Redundancy reminders: how to run a fair selection process

Last week we set out our top ten (or eleven!) pitfalls to avoid when handling redundancy exercises; this week we are going to focus on the process of selecting employees for redundancy. 

There are three phases to the selection process for redundancy, which we consider in turn below:

• the pool for redundancies;
• the selection criteria which will be applied;
• how to apply the selection criteria in a fair and objective manner.

Defining the pool for redundancies

First, you will need to identify the pool of roles which are at risk of redundancy. A redundancy pool is a group of employees from which staff may be selected as redundant.

The choice of pool primarily rests with employers. However, it is important that employers genuinely apply their mind to the composition of the pool and are able to show that there is a reasonable and non-discriminatory basis for their decision about which employees to include.

For each pool, you should include the specific roles at risk, plus any roles which are interchangeable with those roles. To do this, you should look at what employees actually do (rather than just what is in their contract) and ask yourself: what kind of work is disappearing; which employees do that work; and are there other employees who do similar or interchangeable work?

The Tribunals have confirmed that in some circumstances it might be fair to have a redundancy pool of just one employee. However, whilst there may be a temptation to limit the number of employees at risk of redundancy, defining the pool too narrowly could tarnish the fairness of the rest of the redundancy process, and could (if employees have at least two years’ service) risk claims for unfair dismissal.

Selection criteria: what’s fair?

The next step is to identify fair selection criteria and apply them to the employees in the redundancy pool to determine who will be made redundant and who will be offered roles going forward.

Redundancy selection criteria should as far as possible be fair and objective. Unfortunately, this is not as straightforward as it sounds. Three of the most commonly used selection criteria include:

• Length of service;
• Attendance; and
• Performance and ability.

Each of these poses certain challenges:

• Length of service is often popular as it is easily quantifiable and transparent, and rewards loyalty. However, if used as the only criterion (or if the employer gets its weighting, amongst other criteria, wrong) it may leave an employer exposed to claims of indirect age or sex discrimination. However, its use as part of a matrix of criteria has been found to be objectively justifiable on the grounds of rewarding loyalty, experience and a stable workforce.
  
  
• Like length of service, attendance should also be fairly easy to quantify provided accurate records exist. However this may not always be the case, especially if organisations rely on self-reporting which can be patchy, and where there is a blurred line between sick leave and time spent working from home when an employee is able to carry out some work but not well enough to attend the workplace. Employers should also exclude absences due to pregnancy related illness, and should consider excluding absences due to a disability – again, not always straightforward to identify, depending on the quality of the records. Family-related leave should not be taken into account when assessing absence levels, and employers should ensure that the period over which attendance is assessed provides a fair and accurate snapshot of relevant employees’ absence levels.
  
  
• Performance and ability is perhaps the criterion which employers would most value being able to capture: after all, who wouldn’t want to hold on to their highest performing staff? However, for most roles, performance is not easy to measure exactly, and even where output measures exist, quality is much less easy to quantify. Historic appraisals may be of some help here provided they have been carried out regularly, but employers should consider whether grades etc have been applied consistently by different managers. In some cases, a new performance assessment process will need to be undertaken for the purpose of the redundancy process. If this is the case, careful records should be kept of the justification for individual scores and, if at all possible, more than one manager should be involved in the scoring process.
  
  
• As well as deciding which selection criteria to use, employers should also decide what weighting to give different criteria. For example, are some criterion more important than others and should they be given more weight as a result?
  
  
• Broadly speaking, an employer has wide discretion over the criteria it uses, provided they are ones which a “reasonable employer” could have agreed upon. However, it is good practice for employers to consult on the criteria and scoring process with affected employees before they are finalised.

It may be that, if an employee is genuinely in a pool of one, there will be no need for any selection criteria. However, this conclusion will very much depend on employers being certain that there is no one else who should be included in the pool (ie that the role is unique with the organisation). Similarly, in the case of a business closure, or where all jobs of a particular kind are disappearing, selection criteria may not be necessary.

Fair application of the selection criteria

The next step is to score employees against the agreed selection criteria. Ideally, in each case employers should use objective evidence such as attendance and disciplinary records or appraisals, etc, to justify decisions. Where more subjective views have to be reached, these decisions should be taken by at least two managers to reduce the risk of bias. Employees’ scores against the relevant criteria should be recorded, along with notes to justify why a particular score was given.

As part of individual consultation, employers should inform employees about their individual scores and how they were reached, and give the employee a chance to challenge them.

Interviews

One question which often arises is: can employers interview staff for available roles? And if so, can they only interview staff who are in the redundancy pool, or can they cast their nets wider? The answers to these questions depend on whether the roles in question constitute suitable alternative employment (for more on which see below).

Where the available roles are different from roles which affected employees have historically carried out, and do not constitute suitable alternative employment for any of the employees at risk of redundancy, there may be potential to interview both internal candidates from outside the redundancy pool, and external candidates. 

However, if the available roles do constitute suitable alternative employment then:

• employees on maternity leave who have been selected for redundancy are entitled to be offered any suitable alternative employment available without going through an interview process (unless, potentially, there are more employees on maternity leave than there is suitable alternative employment available, such that a selection exercise as between these priority candidates is required); and
  
  
• only internal candidates who are at risk of redundancy and for whom the available role constitutes suitable alternative employment should be interviewed. If the role were to be given to another candidate not at risk of redundancy (or an external candidate), this would be likely to result in a finding of unfair dismissal.

But what if the roles which are available after the redundancy exercise are the same roles which existed before: ie can employees at risk of redundancy be required to interview for their own roles? Most employers would historically have been cautious about this approach, and rightly so as the EAT has recently confirmed in Gwynedd Council v Shelley Barratt and Other that, where available roles are the same or substantially the same as the role the employee has previously carried out, the appointment process must not involve a competitive “forward looking” interview. It should instead be carried out as a redundancy selection process, using fair and objective selection criteria as set out above. In this case the EAT upheld a Tribunal’s finding that it was unfair to require the claimants, who were employees at a school, to apply for their own jobs as part of a redundancy exercise.

Consideration of alternative employment

Before making an employee redundant, employers are required to consider whether or not there is any alternative employment he or she could carry out. A redundancy dismissal may be unfair if other jobs are available which could be within the scope of an employee’s abilities or contract of employment. Even where there are no such jobs available, an employer should still consider whether there is any other viable alternative employment available (including through bumping – see our note on Redundancy pitfalls to avoid for more information).

Employers should be careful not to make assumptions about what vacancies potentially redundant employees might consider suitable (eg based on status or remuneration), and instead should provide employees with sufficient information so that they can make an informed decision for themselves about suitability. 

That is not to say that you are obliged to create alternative employment for redundant employees where none exists. However, you must be seen to make reasonable efforts to find alternative work.

There are specific provisions which apply regarding whether a vacancy is a “suitable” alternative vacancy – see above for some examples of where this is relevant. In addition, employees have a statutory right to a four-week trial period if they accept a new suitable alternative role or may lose their entitlement to a statutory redundancy payment if they unreasonably refuse an offer of a suitable alternative vacancy. Suitability is assessed depending on factors such as the terms of the new job and how they compare to the employee’s old job, and the employee’s skill and aptitudes and whether they meet the requirements for the new role.

For more information on how to carry out a fair redundancy exercise, see our blogs on Redundancy pitfalls to avoid and Employee consultation – redundancies and beyond.

If you require further information about anything covered in this blog, please contact Kathleen Heycock, Alice Cave, or your usual contact at the firm on +44 (0)20 3375 7000.

This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.

© Farrer & Co LLP, July 2020