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Although the furlough scheme has been extended, we have seen a very noticeable increase in clients consulting us regarding redundancy – employers looking for advice on making redundancies and employees consulting as after their employer has warned them they are at risk of redundancy.

In the media every day there are repeated warnings of “thousands of redundancies” coming our way in the economic doom and gloom.

Against this background, there is a feeling that the employment law or redundancy rules have been relaxed, or that we are in exceptional times and the normal rules don’t apply.  Many thousands of employees have been away from work on furlough, or have been working from home, and it perhaps feels slightly easier to ‘let an employee go’ in those circumstances.

This is not the case.  Redundancy procedures must be followed by employers, even during the Covid-19 pandemic.  Expensive Employment Tribunal claims could be heading your way if not.

Employees have the usual protections under employment law.

Below we have set out some of the basics.  The McKinstry Company can guide employers, or support employees, in navigating these procedures – please do contact us.  Whether it is for a quick bit of guidance or you have a complex issue to address, we would be happy to help.

Qualifying Service – 2 years

Employees must have worked for the employer for two full years to qualify for protection from unfair dismissal.  If an employee does not have that length of service, their job can be terminated without following redundancy procedures – as long as they are given their appropriate notice period and paid everything they are owed under their contract of employment.

Claims based on discrimination can still be raised even if an employee does not have two years’ service, but claims for unfair dismissal cannot.

“Without Prejudice” (off the record) Discussions and Settlement Agreements

Employers are allowed to have “without prejudice” or “off the record” discussions with employees.  In these discussions, employers can advise the employee that redundancies are being contemplated and propose a redundancy package.  If a redundancy package can be agreed then an employer would ask their employee to sign a Settlement Agreement meaning that the employer would be protected from any future claims and the employee would have a contract setting out their right to their various payments on termination.

To make a Settlement Agreement valid, the employee has to be given independent legal advice.  Usually the employer would pay for that advice, so there should be no cost to the employee.

Usually, the redundancy package offered would be more generous than the basic payments the employee is entitled to.  An employee will be entitled to be paid in full up to their end date for contractual entitlements, such as pay for any unused holidays, pay in lieu of working their notice period and pay for any bonuses or commissions they are due.  They are also entitled to statutory redundancy pay.

Employees are entitled to the above sums.  They are not being paid by the generosity of the employer.  If that is the only package being offered, there is no reason to sign a Settlement Agreement.  The employee is entitled to these payments even if they do not sign.  Signing would mean giving up certain rights, and the employer would be getting protection from employment tribunal claims for free.

Instead, if employees are being asked to sign a Settlement Agreement they should ask for some compensation for doing so.  This compensation would be paid tax free up to £30,000.

It is important that without prejudice discussions are organised and conducted properly because if so then they can be a very effective and efficient way to gain a “clean break” of the employment relationship.  If an agreement is not reached, everything goes back to normal, the employee continues working as if nothing happened and the discussion cannot be referred to in future proceedings.  If the discussion is not handled correctly then that may open the door to an employee claiming they have been unfairly treated or that incorrect procedures have been followed.

Compulsory Redundancy

If it is necessary to make compulsory redundancies then it remains essential that the correct procedure is followed.

In broad terms, this means staff should be notified that their roles are at risk of redundancy as soon as this becomes a realistic possibility.  There should then be a consultation period during which meetings should be held with the employees.  Following the consultation period, the employer must decide which roles are to be made redundant and which employees are to be dismissed.

The procedure to be adopted will vary slightly in each case depending on how many roles are to be made redundant, how many employees are at risk of redundancy and other factors.  It is crucial in every case that the procedure is objective and fair.

We strongly recommend that any employer considering making redundancies consult us for guidance with the process.  Employers are allowed to restructure their business and allowed to make redundancies if necessary. If the process is handled correctly then employers have nothing to fear.

Difficulty arises where the employer fails to follow an appropriate procedure – they expose themselves to potentially costly tribunal litigation.  This can be avoided and the risk minimised by taking advice early.

Conclusion: Redundancy procedure still matters!

The point of this article is not to go into detail about the ins and outs of redundancy procedure.  The point is to make it absolutely clear that it is essential that correct redundancy procedure is followed if redundancies are contemplated, even though everything feels up in the air and abnormal because of Covid-19.

If you are an employer thinking of going down the redundancy route then we would urge you to contact us at the earliest opportunity to make sure that the procedure is correct from the start.

If you are an employee who has been offered a Settlement Agreement or has been told their job is at risk of redundancy then please get in touch to make sure that you are making use of all the protections employment law gives you.

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