and those with the lowest totals should be provisionally selected for

redundancy or placed at specific risk of redundancy. The use of such

expressions is important in view of the need for consultation with the

individual.

Alternative employment

Employers are under a duty to consider and, where practicable, to offer

employees opportunities for alternative employment. This duty is not confined

to alternative work that is ‘suitable’ in the sense described for redundancy

payment purposes. Even if the alternative work attracts less pay and/or has

different duties, it should be at least notified to the employee for his or her

consideration.

The duty concerning alternative employment is not confined to the

prospectively redundant employee’s current place of work. A multi-site

employer should normally check all its locations for vacancies. And

consideration might also be given to contacting any associated companies

about job opportunities.

Consultation with individual employees

Why?

It is important to consult an individual about his or her prospective dismissal

for redundancy, whether that arises from the total removal of a type of job (or

a workplace) or there has been selection from a ‘pool’.

This is simply because the law of unfair dismissal requires that, before any

decision to terminate employment is taken (on any ground), an employee

should be informed why such a decision is being contemplated and should be

given a chance to argue against it. And, in the context of redundancy, the

simple fact that employees may be aware that their employer has a


7

‘redundancy situation’ within the business does not necessarily mean that they

know the reason why they, specifically, are at risk.

So, there is a need to make them aware why they personally risk the loss of

employment and to allow them to consider and discuss the matter. If

consultation with individuals is inadequate, or not meaningful, a claim for

unfair dismissal is far more likely to succeed.

The obligation to consult with each ‘at risk’ employee individually applies

whether or not there has been earlier relevant consultation with employees’

representatives (see 2.3 above).

To fulfil the need for consultation, provision for an absolute minimum of two

meetings with an ‘at risk’ employee will normally be necessary.

Initial meeting

The initial meeting will be to explain to the employee that he or she is at risk

of dismissal because of redundancy and, more importantly, why. So, the

manager who attends the meeting must be familiar with and able to explain

the reasons, particularly if the employee has been selected from a pool of

colleagues. This meeting is principally about supplying information to the

employee so that she or he can subsequently reflect on the situation and, if

desired, ask for any clarification and/or challenge managerial thinking before

a final decision is made. It is important to make clear that, at the point of

this meeting, a final decision has not been made and that the situation will be

discussed further with the employee.

Subsequent meetings

Subsequent consultative discussions, whether in one or more meetings, are

about ensuring that the employee has had a reasonable opportunity to air any

concerns about the basis of his or her proposed dismissal for redundancy and

that any realistic opportunities for alternative employment have been

canvassed.

The length, shape and content of these ‘follow-on’ meetings are dependent on

the particular circumstances and on the attitude of the employee. So, they are

not easy to ‘script’ in any great detail. However, that fact should not preclude

preparation and anticipation of an employee’s likely lines of challenge or

questioning. Provided that it does not result in a managerial style that

suggests a fait accompli, such an approach makes for a ‘smoother’ meeting

that is less likely to antagonise than one which is faltering, and also increases

the prospect that matters raised will be resolved quickly.

Confirming redundancy

The final consultative meeting (or one that is likely to be final) should be

preceded by a letter to the employee, notifying him/her of the arrangements,

specifying the basic purpose of the meeting, and stating that a possible

outcome is the confirmation of dismissal for redundancy.

If, at this meeting, there are no points raised, or if there arises no compelling

reason to rethink the employee’s prospective redundancy, the fact of dismissal

8

(whether immediate or at some future time) and the right of appeal should be

confirmed to the employee. At this point, she or he can be told that a letter of

dismissal will be given or sent to him or her in due course, with a statement of

payments (it is not consistent with the meeting having still been part of the

consultative process to produce a letter of confirmation at this point).

Written confirmation

The subsequent letter confirming the redundancy and the payments due to the

employee (so far as a statutory redundancy payment is concerned, a statement

of entitlement is legally required) should reiterate his or her right of appeal

and specify the addressee and timescale for any appeal that the employee

might submit.

Overall procedure

Two points are worth making about all consultative meetings:

� An employee does not have a statutory right to be accompanied by

anyone. However, if accompaniment by a colleague (or, where there

is a recognised union, a union official) is requested, it is generally

difficult to find a good reason for refusing it.

� Immediately after each meeting, it is sensible to make handwritten

notes to summarise what was said.

Appeals

Unless an employer’s own procedures say otherwise, an appeal does not have

to be considered and determined before the specified date of dismissal and will

not ‘postpone’ the date of dismissal.

However, an employer generally has an interest in ensuring that any possible

difficulties or weaknesses with its approach are considered and resolved

internally – minimising the risk of litigation. So, in this respect, the facility

for a pre-dismissal appeal is less likely to inhibit an employee from appealing

on the basis that ‘there’s no point, it’s too late’.

In any event, an employee should normally be invited to a hearing to explain

and clarify the grounds of his or her appeal.

The manager hearing and deciding an appeal should be seen as ‘independent’

of the one who made the original decision. Normally, this person will be the

dismissing manager’s line manager or a higher or equally ranked manager

from another function.

The outcome of the appeal should be confirmed to the employee in writing.


9

Ready reckoner for statutory redundancy payments

Service (years) 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Age (years)

17 1 - - - - - - - - - - - - - - - - - -

18 1 1½ - - - - - - - - - - - - - - - - -

19 1 1½ 2 - - - - - - - - - - - - - - - -

20 1 1½ 2 2½ - - - - - - - - - - - - - - -

21 1 1½ 2 2½ 3 - - - - - - - - - - - - - -

22 1 1½ 2 2½ 3 3½ - - - - - - - - - - - - -

23 1½ 2 2½ 3 3½ 4 4½ - - - - - - - - - - - -

24 2 2½ 3 3½ 4 4½ 5 5½ - - - - - - - - - - -

25 2 3 3½ 4 4½ 5 5½ 6 6½ - - - - - - - - - -

26 2 3 4 4½ 5 5½ 6 6½ 7 7½ - - - - - - - - -

27 2 3 4 5 5½ 6 6½ 7 7½ 8 8½ - - - - - - - -

28 2 3 4 5 6 6½ 7 7½ 8 8½ 9 9½ - - - - - - -

29 2 3 4 5 6 7 7½ 8 8½ 9 9½ 10 10½ - - - - - -

30 2 3 4 5 6 7 8 8½ 9 9½ 10 10½ 11 11½ - - - - -

31 2 3 4 5 6 7 8 9 9½ 10 10½ 11 11½ 12 12½ - - - -

32 2 3 4 5 6 7 8 9 10 10½ 11 11½ 12 12½ 13 13½ - - -

33 2 3 4 5 6 7 8 9 10 11 11½ 12 12½ 13 13½ 14 14½ - -

34 2 3 4 5 6 7 8 9 10 11 12 12½ 13 13½ 14 14½ 15 15½ -

35 2 3 4 5 6 7 8 9 10 11 12 13 13½ 14 14½ 15 15½ 16 16½

36 2 3 4 5 6 7 8 9 10 11 12 13 14 14½ 15 15½ 16 16½ 17

37 2 3 4 5 6 7 8 9 10 11 12 13 14 15 15½ 16 16½ 17 17½

38 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 16½ 17 17½ 18

39 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 17½ 18 18½

40 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 18½ 19

41 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 19½

42 2½ 3½ 4½ 5½ 6½ 7½ 8½ 9½ 10½ 11½ 12½ 13½ 14½ 15½ 16½ 17½ 18½ 19½ 20½

43 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21

44 3 4½ 5½ 6½ 7½ 8½ 9½ 10½ 11½ 12½ 13½ 14½ 15½ 16½ 17½ 18½ 19½ 20½ 21½

45 3 4½ 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

46 3 4½ 6 7½ 8½ 9½ 10½ 11½ 12½ 13½ 14½ 15½ 16½ 17½ 18½ 19½ 20½ 21½ 22½

47 3 4½ 6 7½ 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23

48 3 4½ 6 7½ 9 10½ 11½ 12½ 13½ 14½ 15½ 16½ 17½ 18½ 19½ 20½ 21½ 22½ 23½

49 3 4½ 6 7½ 9 10½ 12 13 14 15 16 17 18 19 20 21 22 23 24

50 3 4½ 6 7½ 9 10½ 12 13½ 14½ 15½ 16½ 17½ 18½ 19½ 20½ 21½ 22½ 23½ 24½

51 3 4½ 6 7½ 9 10½ 12 13½ 15 16 17 18 19 20 21 22 23 24 25

52 3 4½ 6 7½ 9 10½ 12 13½ 15 16½ 17½ 18½ 19½ 20½ 21½ 22½ 23½ 24½ 25½

53 3 4½ 6 7½ 9 10½ 12 13½ 15 16½ 18 19 20 21 22 23 24 25 26

54 3 4½ 6 7½ 9 10½ 12 13½ 15 16½ 18 19½ 20½ 21½ 22½ 23½ 24½ 25½ 26½

55 3 4½ 6 7½ 9 10½ 12 13½ 15 16½ 18 19½ 21 22 23 24 25 26 27

56 3 4½ 6 7½ 9 10½ 12 13½ 15 16½ 18 19½ 21 22½ 23½ 24½ 25½ 26½ 27½

57 3 4½ 6 7½ 9 10½ 12 13½ 15 16½ 18 19½ 21 22½ 24 25 26 27 28

58 3 4½ 6 7½ 9 10½ 12 13½ 15 16½ 18 19½ 21 22½ 24 25½ 26½ 27½ 28½

59 3 4½ 6 7½ 9 10½ 12 13½ 15 16½ 18 19½ 21 22½ 24 25½ 27 28 29

60 3 4½ 6 7½ 9 10½ 12 13½ 15 16½ 18 19½ 21 22½ 24 25½ 27 28½ 29½

61+ 3 4½ 6 7½ 9 10½ 12 13½ 15 16½ 18 19½ 21 22½ 24 25½ 27 28½ 30

10

Redundancy consultation flowchart


11

Large-scale redundancy planning – vital action points

� Confirm local practice on any trades union representation: full-time

officials or employees’ representatives?

� Confirm the proposals for closure – the target dates, numbers,

negotiating mandate

� Decide on the ‘constituencies’ and number of elected representatives

for groups of affected employees not covered by union recognition,

and on the post-announcement timescale for completing the electoral

process

� Agree on an approach to enquiries from the press: ‘No

comment’/’Nothing to add to press statement’?

� Confirm the key managers and the retention terms they will be

offered

� Tell the key managers of these terms

� Confirm managerial responsibilities: Steering Group, Negotiating

Team, and Support

� Confirm the key employees and the terms they will be offered to stay

on

� Agree on a plan for communication:

� Confirm audiences: employees, customers, suppliers, media,

‘authorities’, others

� Prepare a ‘core statement’

� Agree on core internal and external scripts

� Prepare an initial message for contacting any full-time union

officials

� Prepare an announcement to employees

� Make a list of employees absent because of sickness,

maternity, holiday, et cetera. Prepare letters to these people

� Prepare Form HR1

� Prepare the section 188 letter

� Prepare answers to Frequently Asked Questions and circulate

them to key managers

� Consider: sabotage, discipline and service to customers

� Brief the key managers on the announcement and their role

� Prepare general communication to other locations

12

� Draw up an initial, broad timetable for consultative meetings with

employees’ representatives.

Large-scale redundancy – actions for the day of

announcement

� Advise managers, supervisors, any local union representatives and

shift workers to be present at meetings as mentioned below

� Brief managers and supervisors

� Brief any full-time union officials

� Meet local union representatives

� Agree on the date of the next meeting with full-time and local

representatives (timing of meetings will be subject to any need to

elect representatives for non-union categories)

� Meet all the employees present and inform them of the intentions

� Brief the staff in reception on how to respond to enquiries from the

media

� Issue a news release to the media

� Send Form HR1 to the Department for Business, Innovation and

Skills

� Get the sales team to inform customers

� Advise other plants of the announcement

� Contact absent employees

� Send a confirmatory letter to all employees containing, if necessary,

arrangements for nomination and election as employees’

representatives.

Outplacement

Outplacement is the term used to describe various initiatives designed to

facilitate an employee’s, or former employee’s, prompt transition into another

desired position, career or vocation (or the training for such).

The principal forms that we offer are individual counselling or coaching and a

workshop on ‘job-search skills’. Although there are some overlaps in broad

subject-matter, there are substantial differences of emphasis and approach.

Individual counselling or coaching is, as its title suggests, geared to the

particular individual and his or her needs and wishes. Of course, the

programme deals with such matters as finding job opportunities, preparing a

curriculum vitae, and interview techniques. But, because of its exclusive

nature, it can also devote time to the person’s reaction to redundancy, so that

a positive outlook and demeanour are (re-)established, and to his or her


13

personality traits and generic vocational interests, so as to explore suitable

options for the future. For these reasons, individual outplacement is provided

by a qualified psychologist.

The workshop, which is intended for a number of employees simultaneously,

can only touch relatively lightly upon the reactions and ‘make-up’ of individual

members of the group. Its focus is on the practicalities of job opportunities

and selling oneself, whether on paper, by phone or face-to-face. However,

with the introduction of appropriate external presenters, it can be extended to

deal with subjects such as managing finances, pensions and investments, and

state benefits.

Both types of programme normally feature the option for follow-up sessions or

advice. However, this process tends to be easier to manage on the individual

outplacement programme.

Our experience is that these offerings to departing or former employees are

well received by the participants and viewed favourably by the staff staying on.

They go some way to improving employee relations and settling things down

after a redundancy exercise. So, outplacement is a natural and sensible thing

for an employer to consider.

The type of programme that is appropriate will, ultimately, depend on the

employer’s wishes, the grade of employee and the attitude of the employee(s).

Given its considerably higher unit cost, it is fair to say that the use of the

individual outplacement programme tends to be confined to senior executives

or employees to whom the employer has a particular loyalty, or where the

legitimacy of the redundancy may be in some doubt.

300513

Costs

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Transitional management, Value chain analysis, Workforce planning

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