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Guidance for employers in redundancy handling
Economic downturns, re-organisations and other business circumstances may create a genuine redundancy situation in a business and an employer may have to consider making redundancies. The mishandling of a genuine redundancy can however give rise to a claim in unfair dismissal, which potentially can expose an employer to substantial compensation awards.
An employee who has been in the continuous employment of an employer for one year or more has the right not to be unfairly dismissed. For a dismissal to be fair, the employer must have a ‘potentially fair’ reason for the dismissal and must have acted reasonably in so doing. The Employment Rights Act 1996 (‘the Act’) sets out six potentially fair reasons for a dismissal, one of which is redundancy. Where an employer can demonstrate that an employee’s dismissal was by way of redundancy, the dismissal will be a potentially fair dismissal.
The Act recognises four situations which can give rise to a dismissal on the grounds of redundancy. They are:
However, an employer has a duty to act reasonably in all the circumstances of the case and in practice, this means a fair redundancy procedure must be applied. A failure to follow a fair redundancy procedure can turn a potentially fair dismissal into an unfair dismissal and is a common reason for a finding of unfair dismissal by Employment Tribunals.
Our highly experienced team can provide practical and legal advice on handling redundancies, such as:
In certain circumstances, it may be appropriate for an employer to consider using a compromise agreement, either as an alternative to the redundancy procedure or to conclude a redundancy process with an employee. An employee who enters into a valid compromise agreement is deemed to have legally waived his or her statutory claims against his or her employer. We can provide you with practical advice on the preparation of compromise agreements, which are complex documents and must fulfil certain criteria to be valid in law.
We are able to provide employers with practical solutions in redundancy handling and enable them meet their legal obligations as an employer. If you would like to discuss your own company’s position vis-à-vis potential redundancies and the procedures that may be necessary, please call us on 0845 519 2101.
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