Managing Redundancy

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Managing a redundancy process

A Guest Article by Richard Linskell November 2007
www.tcii.co.uk

Building Profitable Business

Managing a redundancy process
A Guest Article by Richard Linskell for TCii Management Consultants

Impact of the credit crunch
As a result of the recent credit crunch, many sectors are already starting to notice a downturn in business, or at least more difficult trading conditions. This may, in due course, impact on profits, leading many businesses to consider whether they need to make redundancies. Implementing redundancies can be one of the most difficult tasks which a manager faces. Not only will this be an emotionally charged process, but there is also a wealth of legal issues that need to be tackled. The purpose of this article is therefore to set out some practical advice on the steps which employers need to take before making any employee redundant. The starting point is to note that redundancy is often used euphemistically to cover any situation that is not gross misconduct. In fact, the statutory definition of redundancy is very precise and covers the following situations: • • where the employer needs fewer employees to do the same (or less) work; or where the business is closing down completely or moving to another location.

Before deciding to make an employee redundant, you should consider whether redundancies can be avoided by freezing recruitment, reducing overtime or taking other measures to address the situation, such as temporary redeployments (with consent, where appropriate). If it appears that redundancies may be unavoidable, a number of procedural steps must be taken before reaching a final decision, failing which any subsequent dismissal is likely to be unfair. This article does not deal with the additional procedural requirements that must be followed where 20 or more employees are at risk of being made redundant at the same establishment, in particular the obligation for collective consultation. If it is likely that this number of redundancies will be required, you should seek specific advice.

Selection
If an employee holding a unique post which is no longer needed is to be made redundant, selection will usually not be necessary and that employee may be made redundant, subject to following the statutory minimum dismissal procedure (details of which are set out below).

Managing a redundancy process A Guest Article by Richard Linskell for TCii Management Consultants

www.tcii.co.uk

2

Building Profitable Business

Managing a redundancy process
A Guest Article by Richard Linskell for TCii Management Consultants

However, if there are to be redundancies from amongst a number of employees doing the same or similar jobs (known as a “selection pool”), you must act fairly in choosing who is to be made redundant. This will involve using fair criteria that are as objective as possible. This is often done by way of a matrix in which points are awarded to employees for a range of criteria, and the selection is based on the number of points scored. The criteria adopted should, as far as possible, not merely reflect a personal opinion but should be capable of being verified. Factors that are commonly used in such a matrix include: • • • • • absence record/timekeeping conduct disciplinary record performance, particularly if this can be accurately measured skills.

Length of service (last in, first out) was commonly used in redundancy situations but it is now rarely used, partly because it is a blunt instrument in deciding what skills the company needs going forward and now also because employers risk breaching age discrimination legislation (by advantaging older employees) Once you have decided which selection criteria to adopt, it would be worthwhile inviting all employees in the selection pool to a meeting to warn them of the potential redundancy situation. Warning of the impending redundancies is one factor an employment tribunal can take into account...
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