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Difficult decisions

If you are facing redundancy situations for the first time, be aware that you do need to follow the correct procedures, and there are a few new pitfalls to consider, says David Rankin of BusinessHR

The Treasury is now predicting that unemployment will reach three million this year. It is already at its highest level since 1997. Unsurprisingly more and more workers are growing increasingly concerned over the security of their jobs. A poll of 5,000 workers by Jobsite.co.uk, found that one in five workers (19%) are concerned about being made redundant from their current position; 12% are reluctant to move jobs as a result of recession fears but 16% (largely those with short service) are looking to change jobs before they face redundancy.

A survey by law firm Pinsent Masons LLP found that 55% of employers have implemented alternatives to redundancy in a bid to protect jobs, with a further 32% considering this. Alternatives included pay freezes or reductions (including bonuses), lay-offs, short time working, early retirement, corporate restructuring such as outsourcing.

Large firms mentioned in the press recently include Thomson Airways (whose pilots have agreed to take a 5% pay cut), accountants KPMG (where 85% of staff have opted for either a four-day week or a three month sabbatical if necessary) and BT, which has imposed a pay freeze across all of its staff, including its chief executive.

We've also found that our clients are showing much more interest in avoiding redundancies - and that staff are more willing to consider things which would have been rejected out of hand previously.

Bear in mind that unless your contracts permit this, any "across the board" cuts in pay, hours or benefits will have to be agreed by staff.

A majority vote is insufficient to impose pay cuts, reduced benefits or shorter working hours on all employees. Without an express contractual right it is important that employees individually agree before any detrimental change is imposed. If some do not accept the change and you impose it you run a risk of claims for unlawful deductions from wages, breach of contract and constructive unfair dismissal. Any employees who refuse to consent to a change have the right to remain on their contracted terms.

In practice, if the majority agree to lower pay to avoid redundancies it would not be acceptable to have a few fellow workers doing the same job for more. Apart from any potential legal issues this is likely to cause considerable ill-feeling.

On the basis of a reasonable business case, after consultation you could dismiss them and offer immediate re-engagement to start after they have worked their notice. The terms of the new contract would be those already agreed by the others. The dismissal would be for 'some other substantial reason'. However you will have to ensure that your actions are seen as reasonable (and, if commenced prior to 6 April this year, that you have complied with the statutory dismissal procedure) as there is the potential for the employees to reject the offers of re-engagement and bring claims for unfair dismissal. The fact that the large majority had accepted, and the current economic situation, will help your case.

Age discrimination

If you are facing redundancy situations for the first time, do be aware that you do need to follow the correct procedures, and there are a few new pitfalls to consider.

Many employers still think that LIFO (last in, first out) is an obvious selection criteria, but do be aware that this should only be used as one of a number of criteria and not the sole one. Research by UK law firm Dundas & Wilson found that less than a third of British businesses consider age discrimination to be a major issue in redundancies and many seem unaware that LIFO is potentially age discriminatory.

Redundancy came close to the bottom of the pile among the issues businesses had already tackled following the introduction of the age discrimination laws in 2006 and less than half had considered the impact of the legislation on redundancy procedures.