How to manage a redundancy July 2014 In our small community word travels very fast. Brand development and good reputation need not be damaged if this difficult situation is handled well. Reducing staff numbers is probably one of the hardest jobs you will have to do. There are some important legal considerations but in a market like ours it s so important that you come out with your respect and reputation intact. Following our HR Now guide will help point you in the right direction If you re not confident doing this alone seek our professional advice. A poorly handled redundancy plan can be costly - in more ways than one. FACT BOX What is redundancy? Under the Jersey Law, redundancy triggers when an employee is dismissed due to: The employer has ceased or intends to cease carrying on the business for the purposes of which the employee was employed by him; or The employer has ceased or intends to cease carrying on a business in the place where the employee was employed; or The requirements of the employer's business are such that the requirement for employees to carry out the work of the particular kind carried out by the employee have ceased or diminished; or The requirements of the employer's business are such that the requirement for employees to carry out work of the particular kind carried on by the employee have ceased or diminished at the place where the employee works. A reduction in the need for employees to carry out work of a particular kind. Prior to any decisions being made it is essential for the employer to carry out a fair process by following four ordinary principles of fairness:
1. The duty to consult with the employee; 2. The duty to warn of redundancy; 3. The duty to establish fair criteria for selection of employees for redundancy; 4. The duty to explore alternatives to redundancy. Failure to satisfy any or all of the above will not necessarily render a dismissal fair but it will more likely result in an adverse finding at Employment Tribunal. Statutory rights: Redundancy payment An employee will be eligible to receive statutory redundancy pay if: Dismissed by his/her employer by reason of redundancy; and Has at least 2 years continuous service with the employer. Employees who have at least two years' continuous employment will be entitled to a redundancy payment of one week's pay for every year of employment. The amount payable will be capped by reference to the reported weekly average earnings as quoted in the States Statistics Unit Report. The current figure (at 1 st June 2014) is 660. There is no upper limit on the number of years service that will qualify for a redundancy payment nor is there any upper age limit. Those working less than 8 hours per week have the right to a redundancy payment (if they have 2 years continuous service) irrespective of the number of hours worked per week. Where the employee is entitled to receive a larger redundancy payment as a result of a contractual entitlement then this will override the statutory entitlement. An employee who has been employed on a series of fixed term contracts with the same employer will accrue two years continuous service unless there is a gap between any two periods of employment of less than 9 weeks. Paid time off An employee who is given notice of dismissal by reason of redundancy will have a statutory right to 40% of a normal working week as paid time off to look for work or arrange training. Therefore a full time employee working a 5 day week would be entitled to a minimum of 2 days paid time off to seek alternative employment or make arrangements for training for future employment. Individual consultation Collective consultation does not negate the need for individual consultation.
Collective Consultation Collective consultation is triggered if an employer proposes to dismiss as redundant: 12 or more employees; from one establishment; within a 30 day period. The term establishment is not defined in the law and is generally considered to refer to a single geographic location. However, where an employer has several sites which are closely related in geographical and administrative terms, an establishment may cover more than one site. The notification requirements in the Law provide that an employer must notify the Minister for Social Security in writing of the proposed redundancies: before giving any employees notice to terminate their contracts; or at least 30 days before the first dismissal takes effect, (whichever is earlier). Collective consultation should begin 30 days before the first dismissal takes effect (i.e. the termination date not the date redundancy is confirmed). Collective Consultation requirements oblige an employer to consult with appropriate representatives of the affected employees. Appropriate representatives will be either: trade union representatives (where the TU is recognised for the purposes of the Employment Relations (Jersey) Law 2007); or appointed or elected employee representatives. The employer must provide the representatives with the following information in writing: a copy of any notification sent to the Minister; the reasons for the employer s proposals; the numbers and descriptions of employees whom it is proposed to make redundant; the total number of employees of any such description employed by the employer at the establishment in question; the proposed method of selecting the employees who may be dismissed; the proposed method of carrying out the dismissals, with due regard to any agreed procedure, including the period over which the dismissals are due to take effect; and
the proposed method of calculating the amount of any redundancy payments to be made to employees who may be dismissed. The consultation process must include consultation with the union/employee representatives about ways of: avoiding redundancies; reducing the numbers of employees to be dismissed; and mitigating the consequences of the dismissals. Should an employer fail to comply with the provisions of the Law in relation to collective consultation (or, where applicable, the election of employee representatives) the Tribunal may make a protective award which requires and employer to pay remuneration to all affected employees for a period of up to 9 weeks. Redundancy Plan It is important to have a proper redundancy plan that follows the steps below: 1. Reason Have a sound business reason for making reductions the stronger the argument the easier it will be for your team to understand and accept. 2. Selection for redundancy identify the jobs/functions and names for the selection pool; the alternatives to compulsory redundancy; existing contractual or customary selection criteria; redundancy selection criteria. Never use redundancy as an excuse for weeding out poor performers. The procedure for fair selection and consultation The procedure involves a lengthy consultation process. A tribunal would expect you to have done this so whilst it looks lengthy, circumventing it will almost certainly land you in the Tribunal. Stage 1 ideally takes place at least one week before Stage 2. This is typically in the form of an announcement to all staff and may include asking for volunteers/alternatives. Stage 2 this starts the formal consultation process. Individually interview each person in the pool for redundancy. Keep notes of all meetings. Employees will have the statutory right to representation from this stage. Stage 3 takes place at least one week after stage 2 above. Interview the employee(s) again and re-address the points in Stage 2. Stage 4 this is the final stage. Assuming no alternatives have been found inform the employee(s) that the redundancy is confirmed.
Confirm the severance terms and whether notice will be worked, paid-in-lieu or a combination of both. Inform the employee of their right of appeal of the selection decision to a more senior company representative. Again confirm in writing o that they will be made redundant o reason for redundancy o the termination date o their package o their right of appeal against the decision Other considerations Severance packages Offering money, whilst useful is not the only option consider also: Speaking to your contacts and other businesses to see if they have vacancies that you could refer them to as well as sending letters to authorities e.g. social security Compromise agreements In redundancy situations it is the norm that these are signed by the employer, employee and their legal adviser. They set out the severance terms that have tax advantages for the employee but also protect the employer from potential claims for unfair dismissal claim. The future remember those that are staying. They too will be feeling very insecure and morale will be affected by the absence of valued colleagues. Whilst their job seems safe in the short term they will need reassurance if you want to retain them. Remember to communicate honestly and regularly. They need to know the business is secure and has a strategy for the future. They will also want to have seen you treat their departed/departing colleagues treated fairly. Why Call HR Now? We have various tools and resources to guide you through templates for plans, letters for consultation stages, compromise agreements, support for managers delivering the messages. We also have in depth experience in this area and know that help and advice from someone who is an emotional step away is often extremely welcome and beneficial. Contact us at 01534 747559 or www.hrnow.je or becky@hrnow.je This guide is provided for information purposes only and does not constitute advice. Professional advice should be obtained before taking or refraining from any action in relation to the subject matter of this document. When this document refers to the Law it refers to the laws of Jersey only. We do however work across Guernsey and the UK and can advise clients on these laws too.