As recession fears bite, two-fifths of employers are preparing to slim down by showing staff the door. How do you handle redundancies?

The winter CIPD/KPMG Labour Market Outlook survey has found that almost two-fifths of employers (38%) are planning redundancies this quarter – clear evidence that gloomy economic conditions are starting to bite hard. Making people redundant is an unpleasant job, but you can’t take shortcuts.

If you’re planning to make redundancies, you need to be certain that all the job losses you propose are necessary, justifiable and lawful. To make someone redundant, the work you employed them to do must have ceased (or be expected to cease) in the location in which they were (or are) employed.

You can’t make somebody redundant and then employ someone else to do the same job on a lower wage. However, you can make someone redundant if it is more cost-efficient to have their work completed by machinery or a computer.

Deciding who to make redundant?

Perhaps the worst aspect of redundancies is deciding who to let go, and then justifying that decision. Sometimes the choice is made for you: if you need to make redundancies from a group of people doing the same job, for example, first establish whether anyone wants to take voluntary redundancy. Be aware, however, that your most experienced and longest-serving employees are likely to put themselves forward. This could mean losing your better people, and having to pay out more in settlement.

Some firms have a “last in, first out” policy. The disadvantage of this is that an employee who joined you most recently might be much more productive than another who has been with you for years. You may also find yourself falling foul of age discrimination legislation, since this policy puts younger employees at an automatic disadvantage.

The chances are that, when choosing between employees doing the same job, you will have to base your decision purely on ability to do the job.

Legally, you are allowed to consider:

• skills, qualifications and aptitude
• standard of work performance
• adaptability
• attendance and disciplinary record (be aware of automatic unfair selection criteria, however, such as reasons relating to parenthood).

Discrimination

In all cases, you should be particularly careful to ensure that no employees can say they have been treated unfairly on grounds of age, race, sex, disability, sexual orientation, religion or belief. If someone can prove bias on any of these grounds, you are likely to be found to have unfairly dismissed them on grounds of discrimination.

There are other reasons a business can be found to have automatically unfairly dismissed an employee. These include maternity-related grounds or for making a request to work flexibly – and the Work and Families Act has tightened up employee rights in these areas.

You will also have to acknowledge the rights of employees who have been selected for redundancy. This means offering suitable alternative work where possible, in writing and before the employee’s current contract ends. People who turn down suitable alternative employment might lose their entitlement to redundancy pay; but they may undergo a trial period in a new job you offer them without losing their right to redundancy pay.

Redundant employees are also entitled to paid time off for job-hunting or training, as well as a minimum level of redundancy pay.

Statutory redundancy pay

Your company may have its own policy on redundancy pay. In any case, you will have to pay at least the statutory minimum to employees who qualify.

Statutory redundancy pay is based on:

• the employee’s age
• how long the employee has been working for you (past the age of 18)
• the employee’s weekly pay.

To calculate how much you will have to pay, visit the BERR website.

Consultation

If you will be making between 20 and 99 employees redundant you must start consulting with your staff (or their representatives) at least 30 days before taking any action. When there are more than 100 proposed redundancies, the consultation process must start 90 days in advance.

Where there are no employee representatives (eg a trade union), employees must be spoken to individually and given the chance to appeal under your statutory discipline and grievance procedures.