Termination of Employment

(Including Redundancy)

You can lawfully ternate an employee’s employment on the following grounds:

  • redundancy (after undertaking a fair redundancy procedure),
  • following fair disciplinary proceedings
  • gross misconduct by an employee may justify instant dismissal (without warnings or notice of termination). Examples should ideally be specified in the employment contract to include violence, theft, gross disobedience, falsification of records and criminal offences which relate in some way to the employee’s duties. However, such a list should be stated to be non-exhaustive, allowing you discretion where unanticipated wrongdoings are committed.
  • at the conclusion of an employment contract (fixed-term duration).  

Male entrepreneur losing his job due to coronavirus epidemic.

When Dismissal is Automatically Unfair?

There are certain situations where dismissal is automatically deemed to be unfair. Such situations include:

  • dismissal of a woman for pregnancy or a reason connected with pregnancy or maternity;
  • dismissal for reasons connected with independent trade union activities, union membership or non-membership;
  • refusal to comply with a requirement in contravention of the Working Time Regulations 1998;
  • refusal to forego a right under the Working Time Regulations 1998.
  • health and safety related dismissals;
  • denial of statutory rights;
  • acting as an employee representative for certain purposes;
  • dismissal for a reason connected with a transfer of an undertaking;
  • dismissal based on a spent criminal conviction;
  • a dismissal connected with ‘whistleblowing’ by an employee to an employer, legal advisor or authority.

In general, any dismissal based on discriminatory grounds (eg. sex, race, disability, age etc.) is risky and can be very expensive because limits to employment tribunal compensation do not apply to cases involving sex, racial or disability discrimination.

 

Redundancy

Redundancy is the fair reason for dismissing an employee but only if a full and fair consultation process is carried out and the reason for the redundancy dismissal is lawful.

Possible reasons that can give rise to the need for redundancies include Reduced Profits, Takeovers, Mergers, Changing Markets, Operating Losses, Business Reorganisation, Market Pressure, Changing Technology.

It is often sensible for an employer to offer voluntary redundancy to employees as an alternative to compulsory redundancy. However, there is no legal requirement for employers to offer voluntary redundancy, but it is good practice to do so as it may provide a way of avoiding or at least reducing, the need for compulsory redundancies.

 

Alternatives to Redundancy – As an employer, have you considered practical alternatives to redundancy? Potential alternatives may include overtime reductions, work sharing, short-time working, lay-offs, etc. If your business is sufficiently large, you should consider redeployment.  If you fail to consider alternatives and make staff redundant you could expose the business to an unfair dismissal claim by employees.

As part of any fair redundancy process, employers should consider steps that can be taken to avoid compulsory redundancies. These may include:

  • seeking applicants for voluntary redundancy
  • encouraging existing staff to work flexibly on reduced hours by agreement
  • freezing or restricting recruitment
  • redeploying existing employees to other parts of the business
  • reduction in the use of freelancers and casual workers; and/or
  • introducing a pay freeze or agreed salary reduction.

 

The Redundancy Process

Collective Consultation – If 20 or more employees are affected by the redundancy proposal and there is no trade union or elected spokespersons, the company must give appropriate time for the affected employees to elect representatives through collective consultation during the redundancy process.

The business should choose an election organiser to take responsibility for the election of employee representatives. In the interests of impartiality, the election organiser should not be someone who may want to stand as an employee representative. If the employees fail to elect representatives within a reasonable period, the employer must give each affected employee the information that would have been provided to the elected representative.

The business must ensure that the employee representatives understand what their role in the consultation process entails and should be aware that the obligation to consult collectively relates to any employees who may be affected by the proposed dismissals, or by measures taken in connection with those dismissals, not just those whom it is proposed to make redundant.

 

How many employees are going to be made redundant?

It is important to note how many employees are going to be made redundant before the redundancy process begins. Adequate time must be allowed for consultation on the redundancy plans and this will be at least:

If between 20 and 99 staff are being made redundant over a period of 90 days or fewer, you must begin consultation at least 30 days before the first dismissal takes effect;

If 100 or more employees are being made redundant over a period of 90 days or fewer, you must begin consultation at least 45 days before the first dismissal takes effect

If there are fewer than 20 proposed redundancies, the consultation period is not specified but employers should normally allow at least two weeks.

Consultations should be with a view to avoiding redundancies or minimising their impact.

In any redundancy situation, employers must consult with individual employees. In addition, employers must consult with trade union or elected employee representatives if more than 20 employees are affected within a 90-day period. This is known as collective consultation.

The consultation period is deemed to begin as of the date of the first collective consultation meeting.

 

Redundancy Selection

Workplaces vary significantly and so it is difficult to produce a generic redundancy selection criteria matrix that will work for every business.  Some of the key considerations include:

Choose redundancy selection criteria that are as objective and measurable as possible. ACAS advises that employers “should base the criteria on the standard of work; skills, qualifications or experience; and attendance record, which must be accurate and not include absences relating to disability, pregnancy and maternity.” Employers should ensure that these are relevant and appropriate in the circumstances.

Avoid any selection criteria grounds that will be automatically unfair from an employment law point of view. Automatically unfair reasons include; an employee’s trade union membership or activities; health and safety activities; pregnancy and maternity leave; and making a protected disclosure (whistleblowing). Similarly, employers must be careful to avoid any criteria that place an individual at a disadvantage because of sex, race, disability, age, religion or belief, sexual orientation, marital or civil partnership status, pregnancy or maternity or gender.

Make sure scoring is carried out by managers (ideally more than one) with direct knowledge of the employee’s work. Always retain written records of the process and evidence for decisions.

Employers should be mindful that using selection criteria like ‘attitude’ and ‘flexibility’ are hard to quantify and therefore more likely to be subjective.

‘Performance’ or ‘standard of work’ are reasonable redundancy selection criteria to use but any assessment should be supported by clear, objective data. For example, in a sales setting, performance is likely to be relatively easy to measure however in a business in the service sector this may be more challenging. Performance reviews or appraisals are helpful here but only if they are recent and everyone in the redundancy selection ‘pool’ has actually had an appraisal.

Avoid ‘Last In, First Out’ (LIFO) as a means of selecting ‘at risk’ employees for redundancy. Under LIFO, employees are selected for redundancy in the order in which they joined a business, with the most recent joiners being made redundant/dismissed first. This is an objective criterion but often attracts criticism as being discriminatory because the most recently employed are generally also the youngest. If only young people are selected for redundancy, this would give rise to a claim for age discrimination.

Do not use the fact that an employee has been placed on furlough leave as a reason to select them for redundancy.

Ensure employees in the ‘at risk’ group are provided with their score and sufficient information to discuss and challenge a rating under the redundancy selection matrix.

 

Redundancy Pay (including Furloughed Staff)

Any employee who has been employed for a continuous period of more than 2 years is entitled to receive statutory redundancy pay (or a contractual redundancy payment if applicable). Statutory redundancy pay is calculated by reference to the period during which the employee has been continuously employed, his or her age and gross weekly pay. Statutory Redundancy can be easily and quickly calculated at the government’s website. Click the link here to visit the website.

Statutory redundancy payments to an employee on furlough leave are calculated on an employee’s pre-furlough salary. Companies cannot reclaim the cost of statutory or contractual redundancy payments under the furlough scheme.

Notice pay during the notice period is payable at the rate of the employee’s pre-furlough salary. Companies are likely to be able to reclaim the cost of an employee’s notice pay (up to 80% of salary and subject to the £2500 per month cap) for any notice period whilst on furlough. However, employers cannot reclaim any payment in lieu of notice under the furlough scheme.

Employees who are made redundant whilst on furlough leave are entitled to be paid in lieu of any accrued but untaken annual leave. This payment is payable at the rate of the employee’s pre-furlough salary. Employers will not be able to reclaim the cost of any payment made in lieu of annual leave under the furlough scheme.

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