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Cutting the risks when axing jobs

Dealerships across the UK are restructuring their work forces in order to cope with declining sales volumes.

AM spoke to employment law specialist Julian
Hemming, of Osborne Clarke, about the key points dealership managers must follow while making staff redundant to avoid potential litigation.

“If dealers don’t follow the correct procedure then it will automatically be held as unfair by an employment tribunal, and there will be a 10-50% uplift in compensation above that which the tribunal would normally award,” said Hemming.

“And if you get it wrong you’ll probably upset those people that remain. You want people involved in the process to think you’re a decent employer, and to leave thinking they’ve been treated fairly.”

Collective redundancy regime

The redundancy process depends on the number of cuts proposed. For 20 or more within a single ‘establishment’, such as a dealership or a particular function within a group, employers must follow a collective redundancy regime.

The first step is to inform the Department of Business Enterprise and Regulatory Reform and consult with any union or elected employee representatives, 30 days ahead of any redundanciess beginning.

Hemming advises that this notice includes the reasons why redundancies are necessary, the number of employees proposed for dismissal, the method of selecting those employees, and how redundancy pay will be calculated.

30-day consultation

On consulting with employee representatives for their feedback, Hemming suggests the employer and representatives should sign a document to state what has been agreed and what points were discussed but not agreed upon.

After the end of the 30-day consultation period, employees made redundant are entitled to their notice period, plus statutory redundancy pay as a minimum.

Failure to conduct a collective redundancy process means employees may claim a protective award of up to 90 days’ pay through an employment tribunal.

If fewer than 20 jobs cuts are proposed, the employer must consider each employee individually.

Hemming said a ‘general fairness’ test applies. The employer must show they have first considered alternatives to redundancy, such as redeployment, temporary lay-offs or pay cuts.

Fair criteria

Next, the employer must decide the fairest criteria to select people from a pool for redundancy, such as disciplinary record, absence record, skills and qualifications.

Once employees have been scored on the criteria, write to the individuals telling them they are at risk of redundancy and invite them to a meeting. At that meeting, they may review their own score and suggest alternatives to redundancy, which the employer must consider.

The employee is then invited to a second meeting, accompanied by a colleague if desired, at which the outcome of the consultancy process is confirmed.

The employee then has a right to a final appeal to the employer, before beginning their statutory notice period and being entitled to statutory redundancy pay as a minimum.

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