SUMMARY: HSBC has announced it is cutting 8,000 UK jobs in a global reorganisation. There is no doubt that planning has been undertaken for such large scale redundancies, but what are the key steps that any business should take when making redundancies?
HSBC recently announced that as part of a global reorganisation, it will axe 8,000 jobs in the UK. Many businesses will have to make redundancies at some point, whether it is part of a reorganisation or a site or workplace closure. What are the key steps an employer should take when making redundancies?
- Ascertain the current situation – conduct an audit
Before taking any decision about embarking upon redundancy consultation, an employer needs to understand its current structure and terms and conditions of employment by conducting an audit. In particular, it should consider the following:
a) Does it have an up to date organisation chart?
b) Does it have up to date contracts of employment for all employees?
c) Are all employees’ job descriptions up to date?
d) What are the terms of the contracts of employment? In particular, what notice period are employees entitled to receive from the employer?
e) What length of service do employees have? Employees with less than 2 years’ service are not entitled to a statutory redundancy payment and generally do not have a right to bring a claim for unfair dismissal.
f) What age are employees? This is relevant for calculating any statutory redundancy payments.
g) Is there a collective agreement with a trade union and does it include provisions relating to redundancy?
h) Check policies and procedures are up to date and particularly consider whether there is any policy on the process for redundancy consultation and how much employees may be paid when they are made redundant. There may be an enhanced redundancy pay scheme, which entitles employees to be paid more than statutory redundancy pay.
- Consider the reasons for making redundancies
The employer must have a strong rationale for making redundancies and it is sensible to set this out in writing in the form of a proposal. The reasons must relate to:
a) business closure (closure of the business altogether);
b) workplace closure (closure of one of several sites, or relocation to a new site); or
c) diminished requirements of the business for employees to do work of a particular kind (this is generally the reason for a restructure).
It is usually easy for an employer to demonstrate the first two reasons, but the third reason may require some further exploration and gathering of information to support it.
- Identify the pool for selection
A pool is the group of employees from which an employer will select those who are to be made redundant.
Before selecting an employee or employees for dismissal on grounds of redundancy, an employer must consider what the appropriate pool should be. Where the employer recognises a union, it will usually be expected to discuss the choice of pool with the union. A pool can be made up of one person in some cases.
Carefully identifying the pool for selection is likely to be most important in cases where there are diminished requirements for employees to do work of a particular kind.
If an employer is unsure what an appropriate pool for selection would be, we can assist in identifying this.
There are two types of consultation; collective and individual. Individual consultation must always be carried out, even if collective consultation is carried out. Collective consultation obligations (in particular the length of the consultation period) depend on the number of individuals to be made redundant.
In the case of HSBC, it is likely that it will need to carry out collective consultation which must be carried out if an employer proposes to make redundancies of 20 or more employees within a period of 90 days or less. This is one of the reasons it is key for an employer to establish how many redundancies it is proposing to make before starting consultation.
Although there are various steps an employer will need to follow when carrying out consultation, one essential criterion, whatever the type of consultation, is that an employer can show that the consultation is meaningful.
Minimum areas consultation should cover
In all redundancy situations, consultation should cover as a minimum the following areas:
a) the reason for the proposed redundancies;
b) the proposed pool for selection;
c) the method of selection (eg. objective selection criteria); and
d) ways of avoiding redundancies.
If consultation obligations are not satisfied, employers risk potentially expensive unfair dismissal claims being brought against them and/or a requirement to pay significant financial awards (known as protective awards) of up to 90 days’ gross pay per employee for failing to collectively consult.
Before starting consultation, we suggest an employer considers the following:
a) The number of employees to be made redundant.
b) Where those employees are based (i.e. are they at one site or different sites?)
c) Whether there is a recognised trade union.
d) Whether there is a collective agreement with a trade union containing obligations relating to collective consultation.
e) Whether there is a need to elect employee representatives (which may be necessary to satisfy collective consultation obligations).
f) What the timeframe is likely to be for the consultation period prior to making redundancies.
We suggest that employers seek legal advice if they intend to dismiss by reason of redundancy, so that an appropriate process can be followed to avoid a claim of unfair dismissal and/or a claim for a protective award. Our advice will be most effective if an employer has already carried out the suggested steps in “ascertain the current position” above; we can assist an employer in carrying out these steps and conduct an audit of existing documents.
For more details about how to carry out redundancies please contact:
+44 (0) 1604 871143
This update is for general guidance only and does not constitute definitive advice.