Social media giant Twitter continued to make headlines in early January when a group of former UK employees launched a legal action claiming its redundancy process was a “sham”. Whether making one employee or many thousands redundant, there is a clearly established legal process to follow. Failure to comply will leave organisations facing stiff penalties, says Rhian Radia and Stephen Smithers.
2022 closed with reports of widespread redundancies in the technology sector. Musk’s eventual acquisition of Twitter was swiftly followed by the dismissal of half of its workforce. Zuckerberg’s Meta was next, cutting 11,000 jobs, with Amazon in early 2023 announcing the loss of 12,000 jobs and Salesforce cutting 2,500 UK roles.
Whilst many organisations will closely follow and comply with the long-standing redundancy processes, it is not always the case. In early 2022, P&O Ferries found itself under intense scrutiny when it sacked 800 staff immediately replacing them with contractors.
With a looming recession, businesses will undoubtedly face difficult decisions and it is likely many further redundancies will follow.
Legislation requires an employer that is proposing to make 20 or more employees redundant in a 90-day period to undertake a collective consultation over a set timeframe.
Consultations must take place between the organisation and an employee representative, often a trade union. Where a trade union does not exist, an employee representative will need to be elected.
Consultations must run for a minimum of 30 days where between 20 and 99 people are to be made redundant and for 45 days when more than 100 people are to be made redundant.
The purpose of these consultations is to both inform representatives of the proposals, explore alternatives to job losses and minimise the impact on an organisation’s workforce. It is important for employers to note that consultations must take place where job losses are at an ‘informative stage’, meaning that redundancies should not be predetermined.
Whether making one person or 12,000 redundant, there are stiff penalties for employers who fail to comply with the process.
Employers face possible claims for unfair dismissal from those who lose their jobs, with compensation awards equivalent to one year’s salary, capped at £93,878. If an employer fails to comply with the collective redundancy process, they face additional claims of up to 90 days’ pay per affected employee. It is easy to see how claims can quickly increase with even modest redundancy rounds. And finally, the Secretary of State must be notified when 20 or more people are being made redundant. Failure to do so is a criminal offence.
The reputation impact should also not be underestimated. P&O faced public condemnation following the sacking of 800 staff made worse by immediately replacing them with cheaper contractors, and Twitter continues to face widespread press scrutiny.
Getting redundancies right is important for everyone, and it is important to be mindful of the impact on morale and how an employer’s actions sit with its values and culture.
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The above is accurate as at 31 January 2023. The information above may be subject to change during these ever-changing times.
The content of this note should not be considered legal advice and each matter should be considered on a case-by-case basis.