Does your business need to make redundancies?

Does your business need to make redundancies?

In these difficult economic times, many businesses across the country are facing the difficult decision to reduce their workforce through redundancy.

Here, Holly from our employment team looks at some of the main considerations in handling this tricky process correctly and seeking to avoid the pitfalls which can very easily lead to claims and tribunal proceedings.

What steps must my business take when considering making redundancies?

If you are considering making redundancies,  is imperative to follow the correct processes as a business, prior to making employees redundant to ensure that dismissal decisions are fair and reasonable in the circumstances.

Failing to do so could result in employees commencing claims and employment tribunal proceedings for unfair dismissal, which can be very costly and time consuming for a business.

Basic steps would include having a group meeting with your employees before any redundancy process is started, identifying the pool of staff and selection criteria and then having individual consultation meetings with all those employees at risk. It may also be appropriate to ask for volunteers.  It’s imperative that consultation takes place prior to any decisions being made, for example to consider whether there are any alternative positions, this is often where businesses fall down and leave themselves open to potential claims.

If more than 20 employees are to be made redundant in one establishment then collective consultation procedures apply.

Should I consider using a Settlement Agreement?

You may wish to present the employees you are making redundant with a Settlement Agreement reflecting the terms of their redundancy package and containing clauses protecting your company from the possibility of any future claims by that person. By law, you must ensure that the employee receives independent legal advice on that document and that a solicitor signs a declaration that the advice has been given prior to the employee signing the Settlement Agreement.

It is likely that in order to agree a Settlement Agreement, the employee needs at least some additional benefit than what they are entitled to under the law and their contract – whether monetary or perhaps the opportunity to receive a payment without working their notice.  If a Settlement Agreement can be agreed, then they are very useful tools in granting peace of mind for business owners.

How long does the process take?

There is no prescribed timescale but the shorter the consultation period, the more likely it is that the quality of the process may be called into question.  For a small-scale redundancy, involving one or two employees, a couple of weeks may be adequate but if larger numbers are involved, the process needs to be started much sooner.  If collective consultation is required then the minimum consultation period is 30 days prior to dismissal.

How much redundancy must my company pay?

The level of statutory redundancy payment to which your employees are entitled depends on how old they are and how long they have worked for you.

If an employee has worked for you for two years or more, they are entitled to receive a minimum statutory payment in addition to any contractual redundancy or other benefit that you may provide.

Employees who are dismissed without being given full notice in accordance with their contracts will also be entitled to payment in lieu of notice.

What is the minimum statutory amount?

The minimum legal entitlement is as follows:

• Half a week’s pay for every year of service while the employee was less than 22 years of age, plus
• One week’s pay for every year of service between the ages of 22 and 40, plus
• One and a half week’s pay for every year of service while the employee was aged over 41.

For statutory redundancy purposes, the maximum week’s pay is currently set at £538, so if an employee earns more than that amount per week, the maximum used to calculate their entitlements is £538 per week.

The length of service for which an employee can claim is also capped, at 20 years. If an employee has worked for you for longer than that, they can only claim the maximum of 20 years.

This means that the maximum redundancy payment a person can receive under the statutory scheme is currently £16,410 (which is 30 weeks at £538 per week). If an employer cannot afford to pay their employees redundancy pay, they can apply to the Redundancy Payments Service (RPS) for financial assistance.

How can we help?

If your business needs to make employees redundant, you must ensure the correct procedures are followed, to avoid expensive potential tribunal claims in the future.

Our employment team can help with every step of this process, from drawing up the initial redundancy procedures, assisting with individual consultation meetings, liaising with your employees, preparing individual draft redundancy letters and dealing with any issues that arise.  We can also prepare draft Settlement Agreements, liaising with the solicitors who are giving your employees their independent legal advice to finalise the process in the shortest time possible and with the maximum protection for your business against future claims.

Alternatively, we can assist with providing independent legal advice to the employees you are having to make redundant, to ensure they understand their entitlements and the settlement you are giving them and providing you with the required Certificate of Independent Legal Advice. Our turnaround is quick, our fees reasonable and our service exemplary.

Contact our employment team on 01905 900919 or email at holly@bradleyhayneslaw.co.uk for more information on how we may be able to assist you.