With Jon Heuvel, Partner – Employment
Sadly, few businesses will have escaped the impact of coronavirus on their bottom line, and the consequential need to look at ways to cut costs and overheads going forward. With the wind-down of furlough expected this October, many businesses will be faced with the prospect of reducing headcount and making redundancies.
In this webinar, we will focus on some of the common issues that arise in the context of planning and executing redundancies, how to apply best practice and dispel some of the surrounding myths.
This is a live event and there will be an opportunity for questions and answers on the day. If you wish to put your questions forward in advance, please email these to events@shma.co.uk
Who should attend
HR directors and professionals, business owners and senior managers with responsibility for people management
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Webinar transcript
(Please note this is auto-generated and un-edited)
Welcome to today's webinar. We'll be looking at some best practice tips on redundancy for the benefit of those who don't know me. You haven't haven't seen me before. My name is Jon Heuvel - I'm an employment partner here at Shakespeare Martineau.
0:26
Say we're gonna look at redundancy this morning. The ongoing pandemic has already had a huge economic impact on businesses down the land staunch small. The corona job retention schemes, fellow scheme that launched in March certainly helped to reduce the number of redundancies that we might otherwise have seen over the last six months. But as the scheme starts to wind down, as a reminder, it closes at the end of next month, such festival October. I think we're going to see an increase in, in redundancies over the next few months inevitably. Salary, headcounts salary. Roles are part of the costs that the business will be looking at to to reduce overheads.
1:16
I'm not going to be talking today on everything there is to know about redundancy. I would still be here tomorrow if we were doing that. So I'm just going to pick out a few specific tips on areas that commonly arise and how perhaps to manage those in practice. I'm conscious that then they will be questions at the end, so I'll try and wrap it up in about 20 minutes and leave 10 minutes at the end to answer questions.
1:44
So the first bit I'd like to look at is the question of avoiding collective redundancies.
1:51
As a reminder, collective redundancy is when the business is proposing to dismiss 20 or more employees in a period of 90 days or less.
2:02
I'm not going to be talking about the, the increased amount of regulation and the procedure, if you're in attractive redundancy. If that's something that you need a refresher on. I did do a webinar on that a few weeks ago, and if you have a look at our website in the ... on Demand archive, you'll find a copy of it there. Please do take a look at that. What I want to look at today, instead, is how you might still achieve a redundancy of more than 20 people without triggering the need for the collective redundancy consultation. They may think that sounds very old, but it is possible to illustrate how you do it with a, perhaps, an extreme example.
2:47
I'm going to make 15 people redundant today, and I'm going to have their employment terminated immediately, and they'll be paid in lieu of NHS.
2:58
Next week, I'm going to terminate a further 15 people on grounds of redundancy.Â
3:05
So, that would make 30 in total. However, rather than having them just missed immediately and page and, I'm going to require the ones next week to work out their notice.
3:18
They're on three months' notice and listen scenario. Therefore, their jobs will affect rear end around Christmas time.
3:26
Now, the critical point here is that the 90 day period is the is related to the termination date for employees, not to the date on which they were notified of redundancy or the date on which the company made the decision to make some redundant.
3:44
So, if we look at the gap between the two sets of redundancies, the ones this week, and the ones Christmas, there is more than 90 days between them, so we don't have to accumulate the numbers to work out, whether the or rather accumulating the numbers they don't add up to more than 20 in a period of 90 days. Now, this is an extreme example. I'm not suggesting that it would necessarily be a good idea to try and run your business exactly like that.
4:16
But what it does demonstrate is that with a bit of careful advance planning, it is possible to structure your redundancy in such a way that even though you anticipate more than 20, they made redundant that you can do it in a way which avoids having to deal with collective redundancy.
4:37
Richest point out on that helps, if you need help on that, Bowman's, get in touch. I'm happy to talk you through that in more detail.
4:45
The example I was using was 15 people redundant this week, Uh, but on paleo of notice on pylons and 15 people next week but on three months notice. So, their termination date will actually now be Christmas.
5:03
The reason that works, even though there's 30 people being made redundant, is that the termination date is the driving factor for collective redundancy, it's not the date on which you make the decision, it's not the date on which you give notice, it's the actual termination date.
5:23
So I'm not suggesting this would necessarily be a sensible way to proceed in a redundancy, this extreme example, but what I was using that to demonstrate is that, if you use a strategically planned, exit strategy, it is possible to have more than 30 people leaving the business as part of a process that you've thought about now, without having to go through the collective consultation procedures.
5:50
So that's the first point. I really wanted to make sometimes quite a useful tool, particularly when you're looking at numbers around 20 to 25 and you perhaps not entirely sure exactly how many people it might be.
6:04
So the next thing I want to look at is the question of pooling. Often a vexed question, a vexed issue for for employers. It's the question of which employees do I need to put into a pool in order to select redundancy?
6:20
Trade unions, in particular, would love to try and dictate to employers who should be in the portal, the shape and size of the pool. The reality is, it is in the discretion of the employer. It isn't.
6:34
For the employees, there is no hard and fast rules As to how you draw the pool. It is at your discretion, but obviously you need to think about it sensibly and think about the right shape and size of that pool.
6:48
Again, let me use an example example.
6:51
You're a widget maker, you've got five people or making widgets and you've decided that actually a combination of reduced demand, slightly more efficient manufacturing process you can make do with four widget makers. In that scenario, typically, you would pull all five.
7:12
You would develop a scoring matrix to decide which ones are the ones that score lowest. And then that 1 or 2. If it's, if you're reducing by two, would be the ones that you make redundant.
7:26
The difficulty with that, and that works fine. If you have got five widget makers, it'll do exactly the same thing. The problem is that, often these days, they don't quite do the same thing.
7:39
So the jobs are similar, but they're not identical. So the question then is, where do you draw? Draw the line.
7:46
And it really just depends on on your your particular business. Who's in which category? And what what you're looking to achieve? The reality is that often pooling exercises are going to buy the desired outcome.
8:03
As much as anything, A large pool ensures, improves on the fairness aspect. But, obviously, risks causing anxiety and distress to a wider group of employees.Â
8:20
Narrower group might make it easier in terms of making sure that you've honed Jane only on the people whose skills are no longer needed.
8:30
So if we look at the widget example again, instead of it being just five widget makers, perhaps it's to make rounds widgets to make square widgets and one who makes it over widget.
8:42
If the reality is that the reason for the redundancy is that nobody wants over widgets anymore, the market has simply disappeared.
8:53
Then your pool may just be the one over widget maker because that's where the redundancy lies.
9:03
But then the question comes, what if that is the situation? But actually, all widget makers are effectively interchangeable.
9:13
It's just that overall widgets need a little bit higher scale. And actually, my, my best skilled widget maker is the overall widget maker. But actually, there's two options here.
9:21
one is that you could make the pool all five and simply say you have interchangeable skills So we'll select in the normal way and then we'll adjust around. So, if it's a square widget maker that goes on that process, the overall widget maker then steps into the square. Would you make his shapes?
9:42
But there's an alternative which is pumping.
9:45
And, again, this is something which employees, trade union representatives are often keen to try and encourage agencies to offer to protect particular individuals. Again, it's not something that you're obliged to do.
10:00
It is voluntary, and it's not something that you need to think about unless there's a reason for doing so.
10:11
What dumping does is, it basically means that the individual, who you wish to retain bumps out somebody, who wouldn't?
10:26
So, in this example again, if you decided to retain the pool as the overall widget makers, there is no reduction. There's no redundancy situation in the context of a square widget maker.
10:41
But what you do is you say, well, I'm making my oval widget maker. Potentially redundant, but I'm going to bump somebody from the square widget team in order to allow for the overall widget maker, take over that person.
10:57
And then it's the square widget maker who is actually integrated redundant, in the end, that is permitted. I'd say that's coupon payment, So that's an alternative way of doing it if you don't want to deal with it through through portals.
11:12
The next thing I want to have a quick look at is voluntary redundancy.
11:17
Obviously, the purpose of redundancy redundancy consultation is to try and avoid compulsory redundancies.
11:24
So if you can convince staff voluntarily to accept redundancy, that must be an improvement.
11:35
The difficulty here is that it can be a fantastic tool, but it can also result in you getting the wrong applications, applications from the wrong people.
11:46
What you don't want to do is to open a voluntary redundancy exercise and find that all your very best staff, your very best salespeople who know that they can get another job somewhere else. Decide to accept the voluntary redundancy. Take the large sum of money and then go off to your best competitor and carry on working there.
12:08
So that's, that's one problem.
12:10
The other problem obviously is that they, people that you would like to see leave because they're not the best staff, don't apply for voluntary redundancy. So you're still left with them. So you end up with a double whammy that you've actually lost. The best people still got the worst people and you've had to pay for the privilege.
12:31
So I would say with voluntary redundancy only offer it. If you really don't mind who leaves.
12:40
You don't have to offer it to everybody. And also you can have systems where you don't necessarily accept every application that's made.
12:49
Now, that is a solution, but again, that can have unintended consequences, because if you think about it from the perspective of an individual who has applied voluntary redundancy, and you turn that down, how motivated is that employee really going to be?
13:08
They've kind of indicated to you that that they're ready to leave the business, and you've basically said to them, We're not prepared to pay. You've got to stay here. In reality, that's often a very difficult position to maintain going forward.
13:24
And what you tend to find is that that relationship and in the not too distant future, and probably less on the company than it might otherwise have done if you'd pay them. So, ... can be very good, but just be careful about when you apply it.
13:41
The other thing is, in terms of enhanced payments, which usually go with with fallen trees, what you sometimes do is you'll say, we'll give you a higher, above the statute redundancy payments, if you if you take the voluntary.
13:55
That's fine, there's, there's a little check for doing that, which is that you're buying out the risk of having to go through the process. So, it saves you time and expense in the business.
14:06
Sometimes you'd have to do enhanced payments because you've got a contractual redundancy scheme, that's fine, but if you're going to make enhanced payments in any other context, you just have to think about the pros and cons of doing so.
14:23
Obviously, the main benefit provided you do it through a settlement agreement is that you're buying out the risk of any claim.
14:30
That's really why you would, you would do it.
14:34
I'm conscious of time and won't allow time for questions to look and see some questions coming in. So what I'll do is, the last thing I just want to touch on is a quick reminder about what I call the outer site employees.
14:51
We tend to think of redundancy.
14:53
And we look around that the office, metaphorically or physically and we think about who needs to go, but it's very easy to forget about the people that aren't physically there. Obviously, nobody's there in many offices at the moment.
15:08
But people who aren't visible at the time being I'm, what I'm talking about are people who are on maternity or paternity leave, people, long term, sick leave, 600 employees, and that sort of thing. Don't forget that they are part and parcel as much part of the redundancy process as anybody else.
15:28
So they need to be factored in, And the other thing is, particularly in the context of this long term sick, or maternity paternity leave, family friendly, right absences.
15:40
Be careful when you're doing your scoring that, to you or not, indirectly discriminating.
15:47
Because you're scoring them adversely in relation to something which directly relates to that to their absence. So just be careful about those points.
15:59
The last point on that, in terms of, of the anthracite employees that I wanted to to point out is the situation with employees who are on maternity leave.
16:11
Because they have a kind of special status, Some people often say, Oh, I've heard you can't make an pregnant employee redundant. That's not true, you can.Â
16:24
But what is true is that they have special protection once they have been selected for redundancy, They're effectively given priority over every other employee in terms of being placed in an alternative role.
16:39
That's the, that's the key here. It comes from the Maternity and Parental Leave Regulations, Regulation 10.
16:47
They have to be offered suitable alternative employment, and that is in priority to others.
16:54
They don't necessarily have to undergo a competitive interviewing process if that is what you would otherwise have done.
17:01
So particularly if you've got a situation where you're amalgamating a couple of roles into one.
17:07
So the two current roles, effectively, both redundant, but you're creating one new role, which is a combination of the two.
17:16
In a situation like that, then the employee who is on maternity leave will effectively automatically be entitled to take that new role in priority to the other. It seems unfair, and it's about the only situation in English law where we have an actual example of positive discrimination.
17:37
But it is there, and we need to be aware of it, and a breach of it is an automatic unfair dismissal.
17:45
one interesting point, just to finish on, is that, back in July, 2019, the government confirmed that it was committed to reform in this area. And actually, the reform was to extend the protected period. So it would not apply just to people on maternity leave that would, in fact, apply to people from the date when they first inform their employer.
18:12
They're pregnant all the way through to a period of six months after they've returned to the business.
18:20
We've had a number of, fairly significant impacts on Parliament Tree focus of the last period since July 2019, but it was something that was repeated in the Green Speech.
18:34
Went on to the December, just before Christmas.
18:39
What I don't know is, the impact of coronavirus and everything that goes with that, whether it is still on the agenda, but certainly, this current government, it was in the Queen's speech to be part of the employment bill when it comes before Parliament.
18:56
So just be aware that that that protection will extend it's likely to extend to the near future.
19:05
So I will stop there, and hopefully that gives us about 10 minutes or so for questions.
19:11
So I will just read the first question that I've got here. I have one employee who works part-time in an administrative role. She's unable to work from home and we won't be going back to the office for at least 12 months. I've discussed this with her and she said, I'm happy to accept redundancy. But how would you deal with this?
19:30
I mean, that that's, unfortunately, quite straightforward in the If she's happy to accept redundancy, it really is just a case of they, yeah, Giving, giving them the redundancy package, discussing it, and agreeing that there isn't really any complications with something like that.
19:52
If you want to talk about the details of that offline, by all means, get in touch with me, and I'm happy to, to deal with that.
20:01
Uh, next one. Scoring a selection criteria. The best person to score would be the manager. They are new to the business role, and not worked with people who are on photo needs to be stored. Next, best place person, someone who oversees the business, the manager's manager, in effect, Are they able to do the scoring based on feedback from previous manager and their knowledge with business individuals? That's an interesting question. I think yes is the answer to that.
20:29
If you, if it's possible, it's always good to score with more than one person scoring proxy in a small business, and in the situation that you've described here. That's not going to be possible.
20:42
The other thing is that, to as large an extent as possible, the scoring criteria are things to be done based on objective criteria.
20:53
So, in theory, a lot of it ought to be something that is capable of being measured with reference to previous appraisals, general records, and so on. Appreciate, that's great in theory, but not always ideal in practice. But certainly.
21:12
Something like that is, is it's fine to deal with the scoring, if there are any issues that arise from that, that's an opportunity within the consultation, for the employee to say, Well, actually, I disagree with that.
21:25
So, that would be the way to, to protect yourself against any complaint about that, is to allow the employee to comment on your scoring. And obviously, there's also an appeal process as well, so that the further protection.
21:43
Next one, if a small company closes so less than 20 staff to make redundant, how many days of consultation do you recommend as the whole organization closest? That's, that's a very common question, is how long does it take for the redundancies. If you're not in collective redundancy, as as in this example, you're not. The short answer is there is no set period of time. It is whatever time is reasonable to carry out a reasonable consultation.
22:14
A reasonable consultation effectively consists of a warning to the staff of the luckier to seize the opportunity to consult and feedback.
22:28
Comments on how to, how to avoid redundancies and a final decision being taken, the communication of that and a review of whether there are alternative roles. And don't forget that in terms of alternative roles, you're looking across associated companies as well as the company itself.
22:47
Obviously, for companies to close and completely, Then, then, that last option is going to be non-existent, As to how long the period is to be reasonable, There's one case from the front Appeals Tribunal enough. Forgive me.
23:04
I can't remember the date of it, but that, in that particular example, they said they accepted, that appear to seven days, that was used, was the bare minimum that was acceptable.
23:18
Um, it is very much fact dependent. And the fact that, in that particular instance, the trappings at seven days was enough, doesn't mean that you can just assume, seven days is always appropriate.
23:31
What I find, is that, the moment you commence the redundancy and you've done the warning, a lot of employees just want to get to the end result as soon as possible. They don't want this dragged out. So, there's that constant conflict between you trying to do the right thing, and giving them a reasonable period of time, then just wanting to get to the end. And it's really finding what feels reasonable.
23:57
If there's lots of comments come through, consultation might leave that running for a little bit longer. If people haven't really gotten into, say a particularly with closure, the reality is, there's many options available unless they can certainly find a way to, to persuade you to keep this segment.
24:17
It's pretty terminal.
24:19
And therefore, that can probably afford to be pretty short period of time.
24:27
Got myself slightly lost in questions down to you, have we got any other questions that are coming in? A colleague Teresa mentioned layoff and short timeline. Paul wants, what is this exit poll, OK? So yeah, you do hear people talking about layoff and short-term working. They're effectively alternatives to redundancy rather than redundancy, per se. And actually, they're not dissimilar to further in practice.
24:58
A layoff is where you don't give the employee any work at all and, correspondingly, you don't pay them at all, short-term working, as the name suggest, is, where you get the reduced amount of work and reduced pay.
25:15
It has to be in the contract for it to be permissible to do, and that's where, actually, it doesn't apply in many instances.
25:26
Traditionally, we saw it in manufacturing roles, where perhaps, there was a reduced factory input, and therefore you needed to reduce the number of employees physically doing work at any one time.
25:40
It is a complex area of law.
25:42
And there are situations where it will still trigger a statute redundancy payment if the employee elects for one, but essentially, it is a, an alternative to redundancy and it has to be in the contract. Because if it's not in the contract, you're in breach, you're committing a breach of contract to try and remove work from them or reduce their pay.
26:07
So, I think we'll, we'll pick on a different way. I've just seen, and there's another question coming in which I'll pick up here. Wouldn't it be more cost effective for a company to buy tribunal insurance and offer just statutory redundancy go down the settlement agreement route?
26:22
If you've got tribunal insurance, it could be It depends on the terms of the insurance policy. Some insurance policies will protect you for jobs that you've already identified as going.
26:37
And it may be a question of whether or not you want to control the process.
26:44
The other benefit of settlement agreements is that they allow you to short circuit some of the procedural steps because you're, you're buying an indemnity, whereas, within a tribunal insurance, if you haven't followed things to the letter, the policy itself may not be effective. It is certainly an option. But I wouldn't say it's necessarily a panacea.
27:15
Do staff who are on further have to be paid their full page? Or a note is if you're using further for their notice period. That's a very good question, actually A very topical at the moment. It's one of those questions where it depends on how long the notice is as compared to statutory notice.
27:35
Apologies, this may sound slightly confusing, it's not as complex as it may sound as they're trying to describe it.
27:41
So if the employee is entitled to only statutory neg, or if their notice period is no longer then one week, more than the statute.
27:53
So if your statutory notice is five weeks and you are on six weeks notice or five weeks or four weeks, which is brought up to five paid by virtue of the statutory, then you have to pay full pay during the notice period even if they're on furlough.Â
28:13
However, if the notice period is longer, same example, statutory notice is five weeks, but actually the contractual notices two months, three months. Then you don't have to pay full pay and the reason is that the contractual variation overrides the obligation to pay full pay. It's, it's a conflict between two particular legislative provisions. And, those scenarios, you are entitled to continue paying at the 80% of the cap rate during the photo period and then, obviously, it does go back to full pay for the balance of the lotus. Outside of further cases? Looking at such notice, looking at contracture notice and comparing the two.
29:01
We have fun. That's kind of all that, is do we have to allow our employees the right to be a complete consultation meetings.
29:12
That's a good question.
29:14
Surprises me, perhaps the answer is no.
29:18
But I would say good practice is that you always should.
29:22
The, the ... guide, best practice on disciplinary and grievance hearings doesn't apply to two redundancy.
29:32
So, and the legislation, when you look at how it's worded, in relation to those sorts of meetings, where an employee has the right to be accompanied, doesn't appear to cover the situation for redundancy.
29:47
So, on a strict interpretation of both the ACS guide and the legislation itself, there is no obligation to have an employee accompanied if they wish to be a company. But as I say, this is a question of ensuring fairness as much as you can in your redundancy process.
30:08
It is usually very little reason to say, It would not be good reason to have somebody. accompaniment.
30:16
And so I would always say, allow accompaniment as you would for any disciplinary grievance hearing rather than stick to the strict letter of the law.
30:28
Thank you, John. And we just have one last, final one. And then we'll wrap up. And is last, in first out, still permitted as a selection tool.
30:41
It's, it is, but I would say, it's not at all on its own.
30:46
Life, though, for the benefit of those who perhaps, don't recognize that, that term, used to be traditionally a very common selection criteria.
30:57
Sort of say particularly in unionized roles where it was designed to protect the longest serving workers. They've been there the longest, they were protected. So there wasn't redundancy. It was the newer employees that lost their jobs.
31:14
Obviously, from a commercial perspective, it's not always the best tool, because your longest serving employees are not necessarily your best employees.
31:23
But the other problem with it is that it, potentially, it's discriminatory on age grounds, and also potentially indirectly discriminatory on *** grounds as well.
31:34
Having said that, it is something that you can use within a, a larger matrix because there is some value in length of service, it's greater experience and therefore greater value to the business. So it is something that you can use as part of a matrix but you certainly can't use it just on its own.
31:57
And it's also sometimes people, I've seen occasionally rather than the life of FIFO first in first out.
32:07
So actually it reverses that process and it says that the longest serving employees automatically once you pick up actually for the same reason. Yes, you can use that, but you can't use it on his own. Thank you very much, indeed, for listening this morning. Just as a reminder, I did mention that earlier, but we do have this, this webinar itself will be available in due course, on Ashmore on demand, but also all our previous ones are on there. So if you need to look back on some of the topics we've covered in the past, please do use that resource and also look at it for upcoming webinars and then my colleague, Mike will be doing one on ways to avoid redundancy later in the month. That's relevant to you. And also, as shown on the screen now, are Free Legal help line is still running.
33:00
If you need legal guidance up to 20 minutes, that is still available. Please do get in touch with us on that.
33:08
I'd just like to say thank you much for joining. And as we close this, there will be a quick survey coming up on your screen. And it would be very helpful, from our point of view, if you could possibly answer that as you as you leave. Thank you very much, indeed. And good morning.
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