According to a report by the CIPD, an estimated 1 in 4 companies in the UK were planning to make redundancies in the first quarter of 2025. In most cases, the reason cited is the recent Autumn budget which saw the Government substantially increasing the national insurance cost to employers.
In addition, the budget introduced an increase to the National Living Wage, and an increase to the National Minimum Wage for 18 to 20 year olds. These increases place a large financial burden on companies, and at a time where finances are already being squeezed, companies have to make hard decisions on how to fund these increases. Product or service price rises may not always be possible, and so reducing the work force, in many instances, is seen as the only option by employers.
While redundancies can help to reduce the costs to a business, if not handled correctly, they can cause legal headaches for those in charge. Failure to follow due process from the outset can result in claims against the company for:
Having to deal with these types of claim can result in a lack of trust in management from the remaining workforce, time being spent on dealing with litigation rather than focusing on the business needs, and of course, where an employee is found to have a case to answer, financial loss.
By way of an example, in the case of Valimulla v. Al-Khair Foundation [2023], an award of more than £16,000 was made to the claimant when the case went to an Employment Appeal Tribunal. Although the original Employment Tribunal dismissed the claim, the claimant appealed the decision, and an appeal tribunal found in the claimant’s favour.
The case involved the employee being placed in a “pool of one” during the redundancy process, despite the organisation employing others to perform near identical jobs at other locations. The employer failed to properly consider correct pooling and also failed to adequately consult with the employee regarding pooling. The original tribunal found for the employer and dismissed the unfair dismissal claim, but the Employment Appeals Tribunal allowed the employee’s appeal. A potentially expensive dispute which also involved an appeal.
While the amounts awarded vary for claims made against employers not following due process for redundancy, the above example is an illustration of how large awards can be. This can be avoided if your redundancy procedures are robust and are up to date with current legislation.
In order to avoid employment claims against the company, it is imperative that a redundancy procedure follows strict legal guidelines. With nuanced changes in law, it would be wise to ensure your current redundancy procedure is up to date before starting the process. Even if just one part of your procedure can be found to be discriminatory or unfair, an employee could make a claim against the company.
Specialist employment lawyers at Holmes & Hills can review your redundancy policies and procedures to ensure all current legislation is covered and mitigated for. In many cases we understand a company may not have a dedicated HR department to deal with this matter, and so our lawyers can be on hand to offer advice throughout the process.
As specialists in employment law, our lawyers deal with employment issues on a daily basis and offer advice to sole traders looking to employ their first employee, to SMEs with hundreds of employees. This advice covers HR functions such as reviewing and drafting policies and contracts, advising on changes in law, and assisting employers with employment disputes.
Holmes & Hills are recognised as being a leading firm by Chambers & Partners and Legal 500 - independent legal directories citing the UK’s top law firms.
As a full service law firm, the Employment Law Team is supported by many departments, which gives clients access to a wider legal knowledge, particularly useful when legal issues require cross departmental knowledge.
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Disclaimer
The content of this article is provided for general information only. It does not constitute legal or other professional advice. The information given in this article is correct at the date of publication.
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