Alternatives to Redundancy
Since the credit crunch became a commonly referred to descriptor of today’s economic climate, redundancy has been a high talking point in the media. We all know somebody in recent times that has been at risk of redundancy or made redundant; it is a complex situation to manage and must be the last resort once all other options have been considered.
To dismiss an employee by reason of redundancy, the dismissal must be attributable wholly or mainly to
- the fact that his employer has ceased, or intends to cease -
- to carry on the business for the purposes of which the employee was employed by him, or
- to carry on that business in the place where the employee was so employed, or
- the fact that the requirements of that business -
- for employees to carry out work of a particular kind, or
- for employees to carry out work of a particular kind in the place where the employee was employed by the employer
have ceased or diminished or are expected to cease or diminish.
Alternatives to Redundancy
If you are in the fortunate position to be able to act now to try and prevent redundancies, then as an employer you have a duty to consider alternatives to redundancy:
- Recruitment freezes - Frozen recruitment may initially seem drastic, but it is an obvious way to avoid endangering existing/remaining jobs. Always review the job design of a vacated position, streamline duties, reallocate duties, consider automation and outsourcing; these are all options for reducing the cost of employee overheads.
- Pay freezes or cuts - While pay rises are always desirable; it is likely that employees will be happy to settle for job security rather than a pay rise. Pay cuts must be managed through a period of consultation regarding the proposed changed to T&Cs; if you have a strong enough business case you may be able to enforce this through.
- Remove overtime - With many employers seeing reduced demand, reducing overtime is a straightforward way of cutting costs.
- Short-time working or Lay-off – A lay-off is where employees are not provided with work by their employer and the situation is expected to be temporary. Short-time working occurs when employees are laid off for a number of contractual days each week, or for a number of hours during a working day. Even in the best run company, circumstances can arise which lead to a temporary reduction in work.
- Reduce use of agency workers - Relying on core staff and cutting freelance cover is an option, especially in times of reduced demand.
- Cut bonuses or pension payments – Reviewing employee benefits is an option in avoiding redundancy, as above employees may be happier to have job security and agree via a consultation period to have pension contributions reduced, car allowance halved or bonus removed.
- Secondments to other companies - This is an ideal way of increasing staff skills and retaining them, while reducing costs.
- Redeployment in other parts of the business - Moving staff from quieter areas of the businesses to cover needs elsewhere can help keep staff motivated and save on recruitment costs.
Of course as a business if you have worked through all or some of the above options and despite this redundancy remains to be a realistic next step; then the Company must not delay the management of the process, placing the effected employee/s at risk of redundancy and commencing the consultation process.
The consultation process must be meaningful, so employees must have input in identifying the ways to avoid redundancy in identifying alternatives to redundancy.
Suitable Alternative Employment and Unreasonable Refusal
During this process it is a legal requirement that the employer puts forward available positions within the Company that are deemed to be ‘Suitable Alternative Employment.’ Although you do not have to create these if they do not exist. If you identify suitable alternative employment and an employee unreasonably refuses this offer they will lose their right to statutory redundancy pay. However, the definition of suitable alternative employment can be subjective, so if an employee went to an Employment Tribunal they would have to prove that they had some reasonable justification for that belief to then win back their entitlement to redundancy payment. Examples of what are not considered to be suitable employment are as follows:
- a substantial change in role, either in scope or responsibility i.e. from Account Manager to Factory Operative even if it is on the same pay
- a significant drop in salary
- actual drops or perceived drops in status
- increased travel time
- different or more inconvenient times for working.
Alternative Employment
The above are all reasons for finding alternative work as unsuitable. However, even if the Company is not in a position to place the employee into a suitable alternative position, it must still offer alternative employment, as part of any redundancy consultation process (if available).
On this basis, for an offer of alternative employment to be valid, the position differs significantly from the old one; it must be made before the old job ends and must either begin forthwith or within four weeks of the old job ending. Employees and Employers are permitted a trial period of up to 4 weeks where the suitability of the alternative employment is reviewed and then potentially accepted. If an employee decides to leave during the trial or the employer does not believe the employee is matched to the skill requirements then the employee can still claim their redundancy pay.
Unfortunately, what constitutes ‘suitable alternative employment’ and ‘unreasonable refusal’ of it is not an exact science; the burden of proof is on the employer to prove both. The criteria relating to ‘suitability’ include pay, status; hours, title etc and those relating to ‘reasonable refusal’ depend on the individual affected and their personal circumstance.
Either way it is not a straightforward application of the law, so if you are considering commencing a redundancy situation, please contact your RHHR Consultant.
