Understanding redundancy and its regulations

Making someone redundant is never easy - but it can be a particularly difficult experience for a licensee who has worked side-by-side with a member of staff who has to go.

Redundancy is back in the headlines, with many well-known firms having announced large-scale lay-offs as the global economy takes a downturn. To make news, redundancy figures need to run into the thousands. However, as a publican running your own business, you may one day be faced with an even harder decision than the chief executive who lays off thousands of workers he has never met.

If you need to reduce the number of staff you employ, the people affected will almost certainly be colleagues you have worked alongside closely, making the decision all the harder.

In order to protect both yourself and the employees involved, it is important to understand and follow the regulations governing redundancy.

Remember that the information in this feature refers to the statutory arrangements. If, for example, an employee has a valid contract which sets out more generous redundancy terms, it will take precedence.

What is redundancy?​

Redundancy is the dismissal of one or more employees as a result of a need for the employer to reduce the workforce. This may be because:

• The workplace is closing down, either permanently or temporarily. For example, a pub in a
  seasonal tourist area may be closing for the winter months
• A specific part of the workplace is closing, again
  either permanently or temporarily, such as a
  separate function room or supervised play area
• Fewer employees are needed for work of a particular kind. For example, a pub may need fewer
  waiting or barstaff.

The regulations have been tightened up in recent years, both to give employees increased rights to consultation, and to prevent employers from using redundancy as an excuse for dismissing employees for other reasons. Therefore:

• It is not redundancy if an employer immediately
  takes on a direct replacement.
• However, it is possible to make an employee
  redundant if you are recruiting elsewhere in the
  business - so, for example, if you are making a
  cleaner redundant it is still acceptable to recruit
  new barstaff.
• If you operate more than one pub, it is also possible to make an employee redundant at one
  location and recruit for another location, provided the employee did not have a contract
  requiring them to move if instructed.
• It is acceptable to move an existing employee into the job of an employee who has been made redundant, provided there is no vacancy in the same type of work and location where you worked.

Criteria​

When selecting one or more employees for redundancy, it is important that you follow clear, fair criteria for the selection process. The actual criteria are a matter for the employer, but always bear in mind that you might be asked to justify them by an employment tribunal. Suitable criteria might include:

• A points system based on skill and experience,
  with the lowest scoring employees made redundant
• A last-in-first-out approach, with the most recent
  employees made redundant in strict order of
  joining
• Making those closest to retirement age redundant - this is often used, simply because the oldest employees tend to be the most highly paid. While this approach is currently legal, EU laws to prevent age discrimination will make it illegal by 2006
• A call for volunteers. Anyone made redundant
  voluntarily has the same rights, including the
  right to a lump-sum payment, as those made
  redundant compulsorily.

The regulations say criteria should not be based on a single person's opinion of the employees concerned but in a small business such as a pub the decision is likely in practice to come down to the owner. This is another reason why the criteria should be fair and clearly followed.

It is illegal to make an employee redundant using race, sex or disability as criteria, and it is illegal to use trade union membership as grounds for redundancy.

Entitlement ​

An employee who is made redundant is entitled to a lump-sum payment if they have at least two years continuous service with the employer since the age of 18.

The amount is calculated by age, years of service and weekly pay, allowing 20 years and £240 a week the maximum allowable. Half pay is given below 22 years of age, and one-and-a-half times over the age of 40. By this calculation, the maximum statutory redundancy pay which can be awarded is £7,200.

Consulting​ The employer must consult each affected employee individually before dismissal notices are handed out. The information given should cover the following points:

• an explanation as to why their type of job is under threat
• an explanation as to why, according to the selection criteria, the individual employee may be chosen for redundancy
• the employee should be given a couple of days
  to respond
• the employer should consider any views or opinions expressed by the employee
• both the employer and employee should consider any alternative work or any ways in which
  the employee could stay in their current job
• once the selection has been finally decided the employer should have a second interview when
  the dismissal notices are handed out.

Collective redundancy​

Collective redundancy arises where an employer proposes to make 20 or more employees redundant within a 90-day period. In these circumstances, the employees' union or other elected representatives must be informed and properly consulted.

The employer also has to notify the Department of Trade and Industry (DTI) of plans to make 20 or more employees redundant.

Alternative employment​

If you offer an employee other employment as an alternative to redundancy, they may lose their right to redundancy pay if they turn down the job unreasonably.

In the case of any dispute, an employment tribunal would decide what is reasonable based on the individual employee's circumstances - for example, significantly longer travelling time or different working hours might be judged to be unreasonable.

The new job should start within four weeks of the old one finishing, and should include any necessary retraining.

Seasonal/fixed-term workers ​

Many pubs take on extra workers for busy times, such as the summer or Christmas period. This is acceptable practice, although in fairness to the employee, as well as to protect yourself, it makes sense to put the length of the employment in writing.

The law has changed recently in order to prevent employers misusing temporary and fixed-term contracts. If they meet the legal criteria, employees may be entitled to a redundancy payment at the end of a fixed-term contract.

Unfair dismissal​

If an employee believes an employer has not carried out the redundancy procedures fairly, they are entitled to ask an employment tribunal to rule. If the complaint is upheld, the tribunal can rule that compensation is paid or the employee is reinstated - in practice, it is rare for reinstatement to be ordered.

Other support​

There are a number of practical ways you can help an employee who has to be made redundant.

• Outplacement consultants - These specialists
  charge a fee to help find new jobs for employees. The cost may not be practical for a small business.
• Office access - Give employees the opportunity
  to use your PC, phone and fax to write letters,
  prepare CVs and contact potential employers.
• Time off - be flexible about allowing time off for
  job hunting and interviews during the notice