HR Redundancy and Restructuring by James Sinclair Taylor, Russell Cooke

Charity Finance Directors’ Group Redundancy and Restructuring James Sinclair Taylor and Jane Klauber 12 May 2011

WHAT IS A REDUNDANCY? Dismissal must be wholly or mainly attributable to the employer: Ceasing or intending to cease to carry on the business for the purposes of which the employee was employed by it (business closure) Ceasing or intending to cease to carry on that business in the place where the employee was so employed (workplace closure); or Having a reduced requirement for employees to carry out work of a particular kind or to carry out work of a particular kind at the place where the employee was employed to work (headcount reduction)

EXAMPLES OF REDUNDANCY Reallocation of duties Change to the kind of work Same work performed by a different kind of employee Re-organisation leading to a reduced need for employees NOT REDUNDANCY Appointment of a junior employee to do the same work Change in an individual’s role if the requirement for employees to do work of a particular kind has not diminished

ALTERNATIVES TO REDUNDANCY Natural wastage Let agency staff go Freeze recruitment Reduce/eliminate overtime Consider offering voluntary redundancy

VARYING A STAFF CONTRACT Variation - Temporary pay freeze - Reduction in hours/unpaid holiday - Reduction in pay/removal of benefits By informed and express consent By express variation clause but any unreasonable change may constitute a breach of trust and confidence By serving notice and offering a new contract following consultation But unilateral imposition without a variation clause will amount to unfair dismissal as well as breach of contract

MOBILITY CLAUSES The “factual” rather than “contractual” test will apply Commonly employers will offer redundancy where significant relocation is required The employee will not be entitled to a redundancy payment if the transfer to a new workplace constitutes suitable alternative employment which he unreasonably refuses

UNFAIR DISMISSAL FAIR REASON Employees with over one year of service have the right not to be unfairly dismissed Redundancy is a potentially fair reason for dismissal Automatically unfair if redundancy selection influenced by prohibited reasons Even where there is a genuine redundancy situation, an employer will need to ensure that they follow a fair process

FAIR PROCEDURE Procedural fairness is essential to avoid an unfair dismissal claim Polkey – failure to follow correct procedures likely to render dismissal unfair unless doing so “utterly useless” or “futile” Question of whether employee would have been dismissed anyway only relevant to compensation

FAIR PROCEDURE warn and consult employees about possible redundancies; adopt a fair basis of selection; take reasonable steps to minimise the number of redundancies by considering alternative work.

FAIR PROCEDURE Union agreement Contractual provisions Handbook

FAIR PROCEDURE Adequate warning Fair selection: correct pool and objective criteria Consultation Amend pool/criteria/proposal Suitable Alternative Employment

IDENTIFYING THE POOL May be agreed with union or employee reps The jobs may be similar or interchangeable Ensure there are no jobs outside the identified pool which are the same/interchangeable

SELECTION CRITERIA Must be reasonable Non-discriminatory (direct or indirect discrimination) Performance and ability (must be evidenced) Disciplinary record Attendance (exclude DDA and maternity absence) LIFO – Age discrimination Bumping

FORMAL NOTIFICATION Notification post at risk Confirm selection criteria Invitation to volunteer Consultation to be followed Any redeployment opportunities Redundancy entitlement

INDIVIDUAL CONSULTATION Reasonable period Genuine engagement Documented Basis of selection and allow employees to comment on individual assessment Allow employees to make suggestions on all issues Consideration of alternative employment

INDIVIDUAL CONSULTATION Consultation should commence while proposals are still being formulated No prescribed period but 7 days is the “bare minimum” A failure to consult may render a dismissal unfair

COLLECTIVE CONSULTATION Proposal to dismiss 20 or more at one establishment within 90 days 20-99 30 days consultation 100+ at least 90 days Consultation with TU reps or reps appointed or elected who have authority to receive information and be consulted Also applies to varying terms and conditions where the employer has to terminate employment and re-engage

ELECTION REQUIREMENTS The employer must:- make arrangements to ensure the election is fair determine the number of representatives to ensure all groups of employees are represented determine whether employees should be represented by reps of particular groups decide term of office all affected employees are entitled to vote voting must be in secret and votes accurately counted

CONSULTATIVE CONSULTATION Consultation must be in good faith with a view to reaching agreement on avoiding dismissals reducing the number of dismissals mitigating the consequences of dismissals

COLLECTIVE CONSULTATION Representatives must be provided with written information The reasons for the redundancies must be given You must finish consultation before giving notice Applies even if fewer than twenty finally selected

SUITABLE ALTERNATIVE EMPLOYMENT No obligation to create a new role But any vacancy should be offered even if not considered suitable Evidence will be required as to why a role is not suitable Trial period (4 weeks) may be extended for retraining If the employee unreasonably refuses he will lose redundancy entitlement Consider selection process if more than one employee is eligible Remember any employee on maternity leave has priority for redeployment Avoid prescriptive matching for new job

ENTITLEMENTS STATUTORY REDUNDANCY PAY Employees with at least two years of service are entitled to a statutory redundancy payment Statutory redundancy pay calculated by reference to an employee’s age, length of service and weekly pay capped at £400 from 1 February Maximum length of service to be taken into account An employee may lose their rights if gross misconduct comes to light during redundancy consultation or notice period

ENHANCED REDUNDANCY PAY Is it required by contract/policy Is it the best use of the charity’s resource? NB any enhancement may be caught by age discrimination rules

TAX TREATMENT Statutory payments are tax free Termination payments are tax free up to £30k (including the statutory element) If a PILON is made it will be safest to deduct tax or (if relying on payment as damages for breach of contract) terminate contract before payment is made

TOP TIPS FOR MINIMISING LEGAL RISK Need for clear business reasons for redundancies – should be documented Take care in considering appropriate selection criteria Managers should be trained to ensure that objective selection criteria are fairly applied Suitable alternative employment should be considered widely Remember to consult long term sick and employees on maternity leave Ensure there is someone available to respond to any queries employees may have Consider offering a compromise agreement

TUPE Application of Tupe Same rules regarding election of representatives as for collective redundancy Duty to inform representatives of transfer date of transfer reason for transfer legal, social and economic implications any measures Consultation on measures Protective awards

TUPE Any dismissal or contractual change which is transfer-related will be automatically unfair Unless there is an “ETO” reason requiring a change to the number or functions of staff A transferor will not be able to rely on a transferee’s defence An employee may object to transfer but if he objects on the basis of a substantial change in working conditions he may treat himself as having been dismissed and the dismissal will be unfair

INSOLVENCY Where insolvency proceedings are instituted with a view to liquidating the Transferors assets, employees do not transfer and there is no protection against contractual variations or dismissals connected to the transfer Where insolvency proceedings are not commenced with a view to liquidating assets, contractual variations may be agreed with employee representatives in order to safeguard employment

CONTACT DETAILS James Sinclair Taylor E: [email_address] T: 020 8394 6480 Jane Klauber E: [email_address] T: 020 8394 6483

HR Redundancy and Restructuring by James Sinclair Taylor, Russell Cooke

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HR Redundancy and Restructuring by James Sinclair Taylor, Russell Cooke