Redundancy policies - early consultation and steps to avoid job losses are key

In bad times, when redundancies are looming, it is something of a relief to unions and employers to have good redundancy policies to draw on. Indeed employment relations service Acas advises employers to draw up such procedures, with the full involvement of unions, at a time when redundancies are not imminent, “so that the parties can contemplate the long-term consideration rather than being preoccupied with immediate issues”.

And the past three years have certainly been bad times. At the height of the recession in early 2009, redundancies were running at 300,000 per quarter, around 12 employees per thousand (see chart). This was more than double the pre-recession rate of 120,000 (first quarter 2008).

The level of redundancies has now almost returned to its pre-recession level at 123,000 (first quarter 2011), a rate of 4.9 per thousand employees, but this may only be a temporary respite.

Number of redundancies (000s) 2008-11

The bulk of the earlier job losses were either in manufacturing and construction or other sectors dominated by private sector employment, while redundancies in public sector administration, education and health remained steady at less than 20,000 per quarter. However, redundancies in the public sector began to rise in the second half of 2010 and predictions are that many more jobs will go.

Workplace Report survey of redundancy policies

This concern is reflected in responses to a survey of redundancy policies in 134 unionised workplaces carried out by Workplace Report in May this year. Some 70% of them came from union reps in public sector workplaces and organisations, many in local authorities and colleges. All but a handful of respondents said there was a redundancy policy in place in their workplace and half said it had recently been put to use.

Around a third said there had been recent changes, or proposed changes, to the redundancy policy. While some employers have been cutting their provision in the face of recent economic difficulties or anticipated spending cuts, others have actually made improvements in areas like redeployment, redundancy avoidance, flexible retirement and voluntary severance.

A small minority of workplaces in the survey had no redundancy policy. At the First South Yorkshire bus company, Unite reported that on the rare occasions this has cropped up it has been subject to “unique negotiations”. A similar comment came from GKN Transparency Systems in Luton (despite having had 35 redundancies in February 2009) and NHS Highland (covered by a ministerial policy of no compulsory redundancies in NHS Scotland). Meanwhile, at the Northern Ireland Fire Authority, the Fire Brigades Union rejects redundancy and has informed management it has no need for a policy.

Acas guidance

Acas recognises that there may be occasions when redundancy can be met by an ad hoc approach, but in general it advises a formal one. Its guide to redundancy handling states that “in the interests of good employment relations it will be prudent to consider the establishment of a formal procedure on redundancy”.

A formal procedure would normally spell out the consultation arrangements that should apply, measures to avoid or minimise redundancies, and severance terms (see box below).

Redundancy procedures may be divided into separate policies, although this can sometimes cause complications. Glasgow Caledonian University has separate policies on Avoidance of Redundancy, Redundancy, Redeployment and Redundancy Pay. Rather than a redundancy policy BA Systems (Brough) has Best Practice, a joint company/trade union initiative for dealing with redundancies (see box below).

At Cumbria Fire and Rescue Service the FBU is currently in discussions about a redundancy policy specific to retained duty system members (who work on an on-call basis), while at Shropshire Fire and Rescue Service a new policy has been written to cope with the proposed regionalisation of emergency control rooms. A new policy under consideration at Harlow College will be a Management of Change policy covering 20 or more redundancies.

Consultation

A culture of consultation and a willingness to communicate are important aspects of a redundancy policy. The best practice agreement at BAe Systems claims to have “a well organised and open communication and consultation process”, ensuring that efforts to protect jobs can be effectively co-ordinated and difficult change can be handled “in a way that preserves individual dignity and self-respect”.

Employers have a statutory duty to consult where 20 or more jobs are at risk but some go beyond this, undertaking to consult over smaller numbers. For example GE Aviation Systems at Bishops Cleeve will “inform Unite and seek their views on the suitability of any measures” where fewer than 20 redundancies are proposed. And at Connexions Nottinghamshire the company will ensure full and fair consultation with employee representatives “takes place at the start of and throughout the process (whatever the size of reduction in staffing).”

Good redundancy policies should set out the statutory position on consultation, as well as company-specific arrangements. Lecturers’ union UCU at Macclesfield College was critical of the local redundancy policy because there was no reference to the legal requirements (and little mention of the need for consultation and forward planning to avoid redundancies).

The purpose of consultation also needs to be clear. The redundancy policy at Ideal Boilers commits the company “to disclose in writing the reasons for the proposed redundancies, the number and description of employees potentially affected, proposed selection method and timing of dismissals as well as the proposed method of calculating the amount of any redundancy pay other than prescribed by statute”.

Consultation should be timely and take place at the earliest opportunity. At Sheffield Hallam University a new approach to reviewing areas under threat has resulted in a commitment to consult early. The union (UCU) considers this to be more important as a defence against job losses than the formal redundancy policy.

And policy at Cumbria University, amended significantly last year, has been used many times over the past 12 months to deal with a huge restructure and redundancies. The UCU sees it as a very good policy which is practiced consistently: “It gives us time and reasonable alternatives which we used effectively and reduced the 100-plus full-time equivalent reduction required last year to voluntary, redeployment and only one compulsory academic redundancy”.

The consultation process, from the first indication of possible job loss to the final outcome, should not be rushed, and input from the union side should be given full consideration. The collective consultation arrangement at Age UK begins by reassuring staff that the initial announcement is “not a redundancy notice”. It goes on to spell out the areas for discussion (including the number of posts, grounds for redundancy, selection methods and criteria, and how payments will be calculated), followed by an appropriate period of consultation. Representative groups will be consulted to explore ways of avoiding redundancies or mitigating effects, with the commitment that the employer will “consider and feedback to all counter proposals received” (normally within two weeks).

Redundancy avoidance

The first aim of consultation should be to seek to avoid redundancies altogether. Age UK gave a qualified nod to this aim in its Transitional Redundancy Policy drawn up to cope with the merger of its two predecessor charities, Help the Aged and Age Concern England. It stated that employees from both “have considerable knowledge, skills and expertise and are key in its ability to provide services”. It would therefore “endeavour to retain that knowledge, skills and expertise wherever possible.” it added, however, that “it must also ensure that Age UK is economically and financially viable in line with both its aim/mission statement and business objectives”.

The redundancy policy at Dudley College says it will give consideration to the appropriateness of a range of measures to avoid redundancies, from other savings to natural wastage, reducing short-term or agency staff, seeking volunteers, and redeployment “on each occasion that a redundancy situation arises”.

And the policy at GE Aviation Systems spells out a detailed commitment to redundancy avoidance covering measures such as retraining, temporary transfers and permanent redeployment (see box below).

Redeployment

For redeployment to succeed, the staff concerned need the opportunity to apply for new posts, a reasonable trial, training and to be confident about the longer-term effects on their salary and status. If these conditions are absent they may opt for voluntary redundancy rather than face the uncertainty of a redeployment process that might end in compulsory redundancy.

To help secure redeployment opportunities, the redundancy policy may need to stop open recruitment to posts which at-risk staff might be eligible to apply for. The statutory trial period, four weeks, can also be extended. For example, there is a further period of up to four weeks at Aberdeen University and a three-month trial period at Blackpool and Fylde College, although negotiators need to be careful not to fall foul of the statutory limitations to extended trial periods (see box on redundancy law).

If the new post attracts a lower salary, redundancy policies often offer salary protection or “red circling”. A number of university policies do this, including Abertay University, which offers three months at the current salary then three months at the mid-point between salaries.

Some others protect pay for longer, up to a maximum of four years in the case of Glasgow Caledonian University. Aberdeen University employees redeployed to a lower grade can receive a redundancy payment and be re-engaged at the appropriate grade and remuneration, but are not obliged to take a post offered (and will not suffer a detriment in terms of redundancy payment if they don’t). Some employers help redeployed staff with travel expenses.

Redeployment has been a target for some employers cutting back on their redundancy commitments. A survey respondent from the London Borough of Haringey said: “The amount of time allowed in order to obtain redeployment was reduced; it now runs concurrently with the notice period after selection for redundancy rather than allowing an additional period”. The level of pay protection on redeployment has been reduced at Milton Keynes council, while the London Fire and Emergency Planning Authority has halved the period during which it will seek to redeploy employees from six months to three (including contractual notice).

Voluntary redundancies/early retirement

One method of avoiding compulsory redundancies is through early retirement (with early release of pension) or voluntary redundancy. Employees whose job is not redundant may be allowed to accept voluntary severance to make way for an employee whose role has become redundant, a procedure known as “bumping”.

At Ineos Manufacturing Scotland, according to the Unite rep, the union has always managed to get agreement for early retirements to be used so, in practice, has never had any compulsory redundancies. Connexions Nottinghamshire allows early retirement for over 55s (at the discretion of the board).

Inducements may be offered for voluntary redundancy (as at BAe) but this can create tensions. The UCU rep at West Thames College said an enhanced payment “helps collect volunteers” but the fact that it drops to the statutory payment for those who do not want to leave “causes a lot of residual ill feeling”. At Milton Keynes council voluntary redundancy attracts the same level of redundancy compensation as compulsory. However, at Messier Dowty volunteers get less than those affected by compulsory redundancy, which union reps “disagree with”.

Temporary staff

The dismissal of agency or temporary staff is commonly seen a measure to reduce or avoid redundancy among permanent staff. A new Reorganisation, Redeployment and Redundancy policy was agreed last September at the London Borough of Lambeth in anticipation of a large number of redundancy proposals.

One of its clauses commits the Redeployment Team to maintain an up-to-date schedule of all vacant posts in the council including all posts covered by agency workers. “We have secured its implementation at least in relation to posts covered by agency workers, which have reduced from more than 600 to less than 300 in the past year,” the UNISON rep told Workplace Report.

At Hull University, information on the number of possible job losses will include the number of fixed-term contracts not to be renewed for members of staff with more than one year’s service. However, the London School of Hygiene and Tropical Medicine makes clear that it has a legal obligation to consult with each employee on a fixed-funding contract prior to the expiry of the funding, and to explore options for extension and redeployment with them.

Selection for redundancy

In legal terms, if compulsory redundancies are to be made, selection criteria must not discriminate and must be fairly applied. But beyond that, things are left pretty much to the individual organisation.

Across the policies existing in the workplaces contacted in the survey, 20 criteria for redundancy were in use (see box below).

Attendance, performance and discipline seem to be just as widely used as the traditional last-in-first-out approach (LIFO), if not more so. Qualifications and skills feature in the policies of many educational institutions, although principles of equality are also present. At Chester University, selection criteria are based on the skills required to meet current and future needs but “have regard to” equal opportunities.

Boston Borough Council makes clear that selection must not be based on criteria such as age, sex, membership of a trade union and other factors governed by legislation, and that its use of attendance records as one of the criteria takes into account any disability or pregnancy-related absences. The policy acknowledges that it may be liable to pay compensation for unfair dismissal if it “does not select fairly those to be made redundant”.

Policy for employers following the Footwear NJC agreement says juveniles should be retained, whenever possible, and special consideration should be given to disabled employees. At the London Borough of Lambeth, UNISON has insisted on detailed equality impact assessments in each restructure as, according to the rep, “some of these have shown particular disproportionate outcomes, which we have pursued”.

Redundancy pay

Redundancy pay terms often make reference to the statutory scheme linking entitlement to age and service, describing entitlement in multiples of or enhancements to the statutory scheme (half a week, a week or a week and a half’s pay per year, depending on age). This is the case at Milton Keynes council (see box). They may disregard the maximum cap on a week’s pay (currently £400).

There are two alternative calculations at Age UK: one involves ignoring the statutory earnings limit and applying a multiplier of 1.75 while the other applies the statutory earnings limit and doubles the payment.

There is no statutory entitlement for employees with less than two years’ service but some employers make provision. Age UK offers a tax-free termination payment equivalent to four weeks’ salary for staff with less than two years’ service. At Connexions Nottinghamshire redundant employees with at least one year’s continuous service are entitled to a redundancy payment.

Other ways in which policies/agreements provide for better-than-statutory provision include that at BAe Systems, which provides a minimum severance payment of £6,000 “where insufficient volunteers are forthcoming”. And the Bank of England pays 15% of salary for each year’s service, up to a maximum payment of three years’ salary, subject to two years’ minimum service (with out-placement support or a payment in lieu of £4,000)

However, the survey also revealed that a significant minority of employers had changed their redundancy policies for the worse in the last couple of years, in most cases through cuts in the level of redundancy pay (or discretionary payments). For example:

• actual-salary-based redundancy pay cut to statutory at Cornwall College;

• three-times statutory redundancy pay cut to one-times (without the statutory ceiling on earnings) for voluntary redundancy, at the London Fire and Emergency Planning Authority (non-fire fighting staff) and statutory redundancy pay only for compulsory redundancy;

• three-times statutory up to 60 weeks cut to 1.5 times up to 40 weeks at Surrey County Council; and

• four-times statutory cut to 2.5 times statutory for voluntary redundancy and statutory for compulsory redundancy, with caps, at Wiltshire Council.