It would be surprising if unemployment in this country was less than shown in the current statistics. It appears that UK employment is likely to continue to rise in the foreseeable future, certainly over the next few years. Pressure on the number of jobs through the improvement in technology and the influence of global markets (in all sectors) was evident prior to the recession. However, the current economic downturn together with the pension pressures for people to work longer means unemployment and redundancies are key issues for this country.
Laudable though any initiative which seeks to ameliorate the potential redundancy of employees, any scheme must be dealt with under the legal rights which employees enjoy. It is not just a simple question of ‘tacking on’ an alternative option. The difficulties and potential liabilities for bringing in any scheme as proposed by the CBI1 will fall on the HR personnel who are generally under considerable pressure at present. No HR department will be thanked for taking action which results in expensive administrative structures and dealing with legal issues, including potentially additional legal claims brought against the employer.
Grounds for redundancy
There are four situations that can give rise to a dismissal on the ground of redundancy as follows:
- the closure of a business;
- a diminishing requirement for an employee to carry out work of a particular kind – this would cover both economic downturns and business restructurings or re-organisations;
- the closure of a place of work where an employee is employed; and
- a diminishing requirement for an employee to carry out work of a particular kind at the place where an employee is employed.
Redundancy is an absolute term; you are either dismissed by reason of redundancy or not. In order to establish redundancy there are, quite rightly, procedures which the employer must go through with the employee before making an informed decision as to whether redundancies need to be made within the organisation and if so who should be made redundant. This is subject to a process of consultation with the employees and their representatives or unions. Employers who follow the procedures prior to dismissing an employee by reason of redundancy avoid the possibilities of claims by employees seeking unfair dismissal.
Legal implications of CBI proposal
The current CBI proposal will be a worry for HR personnel as it raises a number of legal implications. The current arrangements whereby employers and employees agree to amend staff contracts, which are done on a consensus basis rather than an imposition by the employer on the employee, are already well known and include sabbaticals, working less hours etc. All these schemes provide for agreement between the parties and the employee continues to retain their continuity of employment and all rights that are being implied as a result of such a position. At present, the Alternative to Redundancy (ATR) proposal raises a number of unanswered questions, which could be of considerable concern to those who seek to implement the scheme, unless they are dealt with so the position is clear.
If employees are redundant then prima facie the normal rules should apply in that situation. In the event that work has an upturn then jobs will be recreated in that business in the normal way. However, if the ATR scheme is to be used then the employer must go through the normal procedures for redundancy when implementing the same. Furthermore, it seems that if there is to be a review after a period of time ‘when the ATR’s period expires or earlier if business improves’ then the employer should be careful to go through a similar process again. It is too simplistic to say that all employees on ATR would automatically be taken back, some may, and some may not. Furthermore, from a pooling perspective of selection do the employees on ATR have to be considered with all the other employees who have continued in normal employment under their normal employment terms? If ATR is to be used rather than a normal redundancy then consent to such arrangement will need to be made with each employee. This will be a change in terms and will need to be recorded in the required manner.
Other issues affecting employee entitlements
The problem is also that we are not simply talking about salary. Employees will have other benefits such as pensions, company cars etc. If such people are redundant then their employment is terminated and the benefits cease. However, it is to be assumed that under the ATR Scheme these benefits also cease to apply. For those employees who would be entitled to a bonus calculated during the period they are on ATR, would this entitlement be lost resulting in the employee who may be paid a salary based on commission, for example, earn less? However, one can envisage employees objecting to going on the ATR Scheme and claiming dismissal which position would also potentially pertain when the ATR Scheme is assessed at the end of the period or if business improves.
What does business improvement mean? Is this an objective or a subjective test? If the employee is re-employed after the ATR period is there a gap in their continuance in employment, does their period start again after the ATR has finished, are they entitled to back-pay and benefits? Under ATR it is assumed that the employee who is effectively redundant or redundant part-time can look elsewhere and obtain other remuneration and indeed not seek to return to their original job. If ATR is used and the employee claims that this was done on an unfair basis, can the employee enforce restraint of trade clauses at that time?
Another example of potential problems with the ATR scheme is whether employees would be entitled to take maternity and/or paternity leave? If they are not allowed to return to work is that discrimination if there are maternity issues to consider? What will happen to an employee who would be entitled to maternity leave during the ATR period, or if an employee falls ill during this period? Would they lose their statutory sickness entitlements and/or company entitlements? This poses as a potential administrative problem for HR personnel and leaves many questions to be answered for employers and employees.
Alternative earnings
If such a scheme is to be put in place is this a permanent position or simply something that is done to combat the adverse economic position at the present time. Will employees on the scheme be entitled to seek and obtain another job when on ART/payment of allowance? Again, how does one define these terms? If it is permanent then can ATR schemes be written into contracts of employment and used at any time by employers subject to the requirements to prove redundancy in a particular case. The suggestion that employees would be paid ‘twice the rate of job seekers allowance’ if they are on the ATR Scheme does not take into account that such payment might be reduced if the employee receives income from other part-time employment, if the employee has a certain level of savings, pension payments or if the employee’s partner or civil partner works. How can the scheme put forward the idea of not working during the ATR period when any amount of job seekers allowance will probably not be enough to provide for all living expenses especially for those individuals with families. The need to work during the ATR period will be likely, given the current recession, and this is likely to clash with an employee’s current terms and conditions with their employer who provided the ATR.
Migrant workers
We cannot leave out migrant workers. If a company attempts to invoke the ATR Scheme in relation to migrant workers, this will have an impact on their ability to remain in the UK to work, as the very reason for their being in the UK is to work at a particular company who may be their licensed sponsor. What will happen to migrant workers during an ATR period? Would they be protected from an ATR selection and not the local workers? This would undoubtedly cause HR personnel problems and unhappy disgruntled local employees if the migrant workers are not considered for such a sheme due to their migrant working arrangements.
Hidden costs of the scheme
The ATR Scheme in some instances can cost the employer more. If an employer had a genuine reason for redundancy and could have followed a proper procedure to include consultation but decided and agreed with the affected employee(s), who had less than two year’s service, to put them on the ATR Scheme, if at the end of the ATR period the employee found that they will now go through the redundancy process, and will now have acquired two year’s service, they will not only have been paid for the ATR , but will now be entitled to a statutory redundancy payment plus all contractual entitlements.
Any steps which seek to keep people employed on an economic basis must be considered. However, the scheme as currently outlined and without any details must cause those working in the HR field considerable concerns as to the questions that remain unanswered and the legal and commercial issues that will arise from its implementation. Companies could find themselves in greater rather than less legal dispute. It may well be that for all the scheme’s good intentions redundancy is either redundancy or not and that will be used on a current statutory basis. Other schemes can be implemented, such as short-time working, which maintain the employee’s rights (or perhaps reduce the same) but this will be done by agreement between the parties concerned. If companies are to use the ATR Scheme then this should be done with considerable legal care and the detailed implications of the same, some of which are outlined in this article by way of example, considered and at each stage.
1www.cbi.org.uk/ndbs/press.nsf/38e2a44440c22db6802567300067301b/9b9a4bacc1622174802575e400370f75?OpenDocument