Charity Finance Directors’ Group  <ul><li>Redundancy and Restructuring </li></ul><ul><li>James Sinclair Taylor and Jane Kl...
WHAT IS A REDUNDANCY? <ul><li>Dismissal must be wholly or mainly attributable to the employer: </li></ul><ul><ul><li>Ceasi...
EXAMPLES OF REDUNDANCY <ul><li>Reallocation of duties </li></ul><ul><li>Change to the kind of work </li></ul><ul><li>Same ...
ALTERNATIVES TO REDUNDANCY <ul><li>Natural wastage </li></ul><ul><li>Let agency staff go </li></ul><ul><li>Freeze recruitm...
VARYING A STAFF CONTRACT <ul><li>Variation </li></ul><ul><li>- Temporary pay freeze </li></ul><ul><li>- Reduction in hours...
MOBILITY CLAUSES <ul><li>The “factual” rather than “contractual” test will apply </li></ul><ul><li>Commonly employers will...
UNFAIR DISMISSAL FAIR REASON <ul><li>Employees with over one year of service have the right not to be unfairly dismissed <...
FAIR PROCEDURE <ul><li>Procedural fairness is essential to avoid an unfair dismissal claim </li></ul><ul><li>Polkey – fail...
FAIR PROCEDURE <ul><li>warn and consult employees about possible redundancies; </li></ul><ul><li>adopt a fair basis of sel...
FAIR PROCEDURE <ul><li>Union agreement </li></ul><ul><li>Contractual provisions </li></ul><ul><li>Handbook </li></ul>
FAIR PROCEDURE <ul><li>Adequate warning </li></ul><ul><li>Fair selection: correct pool and objective criteria </li></ul><u...
IDENTIFYING THE POOL <ul><li>May be agreed with union or employee reps </li></ul><ul><li>The jobs may be similar or interc...
SELECTION CRITERIA <ul><li>Must be reasonable </li></ul><ul><li>Non-discriminatory (direct or indirect discrimination) </l...
FORMAL NOTIFICATION <ul><li>Notification post at risk </li></ul><ul><li>Confirm selection criteria </li></ul><ul><li>Invit...
INDIVIDUAL CONSULTATION <ul><li>Reasonable period </li></ul><ul><li>Genuine engagement </li></ul><ul><li>Documented </li><...
INDIVIDUAL CONSULTATION <ul><li>Consultation should commence while proposals are still being formulated </li></ul><ul><li>...
COLLECTIVE CONSULTATION <ul><li>Proposal to dismiss 20 or more at one establishment within 90 days 20-99 30 days consultat...
ELECTION REQUIREMENTS <ul><li>The employer must:- </li></ul><ul><li>make arrangements to ensure the election is fair </li>...
CONSULTATIVE CONSULTATION <ul><li>Consultation must be in good faith with a view to reaching agreement on </li></ul><ul><l...
COLLECTIVE CONSULTATION <ul><li>Representatives must be provided with written information </li></ul><ul><li>The reasons fo...
SUITABLE ALTERNATIVE EMPLOYMENT <ul><li>No obligation to create a new role </li></ul><ul><li>But any vacancy should be off...
ENTITLEMENTS STATUTORY REDUNDANCY PAY <ul><li>Employees with at least two years of service are entitled to a statutory red...
ENHANCED REDUNDANCY PAY <ul><li>Is it required by contract/policy </li></ul><ul><li>Is it the best use of the charity’s re...
TAX TREATMENT <ul><li>Statutory payments are tax free </li></ul><ul><li>Termination payments are tax free up to £30k (incl...
TOP TIPS FOR MINIMISING LEGAL RISK <ul><li>Need for clear business reasons for redundancies – should be documented </li></...
TUPE <ul><li>Application of Tupe </li></ul><ul><li>Same rules regarding election of representatives as for collective redu...
TUPE <ul><li>Any dismissal or contractual change which is transfer-related will be automatically unfair </li></ul><ul><li>...
INSOLVENCY <ul><li>Where insolvency proceedings are instituted with a view to liquidating the Transferors assets, employee...
CONTACT DETAILS <ul><li>James Sinclair Taylor </li></ul><ul><li>E:  [email_address] </li></ul><ul><li>T:  020 8394 6480 </...
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HR Redundancy and Restructuring by James Sinclair Taylor, Russell Cooke

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Many organisations are having to consider reducing staff in a recessionary environment.

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HR Redundancy and Restructuring by James Sinclair Taylor, Russell Cooke

  1. 1. Charity Finance Directors’ Group <ul><li>Redundancy and Restructuring </li></ul><ul><li>James Sinclair Taylor and Jane Klauber </li></ul><ul><li>12 May 2011 </li></ul>
  2. 2. WHAT IS A REDUNDANCY? <ul><li>Dismissal must be wholly or mainly attributable to the employer: </li></ul><ul><ul><li>Ceasing or intending to cease to carry on the business for the purposes of which the employee was employed by it (business closure) </li></ul></ul><ul><ul><li>Ceasing or intending to cease to carry on that business in the place where the employee was so employed (workplace closure); or </li></ul></ul><ul><ul><li>Having a reduced requirement for employees to carry out work of a particular kind or to carry out work of a particular kind at the place where the employee was employed to work (headcount reduction) </li></ul></ul>
  3. 3. EXAMPLES OF REDUNDANCY <ul><li>Reallocation of duties </li></ul><ul><li>Change to the kind of work </li></ul><ul><li>Same work performed by a different kind of employee </li></ul><ul><li>Re-organisation leading to a reduced need for employees </li></ul><ul><li>NOT REDUNDANCY </li></ul><ul><li>Appointment of a junior employee to do the same work </li></ul><ul><li>Change in an individual’s role if the requirement for employees to do work of a particular kind has not diminished </li></ul>
  4. 4. ALTERNATIVES TO REDUNDANCY <ul><li>Natural wastage </li></ul><ul><li>Let agency staff go </li></ul><ul><li>Freeze recruitment </li></ul><ul><li>Reduce/eliminate overtime </li></ul><ul><li>Consider offering voluntary redundancy </li></ul>
  5. 5. VARYING A STAFF CONTRACT <ul><li>Variation </li></ul><ul><li>- Temporary pay freeze </li></ul><ul><li>- Reduction in hours/unpaid holiday </li></ul><ul><li>- Reduction in pay/removal of benefits </li></ul><ul><li>By informed and express consent </li></ul><ul><li>By express variation clause but any unreasonable change may constitute a breach of trust and confidence </li></ul><ul><li>By serving notice and offering a new contract following consultation </li></ul><ul><li>But unilateral imposition without a variation clause will amount to unfair dismissal as well as breach of contract </li></ul>
  6. 6. MOBILITY CLAUSES <ul><li>The “factual” rather than “contractual” test will apply </li></ul><ul><li>Commonly employers will offer </li></ul><ul><li>redundancy where significant relocation is required </li></ul><ul><li>The employee will not be entitled to a redundancy payment if the transfer to a new workplace constitutes suitable alternative employment which he unreasonably refuses </li></ul>
  7. 7. UNFAIR DISMISSAL FAIR REASON <ul><li>Employees with over one year of service have the right not to be unfairly dismissed </li></ul><ul><li>Redundancy is a potentially fair reason for dismissal </li></ul><ul><li>Automatically unfair if redundancy selection influenced by prohibited reasons </li></ul><ul><li>Even where there is a genuine redundancy situation, an employer will need to ensure that they follow a fair process </li></ul>
  8. 8. FAIR PROCEDURE <ul><li>Procedural fairness is essential to avoid an unfair dismissal claim </li></ul><ul><li>Polkey – failure to follow correct procedures likely to render dismissal unfair unless doing so “utterly useless” or “futile” </li></ul><ul><li>Question of whether employee would have been dismissed anyway only relevant to compensation </li></ul>
  9. 9. FAIR PROCEDURE <ul><li>warn and consult employees about possible redundancies; </li></ul><ul><li>adopt a fair basis of selection; </li></ul><ul><li>take reasonable steps to minimise the number of redundancies by considering alternative work. </li></ul>
  10. 10. FAIR PROCEDURE <ul><li>Union agreement </li></ul><ul><li>Contractual provisions </li></ul><ul><li>Handbook </li></ul>
  11. 11. FAIR PROCEDURE <ul><li>Adequate warning </li></ul><ul><li>Fair selection: correct pool and objective criteria </li></ul><ul><li>Consultation </li></ul><ul><li>Amend pool/criteria/proposal </li></ul><ul><li>Suitable Alternative Employment </li></ul>
  12. 12. IDENTIFYING THE POOL <ul><li>May be agreed with union or employee reps </li></ul><ul><li>The jobs may be similar or interchangeable </li></ul><ul><li>Ensure there are no jobs outside the identified pool which are the same/interchangeable </li></ul>
  13. 13. SELECTION CRITERIA <ul><li>Must be reasonable </li></ul><ul><li>Non-discriminatory (direct or indirect discrimination) </li></ul><ul><li>Performance and ability (must be evidenced) </li></ul><ul><li>Disciplinary record </li></ul><ul><li>Attendance (exclude DDA and maternity absence) </li></ul><ul><li>LIFO – Age discrimination </li></ul><ul><li>Bumping </li></ul>
  14. 14. FORMAL NOTIFICATION <ul><li>Notification post at risk </li></ul><ul><li>Confirm selection criteria </li></ul><ul><li>Invitation to volunteer </li></ul><ul><li>Consultation to be followed </li></ul><ul><li>Any redeployment opportunities </li></ul><ul><li>Redundancy entitlement </li></ul>
  15. 15. INDIVIDUAL CONSULTATION <ul><li>Reasonable period </li></ul><ul><li>Genuine engagement </li></ul><ul><li>Documented </li></ul><ul><li>Basis of selection and allow employees to comment on individual assessment </li></ul><ul><li>Allow employees to make suggestions on all issues </li></ul><ul><li>Consideration of alternative </li></ul><ul><li> employment </li></ul>
  16. 16. INDIVIDUAL CONSULTATION <ul><li>Consultation should commence while proposals are still being formulated </li></ul><ul><li>No prescribed period but 7 days is the “bare minimum” </li></ul><ul><li>A failure to consult may render a dismissal unfair </li></ul>
  17. 17. COLLECTIVE CONSULTATION <ul><li>Proposal to dismiss 20 or more at one establishment within 90 days 20-99 30 days consultation </li></ul><ul><li>100+ at least 90 days </li></ul><ul><li>Consultation with TU reps or reps appointed or elected who have authority to receive information and be consulted </li></ul><ul><li>Also applies to varying terms and conditions where the employer has to terminate employment and re-engage </li></ul>
  18. 18. ELECTION REQUIREMENTS <ul><li>The employer must:- </li></ul><ul><li>make arrangements to ensure the election is fair </li></ul><ul><li>determine the number of representatives to ensure all groups of employees are represented </li></ul><ul><li>determine whether employees should be represented by reps of particular groups </li></ul><ul><li>decide term of office </li></ul><ul><li>all affected employees are entitled to vote </li></ul><ul><li>voting must be in secret and votes accurately counted </li></ul>
  19. 19. CONSULTATIVE CONSULTATION <ul><li>Consultation must be in good faith with a view to reaching agreement on </li></ul><ul><li>avoiding dismissals </li></ul><ul><li>reducing the number of dismissals </li></ul><ul><li>mitigating the consequences of dismissals </li></ul>
  20. 20. COLLECTIVE CONSULTATION <ul><li>Representatives must be provided with written information </li></ul><ul><li>The reasons for the redundancies must be given </li></ul><ul><li>You must finish consultation before giving notice </li></ul><ul><li>Applies even if fewer than twenty finally selected </li></ul>
  21. 21. SUITABLE ALTERNATIVE EMPLOYMENT <ul><li>No obligation to create a new role </li></ul><ul><li>But any vacancy should be offered even if not considered suitable </li></ul><ul><li>Evidence will be required as to why a role is not suitable </li></ul><ul><li>Trial period (4 weeks) may be extended for retraining </li></ul><ul><li>If the employee unreasonably refuses he will lose redundancy entitlement </li></ul><ul><li>Consider selection process if more than one employee is eligible </li></ul><ul><li>Remember any employee on maternity leave has priority for redeployment </li></ul><ul><li>Avoid prescriptive matching for new job </li></ul>
  22. 22. ENTITLEMENTS STATUTORY REDUNDANCY PAY <ul><li>Employees with at least two years of service are entitled to a statutory redundancy payment </li></ul><ul><li>Statutory redundancy pay calculated by reference to an employee’s age, length of service and weekly pay capped at £400 from 1 February </li></ul><ul><li>Maximum length of service to be taken into account </li></ul><ul><li>An employee may lose their rights if gross misconduct comes to light during redundancy consultation or notice period </li></ul>
  23. 23. ENHANCED REDUNDANCY PAY <ul><li>Is it required by contract/policy </li></ul><ul><li>Is it the best use of the charity’s resource? </li></ul><ul><li>NB any enhancement may be caught by age discrimination rules </li></ul>
  24. 24. TAX TREATMENT <ul><li>Statutory payments are tax free </li></ul><ul><li>Termination payments are tax free up to £30k (including the statutory element) </li></ul><ul><li>If a PILON is made it will be safest to deduct tax or (if relying on payment as damages for breach of contract) terminate contract before payment is made </li></ul>
  25. 25. TOP TIPS FOR MINIMISING LEGAL RISK <ul><li>Need for clear business reasons for redundancies – should be documented </li></ul><ul><li>Take care in considering appropriate selection criteria </li></ul><ul><li>Managers should be trained to ensure that objective selection criteria are fairly applied </li></ul><ul><li>Suitable alternative employment should be considered widely </li></ul><ul><li>Remember to consult long term sick and employees on maternity leave </li></ul><ul><li>Ensure there is someone available to respond to any queries employees may have </li></ul><ul><li>Consider offering a compromise agreement </li></ul>
  26. 26. TUPE <ul><li>Application of Tupe </li></ul><ul><li>Same rules regarding election of representatives as for collective redundancy </li></ul><ul><li>Duty to inform representatives of </li></ul><ul><ul><li>transfer </li></ul></ul><ul><ul><li>date of transfer </li></ul></ul><ul><ul><li>reason for transfer </li></ul></ul><ul><ul><li>legal, social and economic implications </li></ul></ul><ul><ul><li>any measures </li></ul></ul><ul><li>Consultation on measures </li></ul><ul><li>Protective awards </li></ul>
  27. 27. TUPE <ul><li>Any dismissal or contractual change which is transfer-related will be automatically unfair </li></ul><ul><li>Unless there is an “ETO” reason requiring a change to the number or functions of staff </li></ul><ul><li>A transferor will not be able to rely on a transferee’s defence </li></ul><ul><li>An employee may object to transfer but if he objects on the basis of a substantial change in working conditions he may treat himself as having been dismissed and the dismissal will be unfair </li></ul>
  28. 28. INSOLVENCY <ul><li>Where insolvency proceedings are instituted with a view to liquidating the Transferors assets, employees do not transfer and there is no protection against contractual variations or dismissals connected to the transfer </li></ul><ul><li>Where insolvency proceedings are not commenced with a view to liquidating assets, contractual variations may be agreed with employee representatives in order to safeguard employment </li></ul>
  29. 29. CONTACT DETAILS <ul><li>James Sinclair Taylor </li></ul><ul><li>E: [email_address] </li></ul><ul><li>T: 020 8394 6480 </li></ul><ul><li>Jane Klauber </li></ul><ul><li>E: [email_address] </li></ul><ul><li>T: 020 8394 6483 </li></ul>

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