1. Redundancy policies in practice

In bad times, good redundancy policies come into their own. In a Labour Research Department (LRD) survey of 134 unionised workplaces carried out in May 2011, almost seven out of 10 union reps reported that their employer’s policy had been put to recent use. The survey revealed that some employers have been cutting their redundancy provision but that most had stuck with their existing policy. Some reps even reported improvements in areas like redeployment, redundancy avoidance, flexible retirement and voluntary severance.

Drawing up redundancy policies

Advisory service Acas recognises that redundancy procedures can either be formal or ad hoc. It recommends having a formal policy in place, ready to be called upon when needed but accepts that there may be occasions when an ad hoc approach is unavoidable. Acas recommends that in establishing a redundancy policy or agreement, management “should aim to secure the involvement of trade union officials, employees and their representatives”, if possible at a time when redundancies are not imminent, so that the parties can think long-term, rather than being preoccupied with immediate issues in a potentially conflictual climate. In particular, Acas recognises the role of full and effective consultation in helping to “allay unjustified fears and suspicions.”

Redundancy policies can be divided into separate procedures, although this can sometimes cause complications. For example, Glasgow Caledonian University has separate policies on Avoidance of redundancy, Redundancy, Redeployment and Redundancy pay. Rather than a redundancy policy, BAe Systems has Best practice, a joint company/trade union initiative for dealing with redundancies. This policy was being put to the test as this booklet went to press, as unions reacted angrily to the news that a further 3,000 jobs are to be axed.

Only a small minority of workplaces in the LRD survey had no redundancy policy at all. At the First South Yorkshire bus company, general union Unite reported that on the rare occasions when redundancy had cropped up, it had been subject to “unique negotiations”. A similar comment came from GKN Transparency Systems in Luton (despite having carried out 35 redundancies in February 2009) and NHS Highland (covered by a ministerial policy of no compulsory redundancies in NHS Scotland).

At Cumbria Fire and Rescue, the FBU was in discussions about a redundancy policy specific to retained duty system members (who work on an on-call basis), whilst at Shropshire Fire and Rescue, a new policy was written to cope with the proposed regionalisation of emergency control rooms (now abandoned). And at Harlow College, a new Management of Change policy was under consideration, covering 20 or more redundancies.

Consultation

Employers have a statutory duty under Section 188 of the Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA) to consult where 20 or more jobs are at risk (see Chapter 3). However, some go beyond this promising to consult the union 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).”

A culture of consultation and a willingness to communicate are vital, but the best consultation arrangements will be frustrated if union reps are not given enough time to do what is required. With the London Borough of Haringey looking at large-scale redundancies in 2011, public services union UNISON commented that: “Each group has been dealt with in isolation, meaning almost continuous consultations.”

A good redundancy policy should set out the statutory position on consultation, as well as company-specific arrangements. At Macclesfield College, lecturers’ union UCU 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. Policy at Chester University states clearly that consultation with relevant staff and trade union representatives shall be in accordance with employment legislation and the Acas Code of Practice.

The purpose of consultation also needs to be clear. Mirroring the demands of TULRCA (see Chapter 3), redundancy policy commits Ideal Boilers “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 must be timely and must 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) told LRD that it considered this to be more important as a defence against job losses than the formal redundancy policy. And policy at Cumbria University, amended significantly in 2010, was used many times in the 12 months leading up to the publication of this booklet in dealing with a huge restructuring and redundancies. UCU regarded it as a very good policy which is followed 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.”

Finally, the process from the first indication of possible job losses to the final outcome should not be rushed, and input from the union side should be given full consideration. At Age UK, collective consultation arrangements point out 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, how payments will be calculated, selection methods and criteria, and so on) followed by an appropriate period of consultation. Representative groups are to be consulted to explore ways of avoiding redundancies or mitigating their effects, with the commitment that the employer will “consider and feedback to all counter-proposals received” (normally within two weeks). Feedback is communicated orally, and followed up in writing.

Redundancy avoidance

The first aim of consultation should be to seek to avoid redundancies altogether, particularly compulsory redundancies. Age UK reflected 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 organisations “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”, adding, 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.”

Redundancy policy at Dudley College says it will give consideration to the appropriateness of a range of measures, from other savings to natural wastage, reducing short-term or agency staff, seeking volunteers, and redeployment “on each occasion that a redundancy situation arises”. A commitment to redundancy avoidance measures is also spelled out at GE Aviation Systems.

Redeployment

The law on redeployment is set out in Chapter 5. For redeployment to succeed, affected staff need the opportunity to apply for new posts, a reasonable trial period, 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 prevent open recruitment to posts which at-risk staff might be eligible to apply for. The statutory trial period, four weeks, can be extended by contractual agreement. 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 Chapter 5).

If a new post attracts a lower salary, redundancy policies often offer salary protection or “red-circling”. The Acas Guide to handling redundancies suggests that where possible, earnings should be protected against a fall in the current rate of pay. Alternatively, there may be scope for employees to earn more through, for example, a productivity bonus. Abertay University offers three months at the current salary, followed by three months at the mid-point between salaries.

Some other employers 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 they are not obliged to take a post offered (and will not suffer a detriment in terms of redundancy payment if they choose not to take it). Some employers help redeployed staff with travel expenses.

Acas suggests allowing a redundant employee preferential treatment should the original job become available again following an upturn, as well as taking account of the disruption (in terms of increased travelling time) and expense caused to the employee by any change of location.

Acas also suggests that employers consider retaining the employee in a temporary capacity until permanent vacancies arise, where this is a realistic possibility.

The LRD 2011 redundancy survey identified redundancy pay as been the main target for employers cutting back on their commitments (see Chapter 6) but some had also cut redeployment. According to a rep at the London Borough of Haringey: “The amount of time allowed to obtain redeployment was reduced. It now runs concurrently with the notice period after selection for redundancy, rather than allowing an additional period”. Lack of salary protection was also a weakness.

Pay protection levels on redeployment had been reduced at Milton Keynes council, whilst the London Fire and Emergency Planning Authority had halved its redeployment period from six months to three (including contractual notice).

Early retirement and voluntary redundancy

If the workforce has to be reduced, this is usually done on a voluntary basis if possible, either 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”.

Working against the backdrop of changes to the law on retirement, a number of unions have managed to negotiate flexible retirement options for their members, enabling them to plan their retirement rather than hitting a “cliff edge”. Some good examples of successful negotiated agreements can be found in the TUC Equality audit 2009, free to download at: www.tuc.org.uk/equality/tuc-16977-f0.pdf (pages 39-41). An updated equality audit is due for release in September 2011.

At Ineos Manufacturing Scotland, according to the Unite rep at the time of the LRD survey, the union had managed to get agreement for early retirements to be used so in practice there had never been any compulsory redundancies. And 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. At West Thames College, an enhanced payment “helps collect volunteers”, the union UCU acknowledged, but the fact that it dropped to the statutory payment for those who did 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 redundancy. However, at Messier Dowty, volunteers receive less than those affected by compulsory redundancy, which union reps “disagree with”.

Anecdotal reports from Acas helpline advisors suggest that the trend towards offering better terms to those who opt for voluntary redundancy, seen in evidence at the start of the recession, is now in decline. (See the Acas policy paper: Collective consultation on redundancies).

Temporary agency workers

The dismissal of agency workers is commonly seen as one of the measures that can reduce or avoid redundancy among permanent staff. A new Reorganisation, redeployment and redundancy policy was agreed in September 2010 at the London Borough of Lambeth, in anticipation of more 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 LRD.

At Hull University, information on the number of possible job losses must include the number of fixed-term contracts not to be renewed for members of staff with more than one years’ service. This mirrors the outcome of a successful tribunal challenge brought by the UCU against Lancaster University in 2010 (discussed in chapter 3).

Selection for redundancy

The law in relation to redundancy selection is looked at in detail in Chapter 4.

If compulsory redundancies are to be made, fair and legal selection criteria will be required. For example, at Chester University, selection criteria “have regard to” equal opportunities, while being based on the skills required to meet current and future needs.

And at Boston Borough Council, selection must not be based on criteria such as age, sex, membership of a trade union and other factors governed by legislation. 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 those employers who follow the Footwear NJC agreement is that 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 restructuring and reports that: “Some of these have shown particular disproportionate outcomes, which we have pursued.”

Many agreed redundancy procedures use the criterion of last in, first out (LIFO), which protects employees with longer service from being selected before those with shorter service. The current law relating to the use of LIFO as a selection method is looked at in chapter 5. Briefly, although LIFO agreements have been questioned on the basis that they indirectly discriminate on the grounds of age, the clearest interpretations of the law suggest that having LIFO as one of several criteria for selection is acceptable, whereas having it as the sole criterion is open to challenge.

Time off to look for work or arrange training

The law on this issue is set out in Chapter 5. Collective agreements frequently improve on this statutory minimum and Acas in its guide Redundancyhandling makes some useful recommendations for extra steps an employer can take to help workers find new work, including:

• contacting the local job centre which provides a free service, bringing together employers with vacancies or training opportunities with job hunters. With larger redundancy exercises, job centres may offer on-site facilities;

• contacting other local employers with a view to canvassing for vacancies;

• giving employees first option of re-employment in an upturn;

• providing information on the financial effects of redundancy, pension payments and state benefits;

• helping with training in job search, completion of application forms and training for job interviews;

• engaging skilled counsellors to offer support.

Many larger employers tend not to enforce statutory rules entitling them to reduce pay for time off during job hunting or re-training, or to refuse requests made for time off during the consultation period but before a redundancy dismissal notice has been issued (see Chapter 5). It is obviously in the employer’s interests for employees to find another job quickly, as this limits the exposure to a claim for unfair dismissal.

Outplacement

The use of outplacement services dramatically increased during the early stages of the recession. Outplacement is the provision by the employer of professional advice or support designed to help an employee cope with redundancy and find another job. It may consist of anything from a single advisory interview to on-going assistance spreading over several months. Employers are allowed to fund outplacement counselling and services as an income tax- free benefit for employees with at least two years’ service who meet the qualifying conditions. These are set out in section 310 of the Income Tax (Earnings and Pensions) Act 2003 and Inland Revenue Guidance Note EIM13745. To trigger the tax relief, outplacement services must be limited to: giving advice and guidance, skills development; and providing access to computer facilities or similar equipment.

References

Employers are not obliged to provide references, but any reference provided must be true, accurate, fair and not misleading. Particularly in small scale redundancy exercises, employees may be able to negotiate reference wording to help support them in their job search. And employers should provide clear details of the reference policy – who to apply to, and what form any reference will take, for example, whether verbal references will be given and if so, by whom.

General guidance

The TUC and individual unions also publish free guidance to help workers manage redundancy. See the materials at: www.tuc.org.uk/tuc/rights_redundancy.cfm.