Carillion Aftermath: Advice For SMEs on Making Redundancies

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23 Jan 2018

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The collapse of Carillion has sent shockwaves through the Construction Sector with several of the failed company’s sub-contractors already laying off staff.

It’s clear that Carillion has gone into liquidation owing vast amounts of money to hundreds of businesses, which are currently receiving support worth £250 million. For many small businesses such losses will inevitably lead to staff redundancies and this article considers the process and requirements involved in small scale redundancy situations where companies are proposing to make less than 20 redundancies.

Where To Start

A good starting point is to ensure that appropriate training is first given to any managers within the organisation who are likely to be involved in the redundancy process. Furthermore, it is imperative that the employer establishes whether or not their situation will attract small scale or larger (collective) redundancy obligations.

Fair Process & Meaningful Consultation

Whilst small-scale redundancies do not have nearly the same formalities as collective consultation an employer must still ensure that if an employee has over 2 years’ service that they follow a fair process and engage in fair and meaningful consultation. First, you need to demonstrate that there is a reduced requirement for work of a particular kind, or a business or workplace closure and ensure that the redundancy is not being used to mask another issue with the employee such as poor performance. Secondly, the employer should consider if there are any other options to avoid the need to dismiss anyone – for example establish whether the situation is likely to be for a temporary period and consider whether or not there is a contractual right to place the employees’ on temporary layoff. Thirdly, sufficient thought must be given to identify the pool of employees affected. It is imperative when determining the pool of employees’ that consideration be given to the reason for the redundancies, the type of work carried out, whether people are interchangeable and whether other group of employees are doing similar work. Employers need to show that they have acted logically and reasonably in identifying the pool. Each employee should be told of the precise reasons why he or she has been provisionally selected for redundancy and given any opportunity to make any representations. Any comments the employee makes should be taken into account, both on selection issues and on any suggested alternatives to redundancy, before any final decision is taken.

Selection Criteria

Moving forward, an employer must consider identifying who is directly affect ted by the redundancy situation by applying selection criteria and scoring people within the given pool. This criteria should be discussed and agreed with the employees if possible. It should be based on factors that can be measured objectively (meaning that subjective criteria such as attitude should be avoided as it is difficult to demonstrate and could attract personal prejudice). Care should also be taken with criteria such as:
  • Length of service, which can indirectly discriminate against your employees.
  • Attendance records, which could discriminate against people with absences related to a disability, and,
  • Flexibility, which could discriminate against women who may not be able to work shifts or weekends due to childcare responsibilities.
Each employee should be informed how his or her score was arrived at, and allowed opportunity to challenge the score.

Concluding the Process

An employer will be under a duty to take reasonable steps to identify alternative work for these employees, either within the organisation of with an associated company. If the employer has no alternative option but to dismiss the employee then they will be entitled to receive the greater of their statutory (1 week for every year worked up to a maximum of 12 weeks) or contractual notice than they may be required to work in addition to their redundancy payment. If the employee is to work their notice period then those employed for at least two years have a statutory entitlement to a reasonable amount of paid time off to look for another job or arrange training.

Employment Tribunal Claim Risk

An employee with over 2 years’ service who has been dismissed by reason of redundancy may be able to bring a claim to an employment tribunal. This might be where the real reason for dismissal was not redundancy, the dismissal was handled unfairly e.g. failure to use objective criteria, the employee was selected unfairly or the employer failed to consider any alternative work. To this end, by adopting the principles contained in this article an employer should be able to avoid a successful tribunal claim.

Expert HR & Employment Law Advice

Croner has more than 70 years’ experience of advising businesses of all sizes on a wide range of employment law issues including redundancy. Through the hundreds of thousands of discussions we have every year with clients we also identify trends and help future proof their businesses with timely advice and new services. We also offer expert support to help protect businesses from the increasing likelihood of your employees escalating a case to employment tribunal. For more information contact 0808 145 3490.

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