Losing your job is terrible, but delivering the news is difficult too.
At this testing time it is important to ensure the process is approached in the right way.
Failure to follow correct redundancy procedure can make things harder for staff and land employers before an expensive employment tribunal.
Problems occur when people make up their minds that something is going to happen and the outcome becomes predetermined, says Laura McFadyen, employment specialist with lawyers Stephens Scown.
Employers need to be objective, fair and document the procedure carefully.
“It’s a problem if you make assumptions at the outset and are not taking on feedback from the employee.
“It is very procedural and you need to take it step by step, following a fair and reasonable process and being able to demonstrate this by having a good paper trail of documents.”
In terms of procedure, she suggests the following:
1. Be clear about what redundancy is
Before taking any action, think about whether it truly is a redundancy situation.
A member of staff cannot be made redundant because there is an issue with conduct or performance.
However, if the business has a reduced need for labour because of changes in the way work is carried out, part of the business has stopped operating and a job no longer exists, or the farm is struggling then that is a redundancy situation.
You will need to follow a fair and reasonable redundancy procedure, which is particularly important for employees with two or more years of service who may be able to bring claims of unfair dismissal.
But it is worth taking legal advice regarding any staff who haven’t been with you for two years, in case they might be able to bring another type of employment claim.
2. Pick the selection pool for redundancy
If you are a dairy farmer who has decided to sell up and only employ one herdsman, then the decision about who to make redundant is clear.
Workers who have housing as part their job
The situation regarding workers who have been given housing as part of their job depends on the type of tenancy they have. If there is no written agreement and an employer has told the worker they can stay in a house while working on the farm then they are likely to have created an Assured Agricultural Occupancy.
This means that under the Housing Act the worker has a contractual right to stay in the house even if no longer employed by the business.
The ability to remove the worker from the accommodation is limited, although it may be possible to increase the rent to market levels.
To avoid this problem, employers are strongly advised to create an Assured Shorthold Tenancy (AST) when a new employee first starts working for them.
This means they must charge a rent of more than £250/year to live in the house and the worker must be given a notice which confirms their AST.
Employers with an AST in place can give two months’ notice to a former employee to leave their accommodation.
However, those with more than one employee need to consider who should be in the selection pool for possible redundancy.
If you employ five people in similar roles they all need to be put in the pool and then objective selection criteria applied to reach a score for each employee.
Whoever scores the lowest will be the person who leaves, assuming that an alternative plan does not emerge during the consultation process.
3. Choose objective selection criteria
An employee could make a claim of unfair dismissal if the selection criteria on which they are judged can be ruled discriminatory.
For example, it could be dangerous to take a last in, first out approach as a younger worker might be able to mount an age discrimination case.
Typically, criteria may include attendance and disciplinary records, skills and experience, performance, aptitude, formal qualifications, specialist skills.
If challenged on the criteria you need to be able to show that you have gone through the process in a fair and objective way.
4. Set up a group meeting
The next step is to meet with all employees who might be made redundant and explain the reason for the potential redundancies.
This marks the start of the redundancy consultation process and may be best done as a group meeting. It should cover:
- Reasons for potential redundancies
- Explanation of how many jobs are at risk of redundancy (make sure it is clear that proposed redundancies are only a possibility) and that ways of avoiding redundancies are being explored
- Asking employees for suggestions of ways to avoid redundancies
- Consider asking for volunteers for redundancy
- Explain any pools and proposed selection criteria
- Explanation of right to time off to seek alternative employment.
- The idea is to consult to see if there is any way to avoid a redundancy. Show you are engaging with staff, taking on board what they say and not just paying lip service to their comments. At this meeting it is important to give staff members a letter confirming in writing the situation and the selection criteria to be used. Employers should also take a note of the meeting.
5. Carry out the scoring process
Just as the criteria must be objective, so must the process for scoring each person who is up for redundancy. To avoid problems, it is advisable that two people do the scoring.
6. Send second letter to employee
The next step is to write to those employees that have been provisionally selected for redundancy, inviting them to a meeting to discuss their provisional selection.
While not a statutory requirement, it is best practice to invite a member of staff to be accompanied to the meeting if they prefer this.
The letter needs to be reasonably detailed, setting out reasons for the redundancy situation and for provisionally selecting the employee for redundancy, also summarising the consultation that has been held with them to date.
Explain that no final decision has been made and that a further meeting will be arranged if their selection for redundancy is confirmed.
7. Hold first individual consultation meeting
Employers must hold two consultation meetings with any employees under threat of redundancy. If you are selecting from a pool, you will need to provide details of the selection criteria and the employee’s assessment under those criteria.
The meeting gives the employee a chance to challenge those scores and put forward any alternative ideas. You should also discuss details of available alternative roles within the business (failure to consider employees for roles that require retraining or at a lower grade might lead to an unfair procedure).
Employers are legally obliged to offer suitable alternative employment wherever possible or the staff member can claim unfair dismissal.
As a result of these discussions you might change scores or even change your plans. Take detailed notes of the meeting.
8. Follow up any suggestions
After the first meeting, follow up any suggestions made by staff which might avoid redundancies and consider any representations made on scores.
If any employee’s score changes as a result of this process, check whether this will result in a change to the group of employees provisionally selected for redundancy.
If so, repeat relevant parts of the procedure with the other employees to ensure everyone is getting the same treatment.
9. Arrange second individual meeting
Assuming that nothing has changed, there will need to be a meeting to explain to the employee they have been selected for redundancy and to go through the redundancy package.
The employee should be given a dismissal letter which confirms the decision to dismiss them as redundant and specifies the termination date.
It should explain the calculation of the redundancy payment and any other payments to be made, while also highlighting the employee has the right of appeal.
Take detailed notes of the meeting.
You should confirm to employees who were at risk of redundancy but who will continue in your employment that this is the case.
10. Statutory redundancy pay
Staff will be eligible for a redundancy payment if they have more than two years’ continuous service. The payment should be made promptly upon the redundancy dismissal and is calculated based on length of service and age of the employee.
Workers are eligible for half a week’s pay for each full year they were under 22, one week’s pay for each full year they were 22 to 41, and one and a half week’s pay for each full year they were over 41. Length of service is capped at 20 years and weekly pay at £475.
The maximum amount of statutory redundancy pay is £14,250 although individual contract terms can offer more.
Additional information for this article was supplied by Mark Richardson, a specialist in agricultural disputes with Stephens Scown.