Common redundancy risks to avoid
With consumer confidence down in recent economic data, many business owners are preparing for the worst.
The pandemic reduced revenues across various industries, and many business owners are struggling with increased energy costs. If your business has been affected, you are probably considering how to reduce your outgoings. Labour costs often make up a large portion of overall business costs. Reducing the cost of labour may be the best option for your business. And, despite your best efforts to avoid losing staff, you might need to make redundancies.
Why Is Redundancy Risky?
Even though making redundancies might be the only way to protect your business during a downturn, it’s also one of the most technical areas of employment law.
If you do not complete a redundancy process in line with the law, your business will be exposed to the risk of potential claims under:
• Redundancy legislation
• Unfair dismissals legislation
• Employment equality legislation
Steps To Safeguard Your Organisation During Redundancy
Objective selection process
If the key elements of a redundancy procedure is running fair and objective selection processes. As part of this exercise, you should retain documents that record why certain employees were selected over others.
Having the records to demonstrate the objective criteria used for employee selection in a redundancy situation will minimise your risk of a discrimination claim linked to your procedures.
In addition to the objective selection process, you must also ensure that you put a consultation procedure in place to allow employees who are at risk of redundancy to participate in the process. Employee consultations should allow the employee to suggest possible alternatives to redundancies.
Unfair dismissal risks
Redundancy is a fair reason to terminate employment. The risk of redundancy-related unfair dismissal claims tends to arise in two ways.
Firstly, it needs to be clear that a genuine redundancy situation exists. In economic downturns, for example, many redundancies will be justified by a lack of work, and fewer employees are needed to complete the work.
Secondly, you must demonstrate that you followed fair procedures before making the role redundant. If either, or both of these elements cannot be confirmed, you might be at risk of an unfair dismissal claim.
Business risks of a flawed redundancy process
If you fail to comply with redundancy legislation, you leave your business exposed to significant financial downsides. If an employee succeeds with an unfair dismissal claim, they may receive up to two years’ salary in compensation.
You should also consider the reputational consequences of a badly managed redundancy process. Any subsequent claims by employees and negative experiences can negatively impact your reputation as a business. One final issue that is sometimes overlooked is the risk of alienating employees who avoid redundancy. It’s vital to do as much as you can to foster a positive working environment for the employees who remain on with your business.
A time of change and uncertainty can be difficult for many employees. Regular and ongoing communications with staff are vital once the redundancy process has concluded. For expert advice and assistance with redundancy in your organisation, please contact us today.