Consult, avoid, compensate: redundancy in the Covid crisis

Nearly 700,000 jobs vanished between March and August, according to payroll figures published by the Office for National Statistics (ONS). Chancellor Rishi Sunak unveiled a new Job Support Scheme and an extension of the Self Employment Income Support Scheme on 24 September. But – while welcomed – it may not halt the predicted “tsunami” of redundancies as the Coronavirus Job Retention Scheme is wound up. Employers were encouraged to exhaust all possible alternatives before making redundancies, through genuine consultation, in a joint statement by advisory service Acas, the CBI employers’ organisation and the TUC (see box below)

Employers don’t have a completely free hand to cut jobs. The right not to be unfairly dismissed for redundancy and to receive a redundancy payment is set out in section 139 of the Employment Rights Act 1996 (ERA 96). An employee is counted as being dismissed for redundancy if their dismissal is wholly or mainly because:

• the employer has ceased, or intends to cease, to carry on the business for which the employee was employed, or to carry on that business in the place where the employee was employed; or

• the requirements of the business for employees to carry out work of a particular kind, or to carry it out in the place in which they are employed, have ceased or diminished, or are expected to cease or diminish.

Employers can and do dismiss or threaten to dismiss workers as redundant, in order to re-employ them on inferior terms and conditions, “fire and re-hire”. We’ve seen examples of that at British Airways and at Centrica alongside the more widespread challenge of real job losses.

Consultation

Consultation is required at two levels. An employer who has provisionally selected an employee for redundancy must write and invite them to an individual consultation meeting. But if 20 or more jobs are at risk within a 90-day period in one establishment, there must be a collective consultation with union representatives (or employee representatives if there’s no recognised union) under Section 188 of the Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA) and the Employment Rights (Northern Ireland) Order 1996.

It is before and during that consultation period that unions have their best chance to limit the damage. They work to avoid or minimise redundancies – particularly compulsory redundancies – but also to secure compensation over and above the statutory minimum, based on a fair selection system.

Collective consultation must start 30 days before any dismissal, or 45 days if the employer is proposing to dismiss 100 or more employees, but these are minimum periods. Bakery firm Greggs began a consultation process in mid-September, just in time to make redundancies when the furlough scheme ends. But it insists that consultation will aim to avoid losing roles, for example by cutting hours: “We are talking to our colleagues about proposed changes to the way we work to make the business as productive and flexible as it can be to protect as many jobs as possible in the long term and adjust our teams to reflect the estimated level of demand”. Sarah Woolley, general secretary at the BFAWU bakers’ union, and herself an ex-Greggs employee, says the union and company have a history of working well together and believes it will be no different this time.

The 1992 act was amended in 2013, halving the consultation period for 100 or more redundancies, but that change was never implemented in Northern Ireland. So, in the case of aerospace manufacturer Bombardier, which has announced plans for over 600 redundancies at its Belfast site (400 core staff jobs and 200-plus contractors) the consultation will last for at least 90 days.

The act calls for collective consultation to consider ways of avoiding dismissals, reducing the numbers of employees to be dismissed, and mitigating the consequences of the dismissals, and it must be undertaken with a view to reaching agreement. They should be meaningful “tantamount to negotiation” and provide reps with all the information required by TULRCA.

In a recent consultation with Unite, 300 proposed job cuts at the Royal Society for the Prevention of Cruelty to Animals (RSPCA) were reduced by 10% to 269. Chief executive Chris Sherwood said the charity had seriously considered every single proposal submitted and would be exploring some of the cost savings measures suggested by staff.

Consulting under Covid

The Covid crisis has not only triggered redundancies, it has also made face-to-face negotiation and consultation difficult, driving it into “virtual” meetings (on Zoom, Teams or Webex, for example).

Unite reps representing Liverpool Dock Workers (Peel Ports) who have been in consultation over furlough-related voluntary redundancies, have been in both face-to-face and virtual meetings, and in their view the former type have been more productive: “The Zoom meetings are hard to manage, and both sides appreciate the traditional method of negotiating such complex issues”.

At Bentley Motors (Crewe) there have already been 500 redundancies (none compulsory) with 80 more proposed and being consulted on. But the experience there of virtual consultation seems to have been better. During the consultations, daily meetings were held remotely, while minutes of meetings were circulated soon afterwards and every action was followed through. It was well documented and “felt meaningful”. Special arrangements were in place for reps to access all affected employees, with team meetings set up and regular correspondence with affected members.

But another downside, identified by the Nationwide Group Staff union, is that employees who face losing their job don’t have the immediate support of colleagues as they would if they were together for a face-to-face announcement. With redundancies due (see box on page 17) some members have been distressed to hear while at home that they’re at risk, particularly if they become upset and have children around them. On the plus side, people are able to post questions in the “chat” facility, which some are more comfortable with.

But employers still need to get the basics right. Unions at Nottingham City Council found themselves at odds with the authority for failing to consult unions properly about its plans for job cuts. They warned about the speed with which employees received letters without warning; voiced concern that the proposals might be discriminatory; and criticised the council for retreating from its responsibilities “to champion local government during a national crisis”.

It doesn’t have to be that way. When energy company OVO/SSE Energy announced plans to make around 2,600 workers redundant earlier this year, Prospect (one of the unions involved), welcomed a “pre-consultation approach” which reduced the overall number of roles at risk by 700: “With continued dialogue, and the improved voluntary terms now on the table, we hope to get to a position where compulsory redundancy can be avoided”.

But there is still a right and a wrong way to consult. Eurest provides catering facilities in BT buildings, where demand for its services has collapsed. When redundancies were on the agenda, Brendan O’Brien (Assistant Secretary for the CWU union) found it necessary to remind Eurest that consultation with the union should have been held before any approach to members.

Although the situation was desperate, alternatives to redundancy had to be considered, including:

• reviewing temporary contracts or agency workers and considering if these roles could be offered to those at-risk of redundancy;

• requesting expressions of interest in voluntary redundancy;

• voluntary reduction in hours – discussing whether an employee is willing to do this and accommodating where possible; and

• not “backfilling” any existing vacancies (filling them from elsewhere within the company).

Unions at the University of East Anglia used consultation and dialogue with the employer to protect the lowest-paid when pay cuts and voluntary redundancies were on the employer’s agenda.

Avoiding redundancy

Consultation is an opportunity to avoid redundancies. Securing a commitment from the employer to avoid compulsory redundancies is a particularly high union priority, and at Nationwide Building Society it has paid dividends (see box).

In the examples below, unions have been willing to consider other measures to mitigate or reduce the need for job losses.

Cutting working time

Cutting working time to save or create jobs is a classic trade union approach. Union reps at Airbus UK told LRD they were looking to ballot members on a shorter working week to help mitigate compulsory job losses (450 staff have already been made redundant, along with all agency staff, while over 1,400 more redundancies are being proposed or consulted on).

Elsewhere, Unite and Senior Aerospace have agreed a four-day working week from Monday 2nd November 2020 through to June 2021. The aim is to reduce compulsory redundancies in the direct production pool from 152 to 110, and hopefully reduce the need for compulsory redundancies in other production-related areas.

The non- working day will be Friday and it will result in employees’ pay being reduced on a pro-rata basis. The hours cut will be reviewed every two weeks and it is hoped that normal working hours can be resumed as soon as possible. A further possible voluntary redundancy scheme is being considered, for those facing hardship at the prospect of four-day week working.

Temporary pay cuts

Air travel has been seriously disrupted by the Covid crisis. In talks to avert 3,000 job losses at Ryanair (and the potential closure of its UK bases) Unite members agreed a temporary “tiered” pay cut. The lowest paid would take a 5% cut, those paid more 7.5%, and those paid most 10%.

The pay cuts will be returned in two tranches in 2023 and 2024 while the current pay agreement will be retained and phased in from 2023. A review clause means that if Ryanair returns to pre-coronavirus levels of business earlier, the pay cuts can be reversed earlier. Commenting on the deal, Unite national officer Oliver Richardson said: “Temporary problems require temporary solutions”.

Members of pilots’ union BALPA at Ryanair also voted overwhelmingly to accept temporary pay cuts to try to save 330 jobs. But the union’s general secretary Brian Strutton described a proposed 458,000 euro ($540,600) annual bonus for Ryanair boss Michael O’Leary as a slap in the face when “unprecedented measures” were being accepted by union members.

Ways of working

Another option to consider in a redundancy consultation is ways of working. The government’s revenue and customs department (HMRC) had been considering a massive redundancy scheme affecting 2,000 staff, with plans to close 90% of local offices and replace them with fewer than 20 large regional hubs. With the Covid crisis those plans were put on hold and staff due to be made redundant were asked to stay until the end of September.

But the crisis proved that the overwhelming majority of staff were able to work effectively from home. The PCS union said HMRC should adjust its location strategy, and a “lessons learned” programme was immediately launched. Although that project is not due to report until January 2021, HMRC’s “current thinking” is apparently to go ahead with the redundancy exercise. PCS says that’s incredible and contradicts a ministerial commitment that redundancies would only go ahead if they were “necessary and unavoidable”.

Lobbying and campaigning

Lobbying and campaigning can be as much a part of union tactics on redundancy as negotiation. When the Scottish Government announced a £3.8m support package for the National Trust for Scotland (NTS), Prospect said the work of its reps and members “has substantially reduced the potential redundancies”. The money is conditional on sites re-opening and more jobs being saved, a “key ask” from the union, and seen as vitally important. The funding is expected to secure nearly 200 critical jobs, but over 200 staff still face redundancy.

The RMT union is campaigning to stop the job cuts at the Trump Turnberry Golf Resort, after consultation proposals to axe up to 80 jobs and the imposition of a “brutal package of measures”, including cuts to sick pay, working hours, pay enhancements, staff benefits and working conditions. An on-line petition was launched (https://bit.ly/31kmwt7).

Staff at Tate Modern and Tate Britain took strike action in August to oppose redundancies. They are demanding that 10% of an anticipated £7 million government bailout money should be used to save jobs. They also say there should be no redundancies while some senior staff are paid over £100,000, and if the money the government provides isn’t enough, the Tate should join PCS in demanding more.

Redundancy pay

Employees made redundant have a right to statutory redundancy pay, but only if they have been working for the employer for two full years, a condition that potentially excludes a quarter of employees (see Labour Research, October 2020).

Statutory redundancy pay is worth half a week’s pay per year of service for years worked under the age of 22; a week per year for ages 22 to 40; and a week and a half for ages 41 to 66. But the value of a week’s pay is capped (currently at £538, or £560 in Northern Ireland). And only a maximum of 20 years’ service need be taken into account.

If an employer is calculating redundancy or notice pay for furloughed staff, they must use the employee’s full normal pay, not their reduced rate due to furlough. In the retail sector Sir Philip Green’s Arcadia group was recently forced to back down because it had ignored that principle in calculating notice pay for 40 headquarters staff.

Some employers may have reduced their redundancy pay offer during the Covid crisis, others have not, and some have even improved it (like Swansea University). The examples below are all better than the statutory scheme.

Two years’ service

At aerospace parts manufacturer Blaenavon Forged Solutions it was agreed that everyone, including those with less than two years’ service, would have a redundancy payment (it was also agreed that the company could reduce the working week by 50%, but those affected only lose 20% of their daily rate and their daily shift allowance).

At Bentley Motors staff with less than two years’ service are treated as though they had completed two years (with their full wage taken into consideration). And in the finance sector, LRD has heard of examples of a minimum redundancy payment of £5,000 for all staff, including those with less than two years’ service; and one month’s salary per year up to a maximum of 12 months, with a minimum of three months’ pay.

Capping

Un-capping weekly pay and the 20-year service limit are both common negotiating objectives. Martin Baker Aircraft pays more than statutory redundancy pay from age 18 to 40 (eg three weeks instead of two); and from 40 it pays twice the statutory level per year of service. At CraneProcess Flow Technologies the statutory maximum limit is enhanced by £28 per week.

At the London Borough of Haringey there is no cap on weekly gross pay and an additional week is granted per completed year of service up to a maximum of 20 years. And at Norfolk County Council redundancy pay (for those on salaries below the statutory maximum) is based at the level of the statutory maximum. Other examples include:

• Environment Agency: one and a half weeks per year of service under age 22; three weeks 22-41; and four and a half weeks at age 41 or older

• Liverpool Dock Workers (Peel Ports): two weeks full pay for every year after two years up to a maximum of 20 years.

• Old Bushmills Distillery (Casa Cuervo): one month per year before the age of 41; one and a half months for each year service over four (maximum 20 years); and

• South Somerset District Council: two and a half times statutory redundancy pay

At GKN (Bristol) Unite has negotiated a “voluntary resignation scheme” that isn’t based on length of service at all. It offers individuals £20,000 (Filton site) or £10,000 (Western Approach site) tax-free, to resign under a settlement agreement.

At IT services provider Atos (Lytham) redundancy pay of five weeks per year up to a maximum of 20 years’ service or full pension aged 55 and over is available, but only for staff employed on a previous contract from Aegon who were in the Defined Benefit Pension Scheme. Elsewhere in the company a voluntary redundancy exercise across differing terms and conditions is offering one month per years’ service up to 18 months (with salary capped at £30,000).

Meanwhile the Westminster government is moving the goalposts in the other direction. It plans to implement a cap of £95,000 on nearly all types of public sector termination payment — not just redundancy pay — under the new Restriction of Public Sector Exit Payments Regulations 2019. It will override complex negotiated agreements reached between employers and public sector unions.

Selection

Unfair selection for redundancy could be grounds for an unfair dimsissal claim, but can be difficult to challenge.

For more information see LRD’s Law at Work 2020 (https://www.lrdpublications.org.uk/lawatwork) or Redundancy Law – a Guide for Union Reps (https://www.lrdpublications.org.uk/publications.php?pub=BK&iss=1998).