Redundancy is a fair process of dismissing an employee; however there are certain legal requirements that need to be complied with:
- Notification to the Department of Trade and Industry if there are more than 20 redundancies
- Consultation with recognised Trade Unions or elected representatives
- Employee representatives must have written notice
(Employee Resourcing Lecture Notes 2002)
Under the Employment Rights Act, Redundancy is a reason for fair employment.
Good employers should plan in advance how they will handle redundancies. There are three good ways to handle redundancies:
- Ad hoc and informal arrangement varying with each situation (Not recommended)
- Formal Policy and procedures agreed with Trade Unions
- Formal agreement on procedure negotiated with the unions work force
(Lecture Notes Employee Resourcing) Reference
The first ad hoc approach is not recommended as a method it is a very informal process which could lead to the organisation being taken to an industrial tribunal due to unfair dismissal.
The best method an organisation can implement is the formal policy and procedure agreed with trade unions. A fair policy and procedure would be implemented taking into the consideration the well being of both parties those being the employers and employees.
The legal framework for redundancy can be considered in 4 parts:
- The payment of compensation for job loss
- Protection against unfair selection for redundancy
- The requirement for consultation with employees
- Other statutory rights
(Corbridge & Pilbeam 1998)
4.3.1 Redundancy Payments
Redundancy legislation provides for payments for the loss of employment which is “wholly or mainly” due to redundancy. Some employees are excluded from this legislation:
- Employees under the age of 18
- Employees who have reached normal retirement age
- Employees on fixed term contracts of 2 years or more who have waived the right to claim redundancy payments.
The Employment protection (part time employees) Regulations 1995 removed the differential qualifying threshold for redundancy payments for full and part time employees (where part time workers had to work for 5 years instead of 2 years before qualifying for payment) on the basis of indirect sex discrimination.
Statutory redundancy payments are based on age and length of continuous service:
Where any employer fails to make a statutory redundancy payment, the employee can take a claim for payment to an industrial tribunal. A redundant employee has a right to a written statement of how a redundancy payment has been calculated and a dispute about the calculation can also be referred to an industrial tribunal.
(Corbridge & Pilbeam 1998)
Voluntary redundancy or early retirements must be considered first, then employers can fairly proceed to apply the compulsory redundancy criteria which are:
4.3.2 Non Compulsory Redundancy
Last In First Out
Advantages
Rules are clear and simple to apply
Disadvantages
LIFO does not take into account skills, experience and qualifications of staff and future needs of the organisation.
Conclusion
LIFO is so be avoided especially where employers has recently recruited new staff to fulfil opportunity requirement.
Future Needs
These are skills, qualifications and other aptitudes needed by the employer to meet future needs of the organisation
Advantages
More relevant in a small organisation with professionally qualified staff
Disadvantages
It may be difficult to assess these things objectively. Employees selected on this basis on this basis may feel insulted and devalued, even if they do not contest their selection.
Conclusion
This is logically useful, but can also be used in conjunction with the present capability.
Present Capability
Work performance, adaptability and aptitude based on current and existing appraisals
Advantages
In theory it could be relevant and easier to access
Disadvantages
Ignores future needs of the organisation, be careful to avoid sex discrimination in relation to adaptability.
Conclusion
May be useful in conjunction with future needs, but requires careful thought.
Conduct
Attendance, time keeping, sickness and disciplinary records
Advantages
Reasonably easy to calculate and apply
Disadvantages
Records must be accurate and demonstrate reasons for absences. It requires consistency of approach, taking into account patterns of absence and having clear rules about standards. This may give rise to disability discrimination claims if sickness or time keeping is affected by disability.
Conclusion
The use of conduct may be useful if employers has kept careful and consistent records and has good supervision and appraisal procedures in place.
(National Council for voluntary organisations)
The use of these methods for selection can be perceived as unfair, and may result in a case for the industrial tribunal. Many of the methods do not take into consideration the future of the organisation, which if chosen could jeopardise the future of that particular organisation.
Statutory requirements ensure the employees made redundant will be treated adequately throughout the period. This can be seen below.
4.3.3 Redundancy Notice
All employees are entitled to a statutory minimum redundancy notice. However employers may decide in their policy to give longer periods of notice that the statutory minimum; however they cannot give shorter periods.
4.3.4 Other Basic Rights
Employees with one year’s service or more are entitled to reasonable periods of time off with pay, to look for other work during the Redundancy Notice Period.
4.4 The Redundancy Policy
A policy defines the parameters for managerial action to ensure that redundancy is dealt with in a more objective way.
There are a number of elements to be included in a redundancy policy:
Make a positive organisational statement about the commitment to maintaining employment levels and job security, whilst acknowledging that the organisational need for employees and for skills of a particular kind change over time.
State the consultation arrangements to be used in individual and collective redundancy situations, and specify the election arrangements for employee representatives in collective redundancy situations.
-
Actions to be taken to reduce need for redundancy
Refer to the alternative courses of managerial action that will be considered to avoid the need for employees to be made redundant.
Define objective and transparent selection criteria to include the method and the process; specify any eligibility and terms of voluntary severance, but acknowledge that an insufficient number of volunteers may mean that compulsory redundancies are necessary.
-
Redundancy Payment Arrangements
Specify statutory payments together with any enhancement to redundancy payments entitlement.
Refer to organisational redeployment procedures and identify the process through which employers will be considered and selected.
State employee’s right to appeal internally against operation of redundancy policy together with outline of the appeals process and procedure.
Special organisational support e.g. outplacement, counselling, training and time off to job search.
(Legal Advice Service Sheffield)
4.4.1 Advantages of a formal policy:
-
It avoids the likelihood of unfair dismissal claims
- Demonstrates the employers commitment to welfare
- Reduces stress and fear in the workforce
- Promotes stability and security of employment
- Gives organisation opportunity of using union expertise
(ACAS)
A redundancy policy which is reviewed, effectively communicated and clearly understood by employees is essential to the successful management of redundancy.
4.5 The Redundancy Procedure
- Statement of policy
- Consultation arrangements with unions (Not required but highly recommended)
- Consultation arrangement with individual employees
- Measures for minimising or avoiding compulsory redundancies:
- Natural Wastage
- Retraining and or assistance with relocation to another agency
- Restriction on recruitment
- Reduction of hours
- Seeking applicants for early retirement or voluntary redundancy
- Non renewable or temporary or fixed term contracts
- General guidance on criteria to be used for selection in event of redundancy
- Severance terms in practice must be the statutory minimum redundancy notice and payments for staff who qualify.
(ACAS)
Every organisation should try to avoid compulsory redundancies. The redundancy procedure outlines the way in which management can do so.
4.5.1 Principles informing the Procedure
- Employer should balance skills and experience of the work force with the organisations future needs
- Employer should consult on any change or departure from the procedure and notify the work force immediately.
- Employer should negotiate changes to inv contracts separately with each employee
- Employer should comply with the following disclosure requirements:
- Reasons for proposals
- Number of staff affected
- Description of posts affected
- Selection Criteria
- Methods of implementation
- Methods of calculation or redundancy pay
- Employer should allow employees time off to look for other work or training and provision for other work or training and provision of counselling advice
- Employer should recognise employees union reps right of access to union members
Using these criteria for selection may avoid the likelihood of a selection being unfair. Automatically unfair selections will arise if the reason for selection is:
- Engages in TU membership or activities
- Makes a health and safety complaint
- Asserts a statutory employment right
- Is pregnant or on maternity leave
Unfair selection can be very time consuming and expensive for an organisation. Employees can claim unfair dismissal, which will result in the organisation being involved in an industrial tribunal.
The organisational Justice Theory which is outlined below gives an insight into how unfairness is perceived by the employees:
4.6 Organisational Justice Theory
Three types of organisational justice theory exist:
- Distributive Justice
Relates to employee perceptions of outcome fairness which Homans (1961) labelled distributive justice. This promotes an understanding of why survivors may not perceive the outcomes of redundancy decisions to be fair.
Organisations are likely to make or promote redundancy selection decisions, based on criteria related to business needs, efficiency and performance.
However in many cases such criteria will be unlikely to produce outcomes which match the economic need to maintain employment of those threaten by redundancy.
(Brockner & Greenberg 1990)
In addition employees may perceive that the business related criteria for redundancy selection do not match their judgements about effective performance.
- Procedural Justice
This focuses on employee perceptions about the fairness of the procedures used to make decisions about downsizing and redundancies. Thus not only should the outcomes of downsizing decision making be seen to be fair, but also the procedures used to arrive at such decisions are fair. Negative reactions which are likely to arise be reduced by the use of procedures which are seen to be fair.
(Brockner 1990)
Daly and Geyer 1994 report that organisational studies related to procedural justice have focused mainly on 2 factors which affect perceptions about procedural fairness.
- “Voice” Which is linked to employee involvement in the process
- “Justification” Relates to education through explanation
- Interactional Justice
This focuses on employee perceptions about the fairness of the interpersonal treatment which they receive during the implementation of downsizing. Line managers have a potentially significant influence over the way their subordinates react to downsizing in terms of their treatment of those who leave and the survivors
(Bles and Moag 1986)
Line managers need to be able to demonstrate a range of skills which might be broadly described as change management skills. In addition, line managers need to be able to deal with the issues which are specific to a redundancy situation.
These will include:
- Communicating Notification decisions
- Providing reasons for these
- Sensitivity with which they treat leaver during notice period.
(Management Decision, Volume 37 1999)
It is suggested that line managers will require preparation and training to be able to cope effectively and fairly.
(Thornhill & Saunders 1996)
The three justice theories outlined above demonstrate that employees have various different views of how management undertake redundancy decisions.
The main idea is that redundancies do not match the outcomes that are required, therefore
4.7 Management Training
Redundancy policies and procedures are an effective method to manage redundancy, however in order to deliver these policies managers need to be trained in order to implement the process that has been to into place by the organisation.
Managers need to be competent in handling the variety of employee responses and recognise the importance of treating each employee as an individual.
Individuals derive status and self esteem from work, therefore any change in the working arrangements may affect individual morale. An employee may be afraid that the job loss will result in a loss of status in the community.
Another common concern is the fear of the unknown. The fear of change or anticipation may have a more negative effect than the change itself, because humans are resistant to change, they like familiarity and avoid situations that are threatening.
Therefore managers in dealing with redundancy need to recognise the emotional dimension and have the sensitivity skills necessary to respond appropriately.
Managers should also recognise that individual circumstances and characteristics such as age, gender and personality effect individual responses e.g. older workers may fear never working again and the real threat of age discrimination may demoralise the individual.
Managers need to be able to recognise and handle individual responses of anger, denial, fear and anxiety. There is rarely a place for humour in the redundancy encounters between management and employee. Good listening skills are necessary and employees should be encouraged to express their feelings.
Training the managers involves the developing of skills necessary to deal with the redundancy encounters with individual employers and providing information on:
- The redundancy policy
- Reasons for Redundancy
- Individual Entitlements
- Payment
- Time Off and Support
Adequate management of the redundancy process is a very vital and essential part, bad management can result in cases to the industrial tribunal which can be costly for the organisation.
5.0 CONCLUSION
To conclude, the redundancy legislation and accompanying policies and procedures are an effective method of downsizing in an organisation.
The policies enable management to offer a fair selection for redundancy. The findings aspect of the report outlined the various methods of selection for redundancy.
The research demonstrated that the “future needs” of the organisation is the best method of selection. It allows the management to analyse how the organisation will want to grow and what direction it will want to grow into. Management will then need to assess what skills and quality they will need from their human resources in order to meet the objectives of the organisation.
This strategy will determine who will be made redundant.
Redundancy is a very complex scenario in order to down size an organisation and decisions cannot be taken lightly. Redundancy does not only involve the ones being made redundant, but also the ones left behind. The research outlined by Nelson & Burke 1997 suggested a theory of “survivor Syndrome” where employees left are alienated from management, have low morale and commitment. This in turn can have an adverse effect on the organisation, resulting in lower efficiency and more employees leaving.
Careful planning and advice should be taken before any decisions are made.
6.0 RECOMMENDATIONS
- The organisation should ensure that it has an adequate system in place to support employees that are being made redundant. This support being:
- Counselling
- Training
- Aid in job search
- Also ensure that the policies are procedures have been followed to ensure that claims to industrial tribunals are avoided by fair selection.
- Employees that are left behind should also be offered counselling
- Other methods of reorganising the organisation should be considered before redundancy.
REFERENCES
World Wide Web page (no author)
Personnel Review: The meanings, consequences and implications of the management of downsizing and redundancy, 1998,
Available: http://www.anbar.com [2002, Oct 30]
Management Decision: Downsizing failures: an examination convergence/reorientation processes, 1999,
Available: http://www.anbar.com [2002, Nov 2]
8.0 BIBLIOGRAPHY
Beardwell, I Human Resource Management
Second Edition
Pitman Publishing
1997
Bratton, J Human Resource Theory and Practice
Second Edition
Macmillan Publishing
1999
Cole, G Management Theory and Practice
Fifth Edition
Letts
1998
Corbridge, M Employment Resourcing
Pilbeam, S First Edition
Prentice Hall, Financial Times
1998
Curtis, Barry Behaviour at Work
Curtis, Susan Second Edition
Pitman Publishing
1995
Rose, E Employment Relations
First Edition
Prentice Hall, Financial Times
2001
Stoner, J Management
Freeman, E Fourth Edition
Prentice Hall
1989
Torrington, J Personnel In Management HRM In Action
Wilkinson, A Prentice Hall
Second Edition
1998
ADDITIONAL SOURCES OF INFORMATION
ACAS Northern Regional Office
Commerce House
St Alban’s Place
Leeds
LS2 8HH
0113-243-1371
DTI Publications Orderline
Admail 528
London
SW1W 8YT
0870-150-2333
Legal Advice Service Voluntary Action Sheffield
69 Division Street
Sheffield
S1 4GE
0114-249-3360
National Council Voluntary Organisations
Regent’s Wharf
8 All Saints Street
London
N1 9RL
0207-713-6161
