Managing Through Financial Distress – Redundancy
Thursday, February 13, 2020
Thursday, February 13, 2020
A recent report by Begbies Traynor, corporate recovery and insolvency experts, suggests that as many as 494,000 UK businesses are in significant financial distress. This number of almost half a million businesses is the highest in 16 years and 81% up on figures reported in 2016. This suggests that uncertainty over the political landscape, specifically Brexit, has played a major part in the commercial downturn.
The statistics cover all sectors however retail has been particularly hard hit. Reports of job losses in the retail sector amounted to 57,000 in 2019 and already 10,000 jobs have been lost before the end of January 2020.
Regardless of Brexit and our own domestic issues, global growth in 2019 was the slowest since the downturn in 2008-9. The world’s GDP rose by just 2.2% last year and 2020 looks set to be another modest 12 months with the Economist International Unit (EIU) predicting growth of 2.4%.
This somewhat worrying economic situation could worsen in light of the fears around the Coronavirus and oil supply in the Middle East.
All this sounds like doom and gloom however as dark as this may appear there are many very successful businesses not only riding out the current storms but thriving in adversity. Hopefully, this reflects the position in your organisation but if not and conversations are turning to “belt-tightening” it might be prudent to review the following article covering this difficult area of redundancy.
When a company finds itself in such financial difficulties the need to bring about a remedy is immediate, and this can be at odds with what they are obliged to do in accord with UK employment law.
If the decision to make staff redundant is followed by an all too eager rush to select and dismiss the business can find itself on the wrong end of hefty time and financial cost in the shape of tribunal proceedings.
It’s therefore important to take a considered and methodical approach and where possible engage and involve your professional advisers to ensure no breach of legal process occurs.
If you don’t consult employees in a redundancy situation, any redundancies you make will almost certainly be unfair and you could be taken to an employment tribunal.
You must follow ‘collective consultation’ rules if you’re making 20 or more employees redundant within any 90-day period at a single establishment.
There are no set rules to follow if there are fewer than 20 redundancies planned, but it’s good practice to fully consult employees and their representatives. An employment tribunal could decide that you’ve dismissed your staff unfairly if you don’t.
- Consider the plan and the likely numbers involved and who needs to be notified. Eg The Redundancy Payments Service (RPS) require completion of form HR1 if you are making 20 or more staff redundant.
- Follow a fair and reasonable redundancy procedure
- Consider whether employee representatives require to be elected/consulted
- Consult with employees on the business rationale for the redundancies
- Identify a redundancy pool
- Adopt fair selection criteria
Before launching into formal redundancy options consider the alternatives such as :-
- Natural wastage
- Restrictions on recruitment
- Retraining and redeployment to other parts of the organisation
- Reduction or elimination of overtime
- Part time working
- Salary reduction
Ensure you clearly document all of the above.
NOTE: If you fail to follow the above then any dismissal may be unfair.
The following is a link to the Government’s redundancy payment calculator: https://www.gov.uk/calculate-your-redundancy-pay
If your organisation is facing the prospect of cost savings which may result in redundancies, we would recommend an initial call to review your plans and help you through this process.
If you have any concerns regarding your organisation’s approach to matters such as the above please feel free to drop Robert or Sally a line e-mail SallyFletcher@samuelphillips.co.uk