A NUMBER of high-profile redundancies have been declared and reported in the insurance industry over the past few months and it would seem, in light of the present state of the world economy, that this is a trend which is likely to continue.

Employers and employees alike often fail to recognise that a redundancy is in fact a dismissal. The redundancy is simply the reason for dismissal, as opposed to poor performance or misconduct. A statutory redundancy situation typically arises when the workplace itself closes or relocates, and otherwise where an employer's need for a particular type of work reduces.

Under statutory obligations, employers legally must consult with trade union or employee representatives where it is proposed to dismiss 20 or more employees at one establishment over a period of 30 days or less.

However, employers often unwittingly fall foul of unfair dismissal rights by failing to consult individuals who may not be members of appropriate unions or do not have an appointed representative for their particular sector of the workforce.

Don't rush it
More pertinently, unfair dismissal claims often arise where fewer than 20 employees have been made redundant and have not been consulted at all.

Even where a legitimate redundancy situation exists, an unfair dismissal will almost inevitably occur if there has been insufficient consultation. Consultation should take place “with a view to reaching agreement”. Employers seeking to rush the process expose themselves unnecessarily to potentially large compensation claims.

Presently, the threshold for compensation stands at £51,700. It should be noted that the potential for such compensation to be awarded is over and above any basic award or statutory redundancy payment. Often, however, a statutory redundancy payment will be taken into account when assessing an individual's financial loss.

Consultation is the key
The simple message to employers is beware.

You must consult with your employees and keep them informed of progress prior to a decision being made – and certainly before it is implemented.

Employees, you have a right to be informed and consulted over potential redundancies. This will generally mean you should have an opportunity to make representations as to alternative options. These may include other positions within the same workplace, working for a while on a limited basis or a transfer to a new site.

In all other respects, an employer is entitled to reduce his workforce as and when he feels it is appropriate to do so. The overriding feature (beyond the need for consultation) is that the employer must act reasonably and fairly, and must ensure, if the entire workplace is not closing, that an objective and fair selection criteria is utilised.

The legislation currently in place does not prevent employers making the difficult decisions they inevitably encounter. It does, however, seek to ensure the individual's position is considered in full and that a dismissal for redundancy purposes is not taken as any-thing other than the last resort.

  • Guy Guinan is an associate at Halliwell Landau (in Manchester).