Employees have rights if they’re made redundant. Moreover, there are processes you must follow and specifications you should know to handle redundancy properly. In the article below, we’ll explore how to avoid redundancy, if possible, and how to handle redundancy should it arise in your organisation.
Redundancies happen when you no longer need an employee to perform a specific job and are forced to terminate him or her. Most commonly, redundancies occur when:
- Your business is changing direction and you no longer need someone for the position;
- Your business is going to overhaul processes and do them in a new way (i.e. investing in new machinery, etc.); or
- Your business is changing locations or shutting down altogether
There are Two Types of Redundancy…
… specifically, voluntary and compulsory redundancies.
Voluntary redundancies are redundancies that employees take of their own accord, often after being offered an incentive of some sort (whether financial or otherwise). In contrast, compulsory redundancies are those employees are forced to accept when management must downsize or make other cuts within an organisation.
As you can imagine, voluntary redundancies are preferred. However, they aren’t always possible.
Your Obligations as an Employer
As an employer, it’s important you only make employees redundant if you have a genuine reason to do so and aren’t influenced by ulterior motives. This means that if you’re going to make an employee redundant, you should take all other steps possible before terminating their employment.
Under notice of redundancy, many employees have a right to:
Reasonable time off, allowing them to search for and secure a new position;
Redundancy pay; and
Fairness (i.e. they weren’t targeted for redundancy)
As an employer, it’s important you follow strict guidelines to avoid taking actions that are either unfair or illegal.
How to Avoid Redundancies
It’s always best to avoid compulsory redundancies. There are several steps you can take to do so, including:
- Recruiting applicants for voluntary redundancy or early retirement. If you do this, you must take volunteers in a fair, transparent process and ensure employees that they won’t be selected simply because they applied;
- Recruiting staff members to work more flexible hours;
- Laying off freelancers or off-site staff that aren’t essential to business operations;
- Eliminating casual labour;
- Restricting overtime allowances;
- Eliminating the need for new employees by filling the gap with existing workers
- Temporarily lay-off an employee while you cannot pay them, and allow them to return when you can
If you can’t avoid redundancy, you can offer an employee a different position within your company. Most often, these employees are allowed a period of time, often four weeks, to test out the position and see if it suits them. They can do this without forfeiting redundancy pay either.
Because you want to avoid redundancy, it’s important you’re familiar with alternatives. The best two alternatives are lay-offs and short-time working.
Lay-offs don’t mean permanently firing an employee. Instead, you’ll ask an employee to remain at home for a period of time until you can afford to pay them again. A less severe option is short-time working, in which an employee still works but works reduced hours.
Typically, you can explore these options only if an employment contract allows for it. In other instances, national industry agreements permit options such as this.
The Compulsory Redundancy Process
If you need to make compulsory redundancies, there are a number of criteria you should use to select employees to keep the process fair. Just some of these criteria include:
- Skills and qualifications for a position;
- Previous work performance;
- Attendance; and
- Disciplinary history
If your redundancy criteria target and affect one group more than another, you should reevaluate the criteria. After all, you don’t want to be perceived as discriminatory. As a means of guidance, you should always avoid these criteria in your redundancy selection:
- Pregnancy, family, or related matters;
- Type of employee (part-time vs. full-time); and
- Age, gender, marriage, disability, sex, sexual orientation, religion, etc.
The Redundancy Process
If you must make employees redundant, you need to be up-front and honest about the process. This means you must notify the appropriate representatives – including the Redundancy Payments Service (RPS) and representatives from trade unions – about the actions you’re taking, consult with the employee, and remain responsive to enquiries and other requests throughout the process.
Typically, you must provide details about why you’re creating redundancies, how many employees are to be involved, the categories of employees being affected, the redundancy selection process, and payments. Once you have selected employees, you must provide notice and determine who to arrange for redundancy pay where appropriate.
Redundancy pay typically only applies to employees with contracts who have served for at least two continuous years and are now being dismissed, laid off, or put on short-time working. The first payment is made when you dismiss the employee and there are statutory pay rates based on age.
Do You Need Help With Redundancies?
Redundancies can be a confusing process. However, it doesn’t have to be. At The HR Booth, we rely on decades of combined experience to find alternatives to redundancies if possible or, if not, to execute the process with skill and according to proper procedure.