We highlight some of the legal and practical issues to consider when making reductions in force in the UK.
With the number of UK redundancies during December 2022 having doubled compared to the same period during 2021 and a number of high-profile layoffs being announced daily, more businesses will likely have to make difficult decisions regarding potential reductions in their workforces in the coming months.
The more time spent planning, the more likely that the process runs smoothly and without claims or unsettling remaining colleagues. Begin by assembling a multi-disciplinary team which includes not just HR, legal and business management, but also payroll, benefits and internal/external communications specialists. The following issues are some of the key strategic points for consideration by HR teams and employers in anticipation of a potential RIF.
Timing is key
Planning at this stage must account for certain legal requirements in the UK including minimum consultation periods and the requirement to notify the Secretary of State for the Department for Business, Energy and Industrial Strategy (BEIS) of the proposed redundancies where an employer is proposing to dismiss 20 or more employees at one establishment in a 90-day period:
Failure to notify BEIS is a criminal offence.
It is also important to take some time to understand your workforce demographic, for example:
-Do you have lots of employees with under two years’ service for the purpose of unfair dismissal claims?
- Is there a particular risk of discrimination with some potentially in scope employees which might necessitate a disparate impact analysis?
- What types of roles are likely to be in scope of the RIF?
What level of consultation is required?
- Although there is not a minimum consultation period, there is a minimum period of time that must elapse after the consultation has started before the first dismissal can take effect. The consultation must commence 30 days before the first dismissal takes effect for 20-99 redundancies and 45 days before the first dismissal takes effect for 100 or more redundancies.
- Failure to collectively consult can result in redundant employees being awarded a “protective award” of up to 90 days’ gross pay.
Employers can expect similar consultation obligations across the UK and EU, however, each jurisdiction has specific obligations with little uniformity and local advice is required for each jurisdiction involved in any RIF.
If your business operates in multiple jurisdictions, you will need to consider how a RIF will be communicated at a global level as well as local, whilst also complying with any stock exchange obligations. It is also important that any proposed announcements or communications are reviewed by local counsel before being shared with employees to manage legal risk and, in the UK, to mitigate the risk of unfair dismissal claims.
Once the RIF has been scoped and the relevant obligations identified, you will need to consider the following implementation issues:
Pooling and selection criteria
- These criteria should be objective, non-discriminatory, clearly defined and where possible, measurable.
- Criteria should be consulted upon with employees.
Once the consultation and selection processes are complete, you must give affected employees formal notice of the termination of employment. You will need to consider the following:
You may decide to offer enhanced redundancy payments to redundant employees to mitigate the risk of unfair dismissal claims. If using enhanced redundancy payments, most employers will look to enter into a binding settlement agreement with redundant employees to waive potential claims arising from the RIF. An employer who offers an enhanced redundancy payment may also consider truncating some of process discussed above.
In large-scale redundancy processes where many employees are dismissed as part of a RIF, the resolution process can be administratively burdensome involving a large amount of document production, particularly where multiple jurisdictions are involved.
A new streamlined, fixed price service
We have developed an innovative, service solution which combines high-quality strategic advice with the use of leading document production technology to help you manage your legal risk, produce individualised redundancy documentation and prepare, negotiate and organise execution of a binding settlement agreement for each redundant employee.
For further details and to obtain a fixed price quotation within 24 hours take a look at our Redundancy Toolkit, or contact our specialist team of lawyers at RedundancyToolkit@gqlittler.com.