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P&O and the redundancy process

Updated: Dec 16, 2022

In March 2022, in a case that made national headlines and sent ripples through the government, P&O Ferries sacked 800 staff members. What raised eyebrows in the media was the way this was done. The staff were informed via a Zoom call that it was their final day and the redundancy was effective immediately. It was then revealed that P&O intended to replace the 800 staff with foreign agency workers on rates below the National Minimum Wage.

At the time, there were reports of plans to take P&O Ferries to court, but in August 2022, the Insolvency Service clarified that it had decided NOT to commence proceedings over the redundancies.

This episode highlights the serious issues that can ensue when an employer gets the process wrong.

A redundancy process is often a difficult and stressful time for both the business and employee. While every redundancy process and the circumstances will be unique, there are general principles and rules to be followed that will help to reduce the likelihood of an employment tribunal claim.

What should a ‘good’ redundancy process look like?

The redundancies should be genuine and not used to get rid of under-performing employees. It is also worth noting that it is the role that is redundant and not the individual.

Section 139 (1) of the Employment Rights Act 1996 defines redundancy thus:

  • The employer has ceased, or intends to cease, continuing the business, or

  • The requirements for employees to perform work of a specific type, or to conduct it at the location in which they are employed, have ceased or diminished, or are expected to do so.

What is considered a ‘fair procedure’ for redundancies?

A fair procedure gives the employees adequate warning and allows meaningful consultation before any proposed dismissals take place. This is likely to involve several consultation meetings before any decision to dismiss is made and confirmed.

‘Meaningful consultation’ should be genuine and include discussion with the employee regarding the reasons for redundancy. It is important to carefully consider alternatives to redundancy and any suggestions provided by the employee. During the consultation, you would also discuss any suitable alternative vacancies available in the organisation. Notes from the consultation meeting should also be kept. This can help to demonstrate, in the event of a tribunal claim, that the redundancy was genuine and not a sham.

Fewer than 20 employees

If fewer than 20 employees are being made redundant, collective consultation obligations are not triggered. Although there is no minimum statutory timescale in the legislation, it is still important that a fair procedure is followed before giving the employees notice of termination. If this does not happen, employers may be faced with unfair dismissal claims.

20 or more employees

If you are proposing to dismiss by way of redundancy more than 20 employees at any one establishment in a 90-day period, you must carry out collective consultation with employees and their elected representatives.

Collective consultation has to be carried out in addition to individual consultations.

The minimum consultation timescales are:

  • 20 employees to 99 employees – a minimum of 30 days’ consultation before the first dismissal takes place

  • more than 99 employees – a minimum of 45 days’ consultation before the first dismissal takes place

Collective consultation must be completed before notices of dismissal are issued. The employer must also notify the Redundancy Payments Service (RPS) before a consultation starts, via the HR1 form. There are deadlines by which this must be done, or a fine may be imposed.

It is not enough to inform employees of a decision that has already been made. For example, employees are entitled to be consulted on the proposed selection process and scoring system. If employers fail to collectively consult, the maximum extra compensation payable - known as a protective award - is 90 days’ pay per employee.

Selecting employees for redundancy

Any method for selecting the employees to be dismissed must be fair and free from discrimination. Consideration should also be given to employees who are on sick leave or maternity leave as they need to go through the same fair process, as far as possible. This includes being consulted, and women on maternity leave must be offered any suitable alternative positions before other affected employees.

All employees in the redundancy process should be given a right of appeal against any decision to dismiss them.

The selection pool

Identification of the people who will be formally at risk of redundancy is known as the pool for selection.

There are a few things to consider when defining the pool for selection, such as whether:

  • all employees are in the pool for selection, or only employees with certain skills;

  • the company has a pre-existing redundancy policy or agreement that specifies who should be in the pool for selection.

The pool for selection should:

  • be clearly stated in the company’s redundancy proposals;

  • be justifiable in case the company is challenged;

  • reflect the company’s reasons for redundancies.

Suitable alternative employment

Employers must consider offering suitable alternative work to redundant employees. If employees unreasonably refuse this, they may lose their entitlement to a statutory redundancy payment. Employees can have a four-week trial period in a new role but if the employer and employee then agree that the role is not a suitable alternative, the employee reverts to being redundant.

Dismissal and appeals

Once the individual consultation is complete, the employer must decide which roles and employees are to be made redundant. A written redundancy notice must be given, the notice must be included, and a leaving date must be agreed. The employer must also explain the redundancy payment calculation.

Employees should be allowed to appeal the redundancy decision.

Statutory redundancy payments

An employee must have been employed for a continuous period of two years to qualify for the statutory redundancy payment.

The amount of a statutory redundancy payment depends on the employee's age, length of service and gross week's pay.

  • Half a week’s pay for each full year the employee worked for you at the age of under 22

  • One week's pay for each complete year in which the employee was less than 41 but not less than 22 years old

  • One and a half weeks' pay for each complete year of employment in which the employee was 41 years old or more.

Statutory redundancy pay is capped at 20 years' service.

'Weekly pay’ is currently capped at £571.00 as of April 2022 (regardless of whether the employee earns more) and the maximum amount of statutory redundancy pay is £17,130.

Notice period

Statutory notice pay is given in addition to the employee’s notice pay and any holiday pay accrued up to the termination date. An employee must, therefore, be given either statutory minimum notice under Section 86 of the Employment Rights Act 1996 or contractual notice, whichever is the greater.

As can be seen from this summary, redundancy is a complex area of employment law; as it involves the futures of employees and their financial and emotional wellbeing, tempers may get raised during the process and therefore, cool and considered legal advice will be essential for businesses who are reluctantly going through the process. Consulting an experienced employment law specialist is highly recommended.

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