It is not just airlines such as British Airways and United Airlines, or the financial sector that have been affected by the downturn in the worldwide economy. The recession in the media and design industry has taken its toll, particularly upon those employed in the e-commerce sector.
In August, publisher IPC shut down one third of its websites with the loss of 90 jobs. More recently, Abbot Mead Vickers laid off 18, BrownKSDP parent Tempus Group cut 150 and Deepend, one of the most well established digital consultancies, closed down completely with the loss of 180 jobs.
Making significant numbers of staff redundant is not straightforward. The short-term ‘benefits’ of reducing staff numbers can be seriously prejudiced if there are resulting claims from employees, including claims for unfair dismissal, where the cap on compensatory awards has been increased to £51 700 since recent legislation.
Employees should also be aware of their legal rights. Too often they accept an employer’s offer which may seem generous, but, in fact, could be increased had they known the full facts.
The employer should also consider his contractual obligations under the contract of employment with the employee. Consequently, any notice period should be complied with, or payment should be made, in lieu of notice. Where the contract of employment includes an express gardening leave clause, the employer may invoke that clause to prevent staff walking off with new business.
Consultation is key for an employer irrespective of the number of redundancies anticipated. An employer must take care to comply with the legislation introduced during the 1990s. This deals with consultation and ensures that the redundancy is genuine and properly dealt with to avoid the significant increase in liability, which would arise from an unfair dismissal claim. If the employer does not comply with the collective consultation process, he or she may be liable to pay a Protective Award of up to 90 days’ actual salary to each affected employee.
Statutory redundancy payments are not particularly generous. They are calculated taking the number of years worked (up to a maximum of 20) and multiplying it by either half, one, or one and a half, depending on the age of the employee during those years worked. This is then multiplied by the employee’s final week’s gross pay (which currently has a maximum ceiling of £240).
For example, should an employee have started working for his employer when aged 25 and is then made redundant ten years later, the maximum statutory redundancy payment that this person could presently receive is £2400. However, many employers have separate redundancy schemes where enhanced payments are made. These can create, for the employee, a separate contractual entitlement. Some employers also make ex-gratia payments to their employees in excess of the statutory redundancy payment.
There is definitely more than meets the eye with regards to redundancy and the obligations on an employer to consult with and notify those that it proposes to make redundant are considerable. As a result of the current situation, the cost to an employer could be substantial unless proper procedures are followed and legal considerations are looked at.
At the same time, an employee should be alive to the fact that he or she has significant statutory rights and should seek legal advice before accepting an employer’s terms of settlement.
A prudent employer should consider the following points:
Whether there are any alternatives to dismissing workers for redundancy and inviting volunteers for redundancy
If it anticipates that 20 or more employees at the same establishment will be made redundant within a period of 90 days or less, it should consult with the appropriate trade unions or employee representatives about the proposals. (If the employees do not already have union or other representatives then the employer will be obliged to invite them to elect some)
Whether retraining is possible, or alternative jobs are available within the consultancy
It should consider any customary arrangement or agreed procedure already in place. If no such arrangement or procedure exists, establish (if possible with the agreement of the union or employee representative) an objective criteria for selection
It must consult with the individuals affected before a final decision is taken and inform those employees as soon as possible of their impending redundancies
Any employee under notice of dismissal for redundancy has a statutory right to a limited amount of time off work to seek new employment, or to make arrangements for re-training
Where an employer proposes to make 100 or more employees redundant at one establishment within a period of 90 days or less, the collective consultation process must commence at least 90 days before the first of those dismissals takes effect (where the proposal is to make between 20 and 100 employees redundant within 90 days the minimum consultation period is 30 days); it should also notify the Department of Trade and Industry of impending redundancies. Failure to do so may lead to a conviction and fine of up to £5000
An employee threatened with redundancy should consider the following:
Has he or she been selected for redundancy where other employees in similar positions have not? If so, why?
Has the employer consulted the appropriate representative of the employee concerned? If not this may render the dismissal unfair. Such consultations should begin before individual notices of dismissal are given
Has the employer given as much warning as possible of impending redundancies so that the representatives and/ or employees can take early steps to consider the relevant facts, possible alternative solutions and/ or alternative employment in the group or elsewhere?
Has the employer sought to agree with the union and/ or representatives the criteria to be applied in selecting the employees to be made redundant? Has the criteria for selection depended solely upon the opinion of the person making the selection, or has it been objectively checked against such things as attendance records, efficiency at the job, experience or length of service?
Has the employer tried to find alternative employment instead of dismissal?
Has consultation been carried out at a number of separate stages and not just when the employer was warned of impending redundancies?
Is it a true redundancy situation or is the employer referring to redundancy as an excuse to dismiss the employee?