The risks of a DIY redundancy process
Posted on 19th April 2021
You may be tempted to create your own redundancy process, especially if the redundancies are intended to save money. However, this can be risky and can leave you open to much higher costs in legal claims and compensation.
There are several reasons it is vital for you to understand the law and get the process right:
1. Legal claims
If your redundancy process isn’t correct, legally, employees who are made redundant may have a claim against the business for unfair dismissal. You may also risk discrimination claims based on how you choose candidates for redundancy.
Tribunal claims are costly in legal fees and compensation. Legal claims also cause stress, take up your time and create a serious reputational risk.
Compared to the risk of a tribunal claim, legal advice is a valuable investment.
2. Staff morale
The redundancy process can be unsettling for your employees. Even those who ultimately keep their jobs will be affected by the process.
Redundancies are often made with the aim of improving efficiency, but staff who have lost heart in a company are rarely as productive as those who are happy at work. A poor redundancy process may diminish morale and could be counterproductive. Unhappy or unsettled employees can also pose a reputational risk.
Having a fair and smooth redundancy process will help your employees keep their trust in you, and in turn, benefit your business.
3. ‘Protective award’ for failure to follow collective consultation rules
If you are considering making multiple redundancies the rules on collective consultation may apply. If you fail to follow the rules on consultation your staff may claim a ‘protective award’. This is in addition to compensation for any other employment claim.
A protective award is up to 90 days' pay for each affected employee, even if they were not selected for redundancy in the end. The actual amount awarded depends upon the extent of your failure to meet your obligations. This can be particularly costly if many employees are affected.
4. Breach of contract
If you do not meet your contractual obligations, you may unintentionally breach your employees’ contracts of employment. A significant breach could terminate the contract, and your former employee may not be bound by any restrictive covenants or clauses intended to protect your business interests. Depending on your employment contracts, this could create a significant risk for your business.
How can we help?
Our Employment Law solicitors can help you to structure a fair, legal redundancy process tailored to your business circumstances. We will get to know your individual business and the aims you hope to achieve through making redundancies, so we can help you to make the best decisions for your organisation.
We will help you to understand all your obligations, from correct consultation to choosing candidates based on legal considerations, to reduce the risk of legal claims and penalties.
Thanks to our extensive experience we can support you through the redundancy process swiftly and smoothly, reducing the period of upheaval and uncertainty for your business and your employees.
Get in touch to discuss your aims and how we can help.
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