Small businesses remain under enormous pressure as they do everything they can to weather the current COVID-19 storm and remain solvent in uniquely challenging circumstances.
No business owner takes the decision to make members of their team redundant lightly, however, once all alternative possibilities have been thoroughly investigated, there may be no other option. Furloughing people isn’t possible for every business.
It is essential that employers and business leaders follow the stringent procedures set out by the Government and tread very carefully if they are to avoid accusations of unfair dismissal which could potentially lead to an employment tribunal.
In this article, we summarise some of the main criteria for selecting employees for redundancy as part of a structured plan which will hopefully minimise disruption and help business owners treat their team members fairly and legally.
- Voluntary redundancies
- Three steps for selecting an employee for redundancy
- Alternative employment
- Calculating redundancy pay
- Maintain accurate records
In these uncertain times with predictions that we are entering a new recession, few employees are likely to want to take voluntary redundancy, although in some circumstances, this might still be appropriate and is certainly worth investigating. It may avoid you having to decide which method to use to select those that will be chosen for compulsory redundancy.
Three steps for selecting an employee for redundancy
1. Identify the area of the business where cuts are needed and the number of redundancies necessary
When selecting employees for redundancy it’s important to decide the area of the business in which cuts need to be made. For example, there may simply not be enough work to keep on three full-time sales staff when one would be sufficient. This will help with determining who to include in the pool from which the selection will be made. This judgement needs to be made for genuine business reasons.
2. Determine ‘the pool’
This is the list of all the employees who fall within the category outlined above. In many cases, the pool of staff to choose may seem obvious. In the example above you may just include the three sales staff in a redundancy pool. However, the pool should not be confined to those currently occupying those roles but should include everyone capable of doing that work.
There is no need to determine a pool or undertake a formal redundancy selection process when the whole business is closing down. Also, where the post being made redundant is unique it may not be reasonable to form a redundancy pool but rather focus on an individual employee.
3. Set clear and objective criteria
When deciding on the selection criteria it needs to be objective and only based on factors that can be proved. The employer will draw up a list of the criteria which will help fairly choose who to make redundant from the pool of employees. These are run past the employees and explained.
It’s important to choose criteria so the company will end up with the best workforce after redundancies are made. It can do more harm to the company to lose some of the best staff in order to make some financial cuts. Making sure the necessary skills and experience are retained is crucial.
Any assessment should be carried out by a line-manager with direct knowledge of the employees’ work, ensuring that the criteria are applied fairly and consistently. Extra care needs to be taken to not discriminate against anyone. An example of this would be penalising someone based on any absences or attendance issues in relation to disability, pregnancy or maternity.
It is important that consideration is given to alternative employment to avoid redundancies, could the employee work in another department, can they be upskilled etc?
Calculating redundancy pay
Once you have selected a member of your team for redundancy, it is important to calculate their statutory pay and settlement quickly and accurately.
Maintain accurate records
Be sure to keep accurate records about each stage of the redundancy process related to each employee. This includes all correspondence with employees. If a dispute does arise regarding a redundancy, having the ability to access a full audit trail of information about the steps you have taken is highly important.