Dismissals
● Work out how many redundancies you need to make. Think about whether it’s a redundancy or a reorganisation scenario (I discuss this in Module 2). Also think about ways of avoiding redundancies (Module 3).
● Choose your selection pool (Module 4) and provisionally choose your selection criteria (Module 5).
● Invite voluntary redundancies, explaining the terms of any enhanced voluntary redundancy package (Module 10).
● If you don’t get enough volunteers, complete the individual scoring (Module 6), and send each employee their score sheet.
● If no suitable alternative employment has been identified tell the affected employees you’re confirming their selection for redundancy and you are giving them notice.
● Keep looking for alternative employment, and keep a paper trail of your search (Module 8).
● When their notice period expires, make any outstanding payments (Module 9).
There’s normally no legal obligation to offer an appeal in a redundancy situation, and there is a very good argument against one.
Unlike performance and conduct dismissals, where nobody else is affected by a dismissal being reversed on appeal, in redundancy situations other people are affected. Someone who came through unscathed may find themselves being told they are redundant after all because somebody else has been allowed back on appeal.
On the other hand, allowing an appeal does have the advantage of fixing procedural flaws — for example, if the tribunal thinks the employee wasn’t given a reasonable opportunity to challenge their redundancy scores.
I look in greater detail at the pros and cons of redundancy selection appeals in Module 9.
Time off to seek new work
Anyone given notice due to redundancy — provided they have two years’ employment at the date the notice expires — is entitled to a reasonable amount of time off to look for a new job or arrange retraining.
This time off is paid, but limited to 40% of one week’s pay even if the employee takes two or more weeks off.
Timing of giving notice Give notice too early and you run the risk that a tribunal will think there’s been inadequate consultation, or that consultation is a sham.
Therefore don’t givethe notice of dismissal until after you have discussed redundancy selection scores with affected employees, you’ve considered their response, and you’ve made a final decision.
If you’re making more than 20 people redundant, there are other essential stages which I discuss in Module 7.
Outstanding payments Redundant employees are obviously entitled to any arrears of pay, expenses, and outstanding holiday pay, as they would be if dismissed for any other reason.
It’s common for employees to work out their redundancy notice, even if they’re asked to stay on garden leave at home, as opposed to the employer exercising a PILON clause — and for the last couple of years, it’s made no difference to the tax position.
If the employee was furloughed before 1 July 2020, and you’re dismissing before 31 October 2020, it’s worth keeping them on furlough as the Government will then pay between 60% and 80% (depending on the timings) of the notice payment.
It’s also a good idea to require employees to take their holiday during their notice period as they are depleting their entitlement and you won’t have to pay outstanding holiday pay.
Redundancy payments
Statutory redundancy payments are calculated based on years of service, age, and a week’s pay — it’s a complex calculation which I cover in detail in Module 9 — and is capped for 2020-2021 at £538 per week.
The statutory redundancy award is tax-free — or more accurately, it counts as part of the £30,000 tax-free allowance.
It’s worth noting that for most employees on furlough, a week’s pay is based on their normal week’s pay rather than their furloughed week’s pay — that is, 100% rather than 80%.
If an employee has unreasonably refused an offer of suitable alternative employment, they lose their right to a statutory redundancy payment.
Some employees are entitled to enhanced redundancy payments, and these rights will be set out in their contracts of employment.
Exit packages and settlement agreements Sometimes, you’ll want to pay an enhanced exit package, in which case consider asking them to sign a ‘settlement agreement’ saying that if they accept, they won’t turn around and sue you afterwards.
Acas has some great guidance on how to negotiate terms, and there is much more about the pitfalls surrounding settlement agreements in Module 9.
Compensation for unfair dismissal
Any employee who is unfairly dismissed for redundancy can bring a claim. The most common reasons a tribunal will find a dismissal is unfair is irrational selection scoring or a poor procedure.
There are two elements to an unfair dismissal award.
The basic award is calculated in the same way as a statutory redundancy payment, and employees don’t get it twice. So if you’ve paid the statutory redundancy payment, they won’t get the basic award.
The compensatory award is intended to reflect the employee’s loss of earnings caused by the unfairness of the dismissal. It’s based on salary, and capped at a year’s pay.
Here are my top tips for managing dismissals...
1. Ensure you have completed all the stages in the selection process
2. Allow those employees you select for redundancy time off to find other work
3. Explore whether offering settlement agreements might work for some employees.