Redundancy - Getting it Right

by Kate Russell

Voluntary redundancy

Voluntary redundancy is a recognised category of dismissal for redundancy. There is no legal requirement to ask for volunteers for redundancy, but it is generally considered to be good practice.

Offering a voluntary redundancy package and then seeking willing redundancy volunteers may avoid compulsory redundancies altogether. You will want to keep the right skills and knowledge in the business, so if you do ask for volunteers, make sure you reserve the right to refuse to allow voluntary redundancy. Just because you offer voluntary redundancy as a way of facilitating matters, you are not under any obligation to accept to make volunteers redundant. You keep the right to make the final selection.

Note that the fact that an employee volunteers for redundancy does not mean that the contract is terminated by mutual consent. Voluntary redundancy is still a dismissal and this means that the usual procedures must be followed if the employer is to avoid a claim of unfair dismissal.

Example

In March 2006, OG Ltd informed its union, the TGWU (now known as Unite the Union), that it was proposing to make 19 redundancies at its Leeds site. Consultation and assessment took place in accordance with agreed procedures. This included asking for volunteers to be considered for redundancy. Three individuals volunteered and the employer accepted their requests. It decided that a further 17 employees were at risk of compulsory redundancy. The TGWU informed the employer that, as 20 redundancies were proposed, the statutory obligation to consult was triggered. The employer’s response was that it was proposing to dismiss only 17 employees by reason of redundancy. It therefore refused to engage in formal consultation. The TGWU complained that the employer had failed in its statutory duty to consult.

The court agreed. Voluntary redundancies count towards the total number of proposed redundancy dismissals at an establishment, which in this case was sufficient to trigger the statutory collective consultation requirements

Employees who volunteer and are accepted for redundancy are then in the same legal position as employees selected compulsorily, for example in relation to their right to receive a statutory redundancy payment.

A redundancy may be unfair if you do not consult with the affected employees (on either an individual or a collective basis). If collective consultation is appropriate, employee representatives will need to be elected (where no existing representatives are in place). A voluntary redundancy programme does not remove these obligations. It is, therefore, important that the scheme is planned carefully and that the employer follows a workable timetable.

Before inviting volunteers for redundancy, you should consider the impact that voluntary redundancies might have on the structure of the remaining workforce and, in particular, whether or not the programme will result in an imbalance in skills and experience. There is a risk that the volunteers may include key employees who might otherwise have been expected to contribute most to the future success of the business. You may wish to restrict applications to selected categories of employees and to reserve the right to decline applications. Where appropriate, try and get the formal agreement of any employee representatives to such an approach.

Voluntary redundancy – the process

Once the scope of the programme has been established and agreed, write to the relevant employees and invite them to apply for voluntary redundancy. The letter should explain:

  • the background to the redundancy situation (for example, a business reorganisation), what voluntary redundancy entails, the reasons for inviting employees to volunteer (to avoid compulsory redundancies, in other words) and the proposed redundancy date
  • the process to be followed by those wishing to volunteer, including the deadline for applications (for example, within 14 days) and what form the applications must take (for example, in writing, on a pre-printed application form)
  • that expressing an interest in or volunteering for redundancy will not amount to a resignation and will not be held against the employee concerned if his application is refused or withdrawn
  • the redundancy terms that will be available if the employee’s application is successful (the employer should try to provide as much information as possible about the redundancy terms at this stage as this is likely to encourage greater take-up of the programme), and
  • the process to be followed by the company in respect of those employees who do not volunteer for redundancy, warning them that they may be selected for compulsory redundancy regardless of whether or not they apply for voluntary redundancy (the employer may wish to set out the objective criteria that will be used if compulsory redundancies are necessary).

Provide employees with details of someone that they can contact if they have any questions or issues that they would like to discuss before making an application. Employees should understand the impact that taking voluntary redundancy could have on their pension.

Once the deadline for the receipt of voluntary redundancy applications has passed, if you have received enough applications that you can accept, it may be helpful, for the purposes of clarity, to remind all affected employees, in writing, that applications for voluntary redundancy are no longer being accepted.

If you do not receive enough suitable applications for voluntary redundancy, consider whether or not it would be worth extending the period for applications to be made. It may be that more employees would be prepared to volunteer if they had more time to consider it, or there may be more information that they require before making a decision. If you think that no further applications are likely to be forthcoming, start the procedure for making compulsory redundancies.

Selecting employees for voluntary redundancy

Identify the employees who will be offered voluntary redundancy. During the selection process, it is important that you do not discriminate on the grounds of a protected characteristic (such as age, disability, gender reassignment, marriage and civil partnership, pregnancy and maternity, race, religion or belief, sex or sexual orientation). You must also be careful not to discriminate against part-time or fixed-term employees.

If the number of volunteers exceeds the number of possible redundancies be aware of the potential reaction of employees who have applied and not been selected, and prepare a general written response to them in advance. This should explain why their applications have not been accepted, for example that you cannot accept applications from people in particular key roles. Thank employees for their cooperation in seeking to avoid compulsory redundancies and confirm that their future with the organisation will be unaffected by their decision to apply for voluntary redundancy.

Once the employees who will be offered voluntary redundancy have been established, you can prepare the terms of individual redundancy notices. Think about whether or not it would be appropriate to ask the employees to sign a compromise agreement, under which they would agree not to bring certain claims against the employer, for example for discrimination or unfair dismissal. It is usual for the company to pay the cost of the legal advice, either in part or in full.

Inform applicants to the voluntary programme in writing of the outcome of their application and invite the candidates who have been accepted for voluntary redundancy to a meeting for further discussion and explanation of the terms of their redundancy.

Hold individual termination meetings with the relevant employees, noting that termination should not take place before the end of the consultation period. This should start at least 45 days before the first dismissal takes effect when you are proposing to dismiss 100 or more employees, and at least 30 days before the first dismissal takes effect when you are planning to dismiss fewer than 100 but at least 20 employees. Consider whether or not those employees who have been offered voluntary redundancy will be required to work their notice periods and if any handover periods are required.

If enough employees agree to voluntary redundancy and there is no need for compulsory redundancies, inform the affected employees, their representatives and the wider workforce of this as soon as possible, to allay concerns that other employees may have about the security of their jobs.

While voluntary redundancy can be a useful way of making a selection and limiting the upset and disruption that comes as an inevitable part of redundancy, employees do not have a contractual right that requires employers to engage in the process.

Even where a document (such as a collective agreement) is expressly incorporated into a contract of employment by general words it is still necessary to consider whether any particular part of that document should actually be a term of the contract. This is especially so in the case of collective agreements made between employers and trade unions, as there may well be certain provisions in the agreements which are clearly not intended to give rise to legally enforceable contractual rights between the employer and the employee.

A contractual right?

Employers may have a contractual obligation to offer voluntary redundancy if a redundancy procedure states that the employer will always ask for volunteers before considering compulsory redundancies.

Example

At the end of 2013, Birmingham City Council (BCC) posted a notice on its intranet with the heading ‘Voluntary Redundancy Information and guidance for employees’, which said that it intended to offer a generous voluntary redundancy package during 2014-15 to ‘affected’ employees. The intranet notice stated that all eligible employees would be contacted and invited to make an application for voluntary redundancy.

In September 2014 Mrs Lynam and others were told that voluntary redundancy would not be available to them and they were made compulsorily redundant with effect from 30 April 2015. They argued that BCC was in breach of contract by not allowing them to apply for voluntary redundancy.

BCC said that the employees had no contractual right to apply for VR because:

  • It had only offered the enhanced voluntary redundancy package in one previous year and was unlikely to do so again after 2014-15. There was therefore no policy giving rise to a contractual right.
  • It was only those employees invited to apply for voluntary redundancy who would be eligible and who had a contractual right to make the application.
  • The contractual right was limited to a right to make an application. Even if an application was made, there was no right to receive VR.
  • Employees within a pool of those whose roles were to be deleted had no right to apply for voluntary redundancy.

The EAT concluded that the voluntary redundancy scheme which had been put forward to the employees was contractual. Not following this contractual procedure was an unlawful breach of contract.

The employees’ claim was that BCC had told them they could apply for voluntary redundancy, and then told them they could not. That was a breach of contract – whether or not there was a ‘policy’ was irrelevant. The proper focus was on what BCC had communicated to its staff.

The documents clearly stated that all affected employees, which included Mrs Lynam and her colleagues, would be eligible for the scheme. It was also of note that ‘affected’ and ‘eligible’ were used interchangeably in the documents. The fact BCC would not necessarily grant them voluntary redundancy if they applied did not affect BCC’s liability to invite them to do so (although it would be relevant to the issue of how much any damages for breach would be).

BCC had not communicated there was any restriction on the right to apply for voluntary redundancy. The court said the real issue was whether BCC’s communications, viewed objectively, gave rise to a contractual right to apply for voluntary redundancy. The EAT didn’t hold that Mrs Lynam and her colleagues were entitled to receive the VR package – that was in BCC’s discretion – but that they were entitled to apply for voluntary redundancy.