No employer, leadership team or HR manager wants to have to consider redundancies. However, 2020 has been a year of difficult choices and, thanks to the ramifications of the ongoing pandemic and the current economic situation, many businesses will be forced to make more tough calls in the near future. The good news is that there is a way to make the redundancy process smoother and more manageable for everyone involved.
In this blog, we’ll provide pointers on how to manage the process as well as possible, sharing key insights gleaned from our years of experience helping companies in similar situations. We also explain our approach to supporting clients through this challenging time, providing commercial and practical guidance and the reassurance of a fixed price service.
Redundancy in the COVID-19 era
Make no mistake: redundancy is an inherently difficult process, for those at risk, for the colleagues who remain and for the leadership and HR teams responsible for the process. However, it’s even tougher in the current climate, when so many people have already experienced an enormous amount of unprecedented stress (from dealing with illness, worries about health and family members, childcare concerns and home schooling, lack of space, cancelled holidays… the list goes on). In addition, the job market is not buoyant, which means that employees having discussions about potential redundancies will probably be aware that finding a new job won’t be easy.
As such, the process may be more painful than usual for your employees – already stressed, aware that the job market is precarious – and they may be more likely to make a claim if the process or outcome is open to challenge. After such an unexpectedly challenging year when so much feels uncertain, people may well feel they have less to lose. Now, more than ever, it’s absolutely vital that redundancies are done ‘well’.
What does it mean to do redundancy ‘well’?
In brief: it means the process is conducted in a way that is both legally compliant and which the organisation is likely to recognise as fair, even if unwelcome. This is important both to those leaving and those staying at the firm.
For many companies, this will be the first round of redundancies they’ve ever faced; but even if you have been through a redundancy process before, in almost all circumstances the recommendation is to take advice from the outset. The law in this area is complex, and it is important to follow a fair process, even where the need to make cuts is clear.
The team at Bellevue Law has a wealth of experience in this process, gained in international, City and national firms and working alongside mid-sized businesses (including during the pandemic).
Honestly, we couldn’t have thought of anything better to have a more functional working relationship … one of the best partnerships I have experienced in my career – thank you so much!
Our approach is to partner with our clients: guiding you from start to finish, advising you on an appropriate process, and helping you to balance legal and commercial considerations. We will lead you through selection of potentially affected employees, helping you assess risk and budget for the redundancies, and preparing all documentation. Where clients feel this would be helpful, we can also attend consultation meetings with employees, together with a member of the HR or management team. We understand just how hard it is for you – and we’ll stand alongside you throughout.
Our approach is – above all – humane. Treating employees with sensitivity and care is not only the right thing to do, but also – in our experience – it makes the process run more smoothly and minimises the risk of damaging the morale of remaining employees. This ethos is something our clients specifically thank us for (and, in our view, it’s never been more important).
Bellevue Law were a joy to work with and made our organizational restructure go smoothly … knowledgeable, professional, friendly, compassionate, as well as prompt and thorough on all work and questions we had. I would strongly recommend the team.
Starting the redundancy process is never easy – but it can be manageable. Here are some top tips and things to consider:
- Take advice from the outset. As mentioned above, whether your business is new to the redundancy process or not, this is a complex area of law, and Covid has made it more so: so it pays to take advice sooner rather than later.
- Start planning as soon as you can. The process inevitably takes some time. It is possible to conclude it swiftly – for example, we’ve worked with several clients who needed to make under 20 employees redundant within a 90-day period, and, as such, have completed complex consultations for them in just two weeks – but this can’t always be guaranteed. Every situation is different and there are a range of options as to how to conduct the process, depending on your priorities and circumstances, so you will need to build in an adequate amount of time for planning before you can launch the process.
- Begin with commercial decisions. Ask yourselves: why are you looking to make redundancies?
- Has revenue fallen/do you anticipate a downturn due to Covid/the economy?
- Has the shape of your business changed during the pandemic, or does it need to do so?
- Can you identify, broadly, which roles are likely to be reduced/eliminated?
- Understand your legal obligations. It is important to take advice on what this means for your business and its circumstances, but in summary to make redundancies fairly:
- The dismissals must be due to redundancy, as legally defined. In current circumstances, this will often be due to financial constraints requiring headcount reductions or the need to change the shape of the business as a result of Covid.
- The employer must select employees for redundancy fairly. In particular, where some employees carrying out a particular function will be made redundant and others will remain, the selection criteria, and their application, must be objective and fair.
- The employer must warn potentially affected employees that their roles are at risk, and carry out a fair consultation process, explaining why the redundancy is proposed, allowing the employee to challenge their selection if they wish and considering any alternatives to redundancy, including alternative vacancies.
- There are additional requirements – and a longer timeframe – if you are making 20 or more employees redundant within a 90 day period.
- Consider whether there may be additional legal risk in making particular employees redundant. For example, have they previously raised a grievance or might they feel their selection is discriminatory? This doesn’t mean you can’t include them in the redundancy programme, but you should take advice and manage the process with care.
- Budget for the redundancies. Your financial planning will need to factor in certain elements, such as:
- How much notice pay are the affected employees entitled to?
- Will you pay statutory redundancy pay or offer an enhanced package?
- If the latter, typically this would be in return for employees signing a settlement agreement waiving claims against the business. Clearly this comes at a cost, but it can make for a swifter, more amicable, process in addition to drawing a line under any potential claims against the business. In order for the agreement to be deemed valid, the employee in question must first have taken legal advice – for which the company typically makes a financial contribution (so that’s another item to factor into your budget).
Bear in mind that if employees are currently furloughed you can continue to claim the furlough grant (up to 31 October 2020) during their notice period – but not if you choose to terminate their employment immediately and pay them in lieu of notice.
- How will you undertake consultations? Due to current circumstances, consultation is likely to be conducted remotely in many cases (e.g. by Zoom/Teams). Though this mode of communication has become the new norm for so many people, it’s still not the medium through which most of us would choose to have a difficult conversation, so it’s important to be mindful and even more sensitive in your approach.
- Have you considered fair selection criteria? If you are reducing the number of employees in a particular role, you will need to think about the criteria you will use to select for redundancies, and how you will score employees. We expect to see more employees challenging their selection, and it is important that you can demonstrate that you used – and documented – a fair selection process.
- Have you taken into account Covid-related considerations?
- For example, you should be careful not to automatically select those who have been furloughed, particularly where this was due to shielding or other health concerns, or childcare. To do so risks an unfair dismissal – and possibly discrimination – claim.
- You should also exercise caution with regard to employees who have resisted requests to come back to work in person.
- This doesn’t mean those people can’t be made redundant, but the health concerns/childcare/health and safety concerns should not be the reason; and you should document the selection process carefully.
- How will you communicate the news to staff who aren’t affected? There will be a limit to what you can say to protect the confidentiality of the process whilst it is ongoing, but it is still important to communicate clearly to minimise uncertainty and damage to morale.
Bellevue Law are here to help: expert advice at a fixed price
The work and attorneys which Bellevue Law provides are both exceptional! Our attorney facilitated an amazing working relationship with several of our parties that were involved. She was thoughtful of the situation at hand, very knowledgeable, well-researched and most of all, extremely good at relationship-building. Bellevue Law and its team is invested in a successful outcome and goes over and above to ensure that their client is not only satisfied but has everything they need for strong decision-making in the future.
Wherever you are in the process – and whatever your experience with regard to managing redundancies – Bellevue Law are here to stand by your side. Our team of senior ex-City lawyers has a wealth of experience providing practical support to businesses going through redundancies, coupled with a truly human, personal approach, and will provide a supportive and knowledgeable guiding hand. We are also conscious that budgets are under pressure and, with that in mind, are able to offer the certainty of a fixed fee. Contact us today to discuss your situation and how we can help you move forward.
Frequently asked questions
How do I prepare for a redundancy consultation?
As described above, it’s important to understand the legal framework for making redundancies [link to Understand your Legal Obligations bullet]. You will need to choose and apply fair selection criteria and decide whether you will offer statutory redundancy pay only or offer enhanced packages in return for employees entering into settlement agreements. It is important to build in time for this planning process into the overall schedule.
What do you say to people when you have to make them redundant?
When planning consultations with individuals, it can be helpful to have a script or bullet points of the items to be covered, such as the rationale for the potential redundancy and the employee’s provisional selection, and consider in advance any questions the employee may have. In some cases, the calls may be very challenging emotionally, and of course should be handled with kindness and sensitivity. It’s nonetheless important for both parties that you are clear about the rationale and process as well as addressing questions the employee may have – or agreeing to do so later if you can’t answer immediately.
Is the redundancy consultation process confidential? How do we communicate with those who are unaffected by the consultation?
Discussions with individual employees should be treated confidentially, but where an employer is planning several redundancies, it is unlikely to be possible to keep this fact confidential. In our experience, it’s often best for employers to communicate internally the fact that the process is happening, while making clear that it’s not possible to provide many details while the process is underway.
Can we make groups of people redundant without consultation?
Consultation is a fundamental part of a redundancy process. Where fewer than 20 redundancies are proposed within a 90 day period, there is no legally prescribed consultation process, and in practice it can often be completed relatively swiftly, but those at risk must be warned and consulted about the potential redundancy.
What is the minimum period we need to consult for?
If you are planning to make 20 or more employees redundant within a 90 day period, there are prescribed timeframes. If you are planning fewer redundancies, there is no legally mandated period, and the time required for a fair process will vary depending on your circumstances and those of your employees. We have concluded complex consultation processes for clients in two weeks, but this cannot always be guaranteed and it’s also important to allow time for planning before commencing the consultation process.
What are the stages of a redundancy programme?
As outlined above, you will need to include time for planning, selection of potentially redundant employees and consultation before confirming the redundancies and giving employees notice.
Can we require our people to work during a redundancy programme?
Yes, in general employees may be expected to work as normal during a redundancy programme. However, some may feel unable to do so, at least immediately after being informed that their roles are at risk, and it’s sensible to offer them the opportunity to take some time off.
What questions are we likely to be asked by our employees during a redundancy programme?
Questions we have seen employees commonly ask over the years include:
- Why are you making redundancies?
- Why have I been selected rather than others?
- How long will the consultation process take?
- What will my package look like if I am made redundant?
Disclaimer: this material is a general overview only, and is not intended to provide legal advice.