Compulsory Redundancy

Compulsory Redundancy: Rights, Processes, Examples

Sometimes forced layoffs may be the only way to overcome difficult circumstances in an organization. Although you can try to avoid this process through cost cutting, job relocation, or voluntary layoffs, it may be unavoidable.

If you are currently trying to navigate the redundancy process in the UK, here is everything you need to know about employee rights and due legal process, as well as some helpful examples.

What is a redundancy?

A dismissal for operational reasons, also known as compulsory dismissal, occurs when a company terminates the contract with an employee not for behavioral or performance-related reasons, but rather due to operational circumstances.

The most common reasons for dismissal for operational reasons are that employers

• Reduction in staff numbers
• Relocation of location
• Change in their services
• Termination of business closures

If a company closes a department or its entire company, the redundancy process is a little more straightforward because management does not have to decide which individual employees should be laid off.

However, when you cut staff, you have to decide who you let go, which often feels more personal to the employee and can lead to allegations of unfair dismissal or discrimination.

Of course, neither situation is ideal, which is why companies often offer a voluntary layoff before implementing a compulsory layoff.

Voluntary dismissal vs. compulsory dismissal

The difference between a voluntary dismissal and a compulsory dismissal is quite clear and obvious. When a company offers a voluntary layoff, employees have the opportunity to resign voluntarily, whereas a compulsory layoff does not.

When you offer your employees a voluntary layoff, you involve them more in the process and give them a say, which can make the experience a little less painful overall.

What are the alternatives to compulsory dismissal?

Termination for operational reasons should always be the last resort if there is a major organizational problem. Before laying off employees, consider the following options:

Reducing working hours or working days

Implement a modified work schedule that includes a reduction in hours or days worked (either temporarily or permanently). While this means a pay cut for employees, it also gives them the opportunity to take on a side job to supplement their lost salary if necessary.

Exemption

When you place an employee on leave, they are suspended without pay for a period of time. This can be a good option for a company if it knows it can furlough a certain number of employees for a certain amount of time each year to save money and avoid redundancy.

Retraining of employees

Is it possible to retrain and transfer employees from laid off departments to retain them in the company? If there is a department that is busy, growing, or needs help, this could be an effective solution, even if it is only temporary.

Restrict or prohibit overtime

Reducing overtime is not a popular decision in the eyes of employees, but it can give companies the additional financial flexibility they need. If necessary, explain to your employees that you are reducing overtime to avoid redundancies. Remaining transparent will help them better understand and accept the circumstances.

Introduction of job sharing

Job sharing means that two or more employees share a full-time position. The employees involved must agree on how to divide their working hours and days as well as their roles and tasks. Job sharing works best when employees choose to do so voluntarily, otherwise the situation can be difficult to manage.

Offer voluntary sabbaticals

Survey your employees to find out if they are interested in taking unpaid time off from work. If an unpaid sabbatical is financially possible for an employee, it can be viewed as a positive experience; an opportunity for them to recharge, focus on passion projects, travel, or spend more time with family.

Offer early retirement

If you have employees who are nearing retirement, consider offering them an incentive to take the next step. If their position is still needed, other employees who would otherwise have been laid off have the opportunity to remain with the company, even if they require additional training depending on their role.

Make other cuts

Instead of redundancies, can you achieve savings in other areas of the company? Would employees be willing to take more annual leave in return for a pay cut? Can the office transition to remote work to save on rent, overhead, and supplies? Is too much money being spent on entertainment and company events? Regardless of where the cuts are made, it is important that you discuss these changes with employees so they know what is happening and why it is happening.

The 6-step process of compulsory dismissal

Under UK law, companies must comply with a number of conditions for compulsory redundancies, including the introduction of a compulsory dismissal procedure, the consideration of all alternatives and the fair selection of employees.

Tip: Document your decision-making process thoroughly and clearly during this time to avoid unfair dismissal lawsuits. Include your layoff process in your contract or HR handbook to ensure transparency. Your company’s redundancy procedure should include at least the following:

• How the company chooses which workers to lay off.
• How long the decision will take.
• Which meetings will take place and when.
• How an employee can challenge his or her dismissal.

Here’s a closer look at the process:

1.Acknowledge and clarify

Before you give notice of termination for operational reasons, you should make sure that it is really necessary. Review your company’s needs, barriers, and any other alternatives to ensure there are no other viable options. If you have the time and resources, you should test the alternatives for a period of time before deciding to terminate your employment for operational reasons.

Once management has decided that compulsory redundancy is the right course of action, the next step is to determine which functions and departments should be laid off.

2.Select employees

Before you announce the layoffs, you should decide what criteria you want to use to make the layoffs. In this case, you should set clear criteria and metrics.

You can e.g. Consider employees who have a history of poor performance or who have had multiple disciplinary actions taken against them. Or you could take a last-in, first-out approach, where the most recently hired employees are laid off.

Another option is to determine layoffs based on skills or qualifications, as you want to retain your strongest and most qualified employees.

Remember: it is a violation of anti-discrimination law to fire someone for reasons such as age, disability, gender, marital status, pregnancy or maternity leave, race or religion.

3.Offer voluntary layoff

While employers are not required to offer voluntary redundancy, this can be used to mitigate the layoff and allow employees to choose their next step.

However, sometimes voluntary dismissal is not enough. If no employee volunteers or if further financial cuts are required, you may still need to initiate the compulsory redundancy process.

Even if an employer does not offer voluntary redundancy, employees can propose themselves for this without the employer having to consider or accept their offer.

4.Conduct consultations

Employees who are eligible for compulsory redundancy are entitled to a consultation with their employer before a final decision is made. This formal procedure includes at least one meeting.

At this meeting, the employer and employee discuss why the layoffs are necessary, why the employee in question is eligible for layoff, whether and which other jobs are possible for the employee, and what other questions or concerns the employee has.

The employee should have the opportunity to explain why he should not be dismissed or why he considers his dismissal to be unjustified. At this point, employees have the right to a representative, e.g. B. a union representative or a person of your choice.

If more than 20 employees are laid off within 90 days (also known as a mass layoff), the employer must consult the employee representatives and not each individual employee.

For groups of 20 to 99 employees, consultations must begin at least 30 days before receiving notice of termination. For groups of 100 or more workers, consultations must begin 45 days in advance.

5.Delivery of dismissal notices

Employees must receive a notice of termination stating how long the notice period is, when it begins and whether it is a compulsory or contractual termination. The length of the notice period depends on the employee’s length of service (the employer can grant more, but not less, notice period):

• Employees who have been with the company for a month or less do not have to be given notice of termination.
• Employees with a length of service of at least one month and up to two years should be given at least one week’s notice.
• The notice period is one week for each year of service, but a maximum of 12 years.
• If the employee has been with the company for more than 12 years, they should receive a notice period of 12 weeks.

6.Organize and distribute severance packages

Employees who have been with the company for more than two years are entitled to a weekly statutory redundancy allowance, which is calculated based on age and professional history:

• Employees receive half a week’s pay for each full year they were under 22 while employed by the company.
• Employees receive one week’s pay for each full year they were between the ages of 22 and 41 while employed by the company.
• Employees receive one and a half weeks’ wages for each full year that they were 41 years of age or older while employed by the company.

To calculate an employee’s weekly wage, the average weekly wage received in the 12 weeks prior to termination is determined. The maximum amount a worker can receive under this scheme is currently £544 per week. Redundancy pay under £30,000 is not taxable.

Conditions: Employees may not be entitled to severance pay if their employer offers them a reasonable work alternative and they refuse it without good reason. There are also some industries where workers are not eligible, including former longshoremen, government employees, domestic workers and others.

Finding an easier way through a difficult process

While firing an employee is never easy, redundancy can be particularly difficult for everyone involved.

To make the situation easier for everyone involved, you should follow a clear and transparent process and know what rights your employees have regarding terminations, hearings and pay.

Consider alternatives or offer voluntary redundancy before taking action, as compulsory redundancy should only be used as a last resort.