If you are able to establish that there is a redundancy situation and your business needs to reduce headcount, you will need to make sure that any selection process for redundancy is fair. When making redundancies you will usually need to identify the pool of individuals at risk of redundancy and score them fairly against objective criteria to see who should be made redundant.
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How do you choose a pool for selection?
A ‘pool’ is just the grouping from which the individuals will be selected for redundancy.
If there is a business closure and all employees are being made redundant, you will not be required to choose a pool for selection.
If there is not a business closure and you are retaining employees, then before you start the redundancy process, you will need to identify which employees are in the pool for selection. To do this you will need to consider carefully what roles or tasks are being reduced or removed from your business. To be able to identify which group of individuals are ‘at risk’ of redundancy, you will need to look at the reality of the particular roles, or tasks your employees perform. Then,those which perform the reduced or eliminated roles or tasks will be in the selection pool and will be placed at risk of redundancy.
It is possible for there to be a pool of one individual if they hold a unique role or have skills and perform tasks that no other employees carry out.
It is important to note that it is just a matter of identifying those employees at risk of redundancyat this stage, and no definite decisions about who will be made redundant or even if there will be any compulsory redundancies have yet been made.
It might seem obvious who will be made redundant. If specific jobs are lost, surely the individual currently occupying that role should be made redundant? However, this is not necessarily the case and assumptions should be avoided. The pool for selection should sometimes be wider to include staff with the same or similar skills, qualifications, or undertaking the same or similar tasks, even if these are undertaken in different departments or on different sites.
It may even be that employees would rather you use ‘bumping’ which means putting them into a role that is already being carried out by another employee, then putting that other employee at risk of redundancy. It is not mandatory to do this, but in some cases, it has been held to be unfair to not even consider it. This means that the question of who is at risk and who will eventually be made redundant is not always clear cut at an early stage.
The key questions to answer are what work is disappearing? Which employees do that work? Are there other employees who do similar work? These should help you to decide on the selection pool and employers do have a wide level of discretion in relation to the pools they decide upon. Unless there is a collectively agreed or customary selection pool, if your choice of pool is within the range of reasonable responses, it will be fair.
Once you have selected a pool of individuals which will be at risk of redundancy, you will need to score them against objective selection criteria.
What are fair selection criteria for redundancy?
Unless there are selection criteria prescribed in your employees’ contracts of employment or your redundancy policy, or agreed with Trade Unions or employee representatives, there is some flexibility in the selection criteria you can choose.
If there are criteria already set out, these must be used, if there are not, it is recommended that you agree the criteria with any Trade Unions recognised by your business or employee representatives, before you score the employees against the criteria. If there is no employee representation, then selection criteria should be discussed individually with the employees through individual consultation. If you would like assistance with updating your employment contracts or redundancy policies, our expert lawyers can assist with this.
Some objective criteria which are easily measurable and not just based on opinion might be:
- Performance (scores from previous appraisals)
- Skills
- Qualifications
- experience
- attendance
- disciplinary record
You might assess against these criteria from previous experience of the employee, or you may ask for at risk employees to reapply and interview for a particular role to take that process into account as part of the scoring for redundancy.
Is Last in First Out (LIFO) a fair selection criteria?
This used to be a popular method for selecting employees for redundancy and it was previously widely accepted by employees that if an employee started employment with an employer last that they should be the first to leave. Whilst LIFO is in principle an objective basis on which to score for redundancy, this must be applied fairly and to be fair should be considered alongside other objective factors.
The concern with LIFO as a selection criterion is that if it is the sole criterion or too heavily weighted as a factor when selecting for redundancy, this may lead to indirect discrimination particularly indirect age discrimination against younger people. LIFO often penalises younger employees disproportionately because they are more likely to have shorter service, meaning they are more likely to be selected for redundancy under LIFO and are more likely to be entitled to a lower redundancy payment.
There is also an argument that women are likely to be indirectly discriminated against when using this criterion, as they tend to have shorter terms of employment due to often having to balance other caring responsibilities and needing flexibility and different roles to fit their lives at different times.
It is possible to justify LIFO as a proportionate means of achieving a legitimate aim, because this criterion helps to reward loyalty of employees and to maintain a stable workforce, however it is just wise to balance this against other selection criteria. LIFO is now often used as a tie break criterion should employees’ scores be tied.
How do I fairly score employees under the selection criteria?
The scores that you choose to award employees will be a matter for you, but they must be objective and justifiable to be fair. The scoring must be awarded consistently, and using a redundancy selection matrix where criteria are clearly defined and evidence provided for scores, can help. If there is any weighting of scores, so that some criteria are given more importance than others, this should be transparent so that employees are clear on what is being assessed, why and by whom.
Scoring against the different criteria should be based on assessment over a reasonable period so it is a fair reflection of the individual employee’s abilities and skills. If you are looking at performance data for example, you should use written performance reviews or appraisals over a period of time. Keeping a written trail is important to evidence your decision-making process.
For the scoring to be accurate and for consistency it will be important for you to consider who is doing the assessing. For accuracy, the scoring will need to be carried out by someone with direct and specific knowledge of all at risk employees’ work, such as their immediate manager, so they can fairly compare. Given that one person’s view could be considered bias, it is strongly advisable that more than one person, but the same people, scores each employee, so that there is consistency and less likelihood of dispute.
It is important that discrimination does not creep into the process in application of the scoring to the non-discriminatory criteria. For example, when considering attendance records, you should not include medical appointments relating to disability or maternity, and parental leave. These should not be considered as absence in the same way as other absences from work, as this would unfairly disadvantage disabled people, new mothers and parents, respectively.
You do not have to choose a weighting for particular criteria, they can all be taken into account equally when scoring employees. However, where certain criteria are more important to the future of your business and the staff you want to retain going forward, weighting will allow you to be more flexible in how you score employees. Again, you will want to be cautious not to discriminate with the use of weighting and if you are weighting criteria to reflect the most important factors for the future, LIFO should not be weighted more highly than other criteria you score against.
What if the selection process goes wrong?
Redundancy is a potentially fair reason for dismissal if there is a genuine redundancy situation and the selection process is fair. If the redundancy selection criteria are unfair or are applied unfairly, there may be potential claims for breach of contract, unfair dismissal and/or discrimination against your business.
If an employee has been selected for redundancy for a discriminatory reason, this is automatically unfair and if that employee is dismissed under those circumstances, this could lead to an automatic unfair dismissal claim. It is also automatically unfair, to select and/or make an employee redundant based on parental leave, or an employee taking time off to care for a dependant, acting as an employee or trade union representative, trade union activity, whether they are part time or fixed term, or for asking for their entitlement of pay, hours or holidays.
If an employee objects to one or more elements of your redundancy selection process it is advisable to allow them the opportunity to discuss their objections through the individual consultation process. As already mentioned, so far as possible elements of the process should be agreed (or at least discussed) in advance, such as the selection criteria to be used. If an employee objects to the scores they have been given, there should be individual consultation and discussion about this as soon as possible. Ultimately, there should also be the opportunity offered for an employee to appeal against their dismissal, should the employee be eventually dismissed.
If you are confident in the redundancy process you have carried out and are able to refer to written evidence and a clear written trail of decision making and discussions on a fair, consistent and non-discriminatory basis, this should be the end of the process. Even if an employee objects to being made redundant, provided you have paid them what is required under their contract and under statute and there was a fair reason for the redundancy, and they were fairly made redundant in the specific circumstances, there is unlikely to be any ongoing liability for your business. If you are unsure and would like to talk through the specifics of your business’ circumstances, our specialist employment solicitors can help.
If you are concerned about ongoing liability relating to your redundancy process, our employment lawyers are experienced in defending employment tribunal claims and resolving ongoing disputes under settlement agreements and so please do contact us for further assistance.
Summary
Incorrect selection for redundancy, whether by selection of the incorrect pool for redundancy, incorrect selection criteria or incorrect application of the selection criteria, is one of the main areas where we experience employers find themselves defending unfair dismissal on the grounds of redundancy claims. To avoid making errors leading to unfair dismissal, breach of contract or discrimination claims, if you are in doubt about selection for redundancy, please do contact our employment lawyers who can guide you through each stage of the redundancy process.
