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Over the years, we have had numerous discussions with clients about terminating the employment of someone who is not very good at their job. Almost inevitably, at some point during the conversation, the client will ask why we can’t just make him redundant? Our answer is generally because the job isn’t redundant.

So what is a redundancy? Redundancy is where an employer decides to reduce the number of its employees within the business as a whole, or within a particular office, department, function or job. The law does not interfere with your freedom to take business decisions, even if the decisions result in redundancies. The law is, however, interested in how you manage the consequences of that decision.

Definition of redundancy

An employee who is dismissed shall be taken to be dismissed by reason of redundancy if the dismissal is wholly or mainly attributable to:

(a) the fact that his employer has ceased or intends to cease –

(i)   to carry on the business for the purposes of which the employee was employed by him, or

(ii) to carry on that business in the place where the employee was so employed, or

(b) the fact that the requirements of that business –

(i)   for employees to carry out work of a particular kind, or

(ii) for employees to carry out work of a particular kind in the place where the employee was employed by the employer,

have ceased or diminished or are expected to cease or diminish.

The leading case on establishing whether an employee has been dismissed by reason of redundancy is Safeway Stores plc v Burrell. In that case, the Employment Appeals Tribunal formulated a three-stage test:

1. Was the employee dismissed? If so,
2. Had the requirements of the business for employees to carry our work of a particular kind ceased or diminished? If so,
3. Was the dismissal of the employee caused wholly or mainly by the state of affairs identified at stage 2 above?

Only if the answer at all three stages is “yes” will there be a redundancy dismissal.

Process

Having decided that your plan results in the requirements for employees to carry our work of a particular kind ceasing or diminishing, the next step is to deal with the employees potentially affected by this decision. In doing this, the most critical concept to keep in mind is that it is the role that is redundant not necessarily the person who carries out the role.

 If there is more than one employee doing the same job, (a pool of workers in technical jargon) then you will need to carry out a selection process, for example, if you have three administrators in the pool and there are only jobs for two in your new organisation, you would need to select out of the three which employee should be made redundant. Normally, businesses do this by scoring the potentially redundant employees against a set of criteria, with the one who gets the lowest score being the selected employee. The content of the criteria is a whole subject of its own, so we don’t intend to write about it here. However, whatever criteria you choose, they must be objective, not discriminatory and you must apply them objectively against all the potentially affected staff.

For any redundancy to be fair you must also comply with your duty to consult. The purpose of the consultation is to discuss any selection criteria and more importantly, any alternatives to the redundancy, such as alternative employment or reductions in hours. No decision should be taken before the end of the consultation period. Where you are making less than 20 employees redundant, there is no fixed period for consultation. It least usually at least a week and would usually be longer if there is a pool of workers. If you are considering making more than 20 employees redundant, you would have a duty to collectively consult (another blog subject there too).

You are also required to consider whether there is any suitable alternative employment in the company. If a position matches the skills and seniority of an employee at risk of redundancy it should be offered as alternative employment. We usually recommend giving the employee a list of all vacancies, even where the vacancies may not be suitable, as the employee may consider that any job, even on lower wages, is more acceptable than being jobless. Unreasonable refusal of a suitable (in terms of content, status and remuneration) alternative position by an employee could lead to him or her losing his or her entitlement to redundancy.

At the end of the redundancy process, if redundancy is unavoidable you would need to give notice or pay in lieu of notice and make a statutory redundancy payment of one week’s wage capped at £430 per week depending on the employee’s age, salary and length of service, with a maximum of £12,900 in total.

There is no right to be accompanied by a work force representative at the consultation or termination meetings and there is no right to appeal, when the reason for the termination of employment is redundancy.

So why can’t we just make the employee redundant?

As you can see, to be a redundancy, you need to be able to demonstrate that the job is redundant, so making someone redundant and then immediately appointing someone into the role is unlikely to make the dismissal fair. Further, as it is the role that is redundant, if you choose to use this reason for terminating an employee’s employment, there should be no discussion regarding performance or conduct except as part of an objectively applied selection process that incorporates appraisals as part of the scoring exercise.

If there is more than one role similar to the role the employee carries out, you will have to carry out selection process with objective selection criteria. If you do not carry out a selection process, you will be exposed to a challenge on the fact that you have carried out no selection. Even if you do a selection process, you can still be challenged on the fairness of the selection process. This is particularly important to bear in mind if it is obvious that you have skewed the selection criteria to ensure that you get the right answer.

Finally, if there is a suitable vacancy and you do not offer it to the employee or if you do not consult or follow any redundancy procedure, the dismissal is unlikely to be fair.

Ticking all the boxes can be a difficult exercise even when the redundancy is genuine. If you are in a position where you want to terminate someone’s employment, it is better to get advice and consider using the actual reason rather than calling it a ‘redundancy’.

However, there are times when a ‘soft’ dismissal is worth considering. This is particularly where there are performance issues that have not been addressed. A performance procedure is time consuming and can be antagonistic for both parties involved.

When you do not intend to replace an underperforming employee like for like immediately, it may be possible to tackle the problem as a redundancy. Even where you do intend to employ someone else, it may be that it may be a more gentle dismissal to explain to the employee that you have decided to appoint someone with different skills and experience to take over part of the employees’ duties rather than telling the employee that they are bad at their job. As you will appreciate, getting this right can be difficult, so if you are considering this route, it is vital that you take advice before embarking on any discussions. Getting it wrong can cost you an unfair dismissal claim.

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