Why the consultation period matters when making redundancies

Running a business can be challenging, and never more so than when decisions need to be made that potentially affect the lives and livelihoods of employees.

Sadly, however, it is part and parcel of the day job, and most business owners and decision makers will grapple with the prospects of having to let people go, and the subsequent redundancy process, at some point during their career.

While the decision itself might be tough, it’s absolutely vital that the process is handled correctly, or employers could find themselves facing legal action.

Here Katie Ash, Head of Employment Law at Banner Jones Solicitors, explains what the correct process is when proposing job losses, as well as the importance of factoring in a thorough consultation period before any final decisions are made and notices are given.

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In the UK, employment law protects employees from unfair redundancy selection. As the recent case of P&O Ferries has highlighted, a failure to follow the correct procedures when it comes to consultation periods, could land a company in really hot water facing damage to their reputation, or worse, in front of politicians, an employment tribunal judge, and even facing a criminal prosecution. 

The P&O case was slightly different in that it was subject to Maritime Law rather than English Employment Law and so it is difficult for us to say exactly what they did and didn’t do wrong. What we can do however, is to make sure that employers who are looking at making redundancies know how to do this correctly.

 

Firstly, when considering redundancies, it’s important to stress that it is the job or role itself that is redundant, and not the person. That is an important differentiator.

There must be a genuine reason behind why an employee is being made redundant too, not simply because a business wants to get rid of a troublesome employee. A proper and meaningful redundancy process also needs to be planned, with sufficient time given to communicate the proposals to those at risk of redundancy before commencing the redundancy consultation process. If you are planning a redundancy situation then you must notify the Redundancy Payments Service (RPS) by filling out an hr1 form before the consultation starts.

Depending on the number of employees affected, consultation may have to last a minimum of 30 days and take place between the employer and their trade union representatives or elected employee representatives. If there is no trade union or existing employee representatives, then an election process will need to be undertaken; and this can add a significant amount of time to the process before any consultation has actually taken place. With 19 or fewer redundancies, there is no minimum requirement for the length of the redundancy consultation period, however it would be considered good practice to fully consult with those affected in reasonable time. Where 20 or more redundancies are proposed within a 90-day period from a single establishment, it is a legal requirement that the consultation period must be at least 30 days before the first dismissal can take effect. This is known as a collective redundancy consultation or a collective consultation process. This increases to 45 days for large scale redundancies where 100 or more redundancies are proposed.

 

Why does it matter?

Following the correct redundancy process  is important for a number of reasons. Firstly, because it is the law, and businesses and business owners could face considerable claims for compensation where they get it wrong; and in the case of a failure to consult for the minimum period of time where 20 or more redundancies are proposed, could also face criminal penalties, including fines, as well as compensation claims for up to 13 week’s actual pay per employee.

Secondly, a fair consultation process allows employers and employees to discuss other options that could avoid redundancy entirely, whilst also giving workers time to prepare and begin searching for alternative employment. Redundancy notices should be issued once the consultation is complete.

By completing a meaningful redundancy consultation with the individual employees, it also allows them to understand:

• The reasons for the proposed redundancies including the selection criteria used;
• If redundancies can be avoided;
• How the impact of redundancy can be mitigated, for example, by providing similar work in an alternative role or retraining.

In the case of P&O Ferries, workers were left without any form of employment and were not given a fair process to provide feedback and explore whether redundancy was necessary.

The full extent of the punishments that the business will face has yet to come to light, but it’s likely to be far reaching and costly.

It’s important to remember that when making an employee redundant is not a fast and easy way to solve problems within your business. Without a genuine reason of redundancy, businesses could face legal proceedings for unfair dismissal, which not only costs money, but your reputation, too.

If you would like further information on what information you need to provide to those staff during a redundancy consultation meeting or require legal advice on the redundancy process itself, get in touch with the Banner Jones employment law team on 0344 558 4104.