The Issue
The statutory dismissal procedures were abolished from 6 April
2009, and the new ACAS Code of Practice does not apply to
redundancies, so what process should businesses be following to
ensure a fair redundancy procedure under the new regime?
Subject to transitional arrangements (which continue to apply the
statutory dismissal procedures if the business has issued a step 1
letter or held a step 2 meeting on or before 5 April 2009), we
return to the good old days of pre-2004 in the case of any
dismissals which are genuinely for redundancy where fairness will
again be governed by the principles established by case law.
The Consequences
By way of general guidance on procedure, a redundancy dismissal will normally be unfair unless the business:
- adopts a fair basis for selection. It must identify the correct pool from which to select potentially redundant employees, and apply appropriate selection criteria fairly and objectively;
- warned and consult fully with employees, or their representatives about their proposed redundancy. Consultation must be at a formative stage, and employees must be given the chance to respond on the reasons for the redundancies, the pools, the criteria and their scores where they are to be selected from a pool, suitable alternative roles, and other ways of avoiding or mitigating the effects of the redundancy. The employer must keep an open mind about the matters under consultation and conscientiously consider the employees' responses;
- consider suitable alternative roles in the group and other ways in which redundancy may be avoided;
- allow employees to be accompanied at consultation meetings; and
- offered redundant employees the right to appeal the decision to make them redundant.
Businesses should also ensure that they follow any company
redundancy procedure or policy. Where there are 20 or more proposed
redundancies at any establishment within a 90 day period, the
business will also need to consider steps for collective
consultation and its obligation to notify BIS (the new Government
Department for Business, Innovation and Skills formed from BERR and
DIUS); these statutory requirements remain unchanged.
ACAS has now updated its guidance booklet on Redundancy Handling ,
which is a guide to both the statutory requirements for collective
consultation and best practice for collective and individual
consultation (http://www.acas.org.uk/CHttpHandler.ashx?id=877&p=0.)
Other than the removal of the references to the statutory dismissal
procedures, the guidance remains largely unchanged, and the
procedure to be followed under the new regime is very similar to
that followed pre-6 April 2009 i.e. for individual consultation, a
warning letter, followed by consultation meeting(s), a decision
letter, and an appeal process if appropriate.
The Government have just announced that the cost of redundancies
for businesses is also set to increase. With effect from 1 October
2009 the limit of a week's pay for calculating statutory
redundancy pay will increase from £350 to £380 (thus
increasing the maximum payment from £10,500 to
£11,400).
What Do You Need To Do?
- You are advised to update any redundancy policies, which may still refer to or be based on the statutory procedures and may therefore be overly prescriptive and inflexible.
- Familiarise yourself with ACAS' guidance on redundancy handling and ensure that general principles of fairness are followed in any redundancy dismissals.
- Businesses no longer risk an automatic unfair dismissal for failing to follow a statutory procedure, but do risk ordinary unfair dismissal claims if the process is shown to be unfair or unreasonable. This is a question of fact in each case but the key is to warn and consult, adopt a fair basis for selection and consider any alternatives to dismissal, as outlined above.
- Factor in the increase in statutory redundancy payments (or enhanced payments based on the SRP) based on a maximum weekly pay of £380 from 1 October 2009.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.