The importance of getting the redundancy process right
As the government furlough scheme begins to draw to a close, many companies are now turning their attention to thinking about not only the survival but also the regeneration of their business following the huge disruption caused by COVID 19. There has been an enormous change in how businesses operate, which means planning for and delivering business continuity solutions is of paramount importance. For many businesses, part of such a response will inevitably include redundancies, perhaps reflecting a reduction in business revenue, or the streamlining of employee costs through increased use of technology.
Irrespective of the reason for making employees redundant, the way in which a redundancy programme is both planned and implemented is key to mitigating any future legal claim against the company. Defending such a legal claim at what is likely to be a financially challenging time, not only redirects financial resources away from the business, but also valuable time which would be better spent ensuring its continuing viability. Alongside this, a wave of redundancies across a business will undoubtedly erode staff morale, and any legal claim against such a redundancy may cause further staff discontent, which in turn could affect employee productivity and profit margins.
Where a company fails to implement a fair redundancy programme, then the reputational harm to a business, irrespective of whether any legal claims subsequently arise, can be enormously damaging. Whilst it may be difficult to place an exact value on reputational harm, the immediate impact can have on relationships with customers and suppliers, at what is likely to be a very pivotal time in the sustainability of a business, should not be underestimated.
Companies must also consider the risk that employees being made redundant in the current economic climate are more likely to contest their redundancy. If they are not happy with the financial package offered, they may either seek to negotiate, or, possibly even bring an employment tribunal claim on the basis of some unlawful treatment against them in the recent past. Regardless of the claim’s merit, it is likely to be costly to defend. Where there is a ‘risky’ employee being made redundant, it is crucial to consider all possible eventualities and if there is a genuine risk, a settlement agreement on enhanced terms should be considered to avoid a future headache.
For these reasons, as an employer it is important to make sure that your redundancy programme is genuine, fair and inclusive. This means that there must be a genuine need for the business to make redundancies, that a fair selection criteria and process is being adopted with consideration given to alternative employment opportunities within the business and that affected employees are given adequate warning of the proposed redundancies.
Cripps Pemberton Greenish has a wealth of long standing experience advising businesses on how to structure and implement redundancy programmes. For more information on this please contact Ed.firstname.lastname@example.org.