If you run a business, then you are likely to end up in the unfortunate position where you need to let go of a staff member, or even multiple members of staff. Whether they need to go because of an issue with their behaviour or abilities or because you need to unfortunately reduce the size of your workforce, there are many procedures and considerations you need to consider to ensure that their departure is fair and provides a reasonable outcome for both parties. In this article, we will look at what dismissals are and what to consider when dismissing somebody, as well as look into what redundancies are and what you need to consider when making someone redundant.
What are dismissals?
A dismissal is when you end someone’s employment. Dismissals should be done for a valid and justifiable reason. There are many reasons you may need to dismiss someone as an employer, but the reason for dismissal should always be fair, something we will discuss in detail later in the article. It is important that you act reasonably during the disciplinary and dismissal process. It is also important that your reason for dismissal is fair, if not you could be taken to an employment tribunal.
There are various reasons you may need to dismiss someone, such as:
- If they have committed acts of misconduct multiple times or a gross misconduct once.
- If the employee is able to do their job but refusing to do it to a suitable standard.
- If circumstances change to mean the employee can no longer perform their role.
What makes a dismissal fair?
Dismissals can either be fair or unfair. Fair dismissals are dismissals which have a justifiable reason and not be based in discrimination. Some reasons for fair dismissal may be:
- If the employee has to be made redundant.
- If the employees conduct and capability are not up to standard.
- If something prevents them from legally doing their job (for example if a lorry driver were to lose their license).
- There may be contractual terms stating the length of the employee’s service, for example if an employee was hired for a temporary period to cover for someone who was unable to work for a few months can be dismissed fairly when the person they were covering for returns to work, because they understood the job was only temporary when they started their placement.
Additionally, even if you are dismissing someone for a fair reason, during the disciplinary and dismissal processes you should act reasonably. There is no clear legal definition of what being reasonable is in this context, however if you are taken to an employment tribunal (or industrial tribunal in Northern Ireland), they will decide whether they believe you acted reasonably by checking whether:
- You genuinely believe your reason for dismissing the employee was fair.
- You carried out proper investigations in situations where they were necessary/important.
- You told the employee why you are considering dismissing them (in Northern Ireland this needs to be in writing) and whether you listened to their thoughts on the matter.
- You allowed the employee to be accompanied at their disciplinary and/or dismissal hearings.
- You gave the employee the chance to appeal.
- The employee could be expected to understand the consequences of the behaviour they are being dismissed for.
Sometimes, you might need to perform a summary dismissal, which is a dismissal done instantly and without notice. Summary dismissals are nearly always done in response to gross misconduct, which is usually criminal activity, for example theft or assault. However, you need to be careful about summarily dismissing someone, because tribunals could claim your summary dismissal as being procedurally unfair for not following proper dismissal procedures. Because of this, you should only summarily dismiss someone if their contract allows you to do this, otherwise you will have to suspend the employee on full pay while you investigate the issue.
What makes a dismissal unfair?
An unfair dismissal is a dismissal which is done without good justification. Even if you think you have dismissed someone fairly, they can still attempt to claim the dismissal is unfair if they believe your reasoning was unfair, if they believe the reason you gave was not your actual reason or if you did not act ‘reasonably’ during the dismissal process.
Even if you acted reasonably throughout the proceedings, there are some reasons for dismissal which are considered automatically unfair. These automatically unfair reasons for dismissal are if you dismiss someone:
- Due to pregnancy or any other reason relating to maternity.
- For family reasons, such as parental leave and adoption leave.
- For acting as an employee representative or union representative.
- Because they joined (or did not join) a trade union.
- For acting as an occupational pension scheme trustee.
- For only being a part time or fixed term employee.
- Due to issues about pay and working time regulations (for example minimum wage laws or annual leave)
- For whistleblowing.
- For taking part in lawful industrial action within the first 12 weeks of the action, as well as any time after the 12 weeks if you have not taken steps to resolve the dispute (it is up to an employment or industrial tribunal to decide whether you have taken reasonable steps to resolve the issue).
As well as these automatically unfair reasons for dismissal, there are other reasons for dismissal which could be considered unfair depending on the circumstances. Dismissing someone due to disability or long-term illness which prevent the employee from carrying out their job could be considered fair only if you cannot make any reasonable adjustments to help them return to work and do their job. If you can make reasonable adjustments but simply choose not to, it will be unfair.
If a tribunal rules that you have unfairly dismissed an employee, you may be ordered to reinstate the employee, meaning giving them their job back, or re-engage them, meaning giving them a new job. You might also have to give them compensation, the amount of compensation you would have to give can vary and is based on the employees age, gross weekly pay and length of service. You might also have to pay extra compensation if you refuse to reinstate them after a tribunal tells you to. There is normally a limit on the amount that a tribunal can award for unfair dismissal, however there can be some exceptions if the dismissal was due to health issues or whistleblowing.
What can I do if I am dismissed unfairly?
If you are an (ex-)employee who believes you have been unfairly dismissed, there are steps you can take to challenge the fairness of your dismissal. If you have been dismissed, or threatened with dismissal, you can receive help from a 3rd party, for example a union representative to help solve the issue through mediation, conciliation, and arbitration with your employer. If you are unable to resolve the issue, you can seek help from an employment tribunal (or industrial tribunal in Northern Ireland), but you must make your claim to the tribunal within 3 months of being dismissed.
Unless the reason for dismissal was automatically unfair, you will have had to work for a qualifying period of 2 years to be able to make a claim. The right to complain to an employment tribunal is also not available to:
- Self-employed people
- Independent contractors
- Members of the armed forces
- Employees who have reached a settlement with their employer though Acas (or the LRA in Northern Ireland)
- Employees who have reached a settlement with their employer though any form of settlement agreement or compromise agreement
- Police officers (unless the reason for dismissal was due to health and safety or whistleblowing)
- People working on fishing vessels who are paid in a share of the profits or gross earnings of the vessel they work on
How do I dismiss someone?
Dismissing an employee can be a difficult process, one which we cannot fully elaborate on within a single blog post designed to give you the basics of employment law. You have to act fairly during the dismissal process, treat the employee with respect, and follow the Acas advice for dismissal (or LRA advice in Northern Ireland). Because it is a complex process, where you need to act respectfully and lawfully, we would recommend getting legal and HR advice if you are at all unsure of how to handle the dismissal process. We at HR and You specialise in employment law and would be happy to be help with any struggles you may be having during dismissal of an employee, simply email us (at [email protected]) or call us (on 0333 006 9489) to get in touch to find out what we can do to help and how much it would cost.
What are redundancies?
A redundancy is when you unfortunately have to dismiss an employee because you no longer need someone to do their job. You may have to do this for a variety of reasons, such as if your business is changing what it does, how it does things, or is downsizing. For a redundancy to be genuine, you need to demonstrate that the employees’ job will no longer exist, so you cannot use redundancy as an excuse to get rid of someone so you can give another person their job.
There are two kinds of redundancy, compulsory redundancies, and non-compulsory redundancies. A compulsory redundancy is when you as an employer choose who to make redundant while non-compulsory redundancy is when you allow staff to volunteer to be made redundant. If you do a compulsory redundancy, you must ensure that your selection process is fair and unbiased. If you are making a non-compulsory redundancy, you must be as honest and transparent with your staff as you can about the selection process and make sure they understand that they will not be automatically selected for redundancy just for applying. Alternatively, you could offer early retirement by giving staff incentives to retire early, but this offer should be made to the whole workforce and you should not single anyone out.
How can I avoid making staff redundant?
You should only make compulsory redundancies if you really need to, there are many alternatives which you can do before resorting to compulsory redundancies, such as:
- Seeking applications for voluntary redundancies or early retirement.
- Seek applications from current staff to move to flexible working.
- Lay off staff not directly employed by you, such as self-employed contractors and freelancers.
- Restrict recruitment for your organisation.
- Reduce, or even completely ban, working overtime.
- Filling vacancy elsewhere in the business with people already employed by you.
- Put people on short time working or give temporary lay-offs.
You can also offer someone who is being made redundant alternative work. However, in order for your offer of alternative work to be valid it should be unconditional- they should not have to apply for a chance to get the job. It is important that you tell them how the offered job differs from their old job, so they can make an informed choice of whether to take the offer or not. Your offer should also be in witing. Additionally, you need to make the offer before their current contract ends and the new job must start within 4 weeks of their old job ending.
If they accept the job offer, there should be a 4-week trial period in order for both you and the employee to see if it is sustainable. If you both agree that it is not, then they can still claim redundancy pay. If you think the job is sustainable but the employee refuses to take it, they might lose out on their redundancy pay. If you wish, you can have a longer trial period than 4 weeks if you both agree with this in writing.
What do I need to keep in mind when making staff redundant?
If you have to make staff redundant, there are some things which you should keep in mind to make sure the process is fair to everyone in the workplace. If you decide that you need to make compulsory redundancies, you must identify which employees will be made redundant and make sure the reason for choosing those employees is fair and not discriminatory. Fair reasons for selecting an employee could be:
- Their skills and qualifications.
- Their standard of performance at work.
- Their attendance.
- Their disciplinary record.
You might also be able to choose someone due to length of service, so long as it is not the only reason you have chosen them, and if you can justify why. You should also be careful when selecting based on length of service since if it effects one group more than another it could be indirect discrimination.
Some selection criteria for redundancy are inherently unfair. Most of the list of what is an inherently unfair criteria for redundancy is similar to the inherently unfair criteria for dismissing someone. These are:
- Pregnancy, and all reasons relating to maternity.
- Family, including parental leave, paternity leave (for birth and adoption), adoption leave or time off for dependents.
- Acting as an employee representative.
- Acting as a trade union representative.
- Acting as an occupational pension scheme trustee.
- Joining or not joining a trade union.
- Being a part time or fixed term employee.
- Pay and working time regulations, such as minimum wage or annual leave.
If you need to make staff redundant, you should consult with your staff about the situation. You can consult with staff by giving them a redundancy consultation, or, if you have more than 20 redundancies planned in a 90-day period, you should a conduct a collective consultation instead. It is extremely important that you do a redundancy consultation before laying off any members of staff, because if you do not it is likely that they could be considered unfair, and employees will be able to take you to an employment tribunal.
There is a specific set of rules you must adhere to if you are performing a collective consultation, but there are no such rules for a redundancy consultation, but it is good practice to at least consult with your employees and their representatives, or else risk being taken to an employment tribunal. When it comes to collective consultations, there are guidelines which you must follow, these are:
- You must notify the Redundancy Payment Service (RPS) before you start consultations. There is a deadline to the minimum amount of time you have for notifying the RPS before your first redundancy happens. This time period is different depending on how many people are being made redundant. If you have between 20 and 99 planned redundancies, you must notify them at least 30 days before the first redundancy is made, but if it is 100 or more, you must notify them at least 45 days before the first redundancy is made. If you do not notify the RPS, you could be fined an unlimited amount.
- If your workplace has union or employee representatives, it is important that you consult with them. If there are none of either, then you should consult with staff directly instead.
- You should provide information about the planned redundancies to the staff or their representatives and give them time to consider the information.
- If anyone is asking for further information, you should respond to their requests.
- Give any effected staff termination notices which show their agreed leaving date.
- Finally, issue redundancy notices when the consultation is complete.
When it comes to providing information to staff or their representatives, you should provide written details of:
- The reason for redundancies.
- The number of employees involved and their categories, as well as providing information of the total number of employees in each category.
- How you plan to select employees for redundancy.
- How you will carry out the redundancies.
- How you will work out redundancy pay.
If you want to learn more about how to handle large scale redundancies, a full Acas guideline document on the matter can be found here. When you have finished your redundancy consultations, you should agree on a leaving date and give staff notice on when their last day will be.
What do I do when giving notice and redundancy pay?
When making redundancies in your workplace, it is important to understand how much notice you need to give to employees and whether they should receive redundancy pay. When giving notice, there is a statutory period of how much notice you must give them (but you can give them more notice if you choose). The notice period varies depending on how long the employee has worked for you, the periods are:
- A week’s notice if they have worked between 1 month and 2 years.
- If the employee has worked between 2 years and 12 years, they should get a week’s notice for every year they have worked (for example someone who has been working for you for 4 months will get 4 weeks’ notice)
- If they have worked for you for more than 12 years, it caps out at 12 weeks’ notice.
When giving staff notice, you should give them notice pay or payment in lieu of notice. Notice pay is the payment they earn during their notice period. Your employees notice pay will be the average weekly salary they have earned over the 12 weeks before their notice period began, and this should include regular overtime, commission, and bonuses. Alternatively, if their contract allows it, you can instead end your staff’s employment without notice and instead make a payment to cover the notice period they would have worked. You will still have to pay staff the basic pay they would have got during the notice period, but you might also have to pay pension, private health care insurance or other contributions if it’s in the employee’s contract.
Redundancy pay is different to notice pay. Redundancy pay is a sum of money which an employer should pay to an (eligible) employee who they are making redundant. The payment should be given when the employee leaves or soon after they leave. If they are eligible, employees that you make redundant might be entitled to a ‘statutory redundancy payment’. To be eligible for statutory redundancy payment, they should:
- Be an employee, meaning they are working under a contract of employment.
- Have worked for you for at least 2 continuous years.
- Have been dismissed, been laid-off or put on short time working, however people who opt for early retirement are ineligible.
The pay rates for their statutory redundancy payment are dependent on the length of their employment and their age, these are both calculated from their date of dismissal (meaning counting their notice time in their length of employment). Employees should receive:
- 1.5 week’s pay for every full year they work after their 41st birthday.
- 1 week’s pay for every full year they work after their 22nd birthday.
- 0.5 week’s pay for every full year they work before their 22nd birthday.
The maximum that you need to pay them is up to 20 years of service. The week’s pay given is based off the average pay the employee earned for the 12 weeks leading to their redundancy, but the weekly pay is capped at £544, and the maximum amount is capped at £16,320. If you want to calculate an employee’s redundancy pay, there is a helpful tool on the government website which helps to calculate it.
If you fail to pay statutory redundancy pay or if the employee disagrees with the amount, the employee has three months from the date their employment ends to make a claim for payment at an employment tribunal. If they do not claim on time, the tribunal has an additional 6 months to decide whether they should still receive the payment.
If you are having financial difficulties which would cause your business to become insolvent (become unable to pay its debts) if you pay the redundancy pay, the Insolvency Service Redundancy Payments Service may be able to help you stay afloat for the time being, but you would have to repay the debt as soon as possible. If you require help from the RPS you should email them at [email protected] and tell them:
- Your name.
- Whether you are the employer or employee.
- Whether you should be the main point of contact between the business and the RPS.
- The name of your business.
- Your business address.
- The number of redundancies being made.
While this article has given you enough of an overview of what dismissals and redundancies are and how they work to help you understand what they are and the processes involved, since they are a complex topic it is impossible to cover every aspect of them in a single blog post. However, if you are curious to learn more, the knowledge gained in this post will be a good jumping off point for learning more into the topics.
If you need to make a dismissal or redundancy and need any extra help or support through the process, we at HR and You are experienced in our understanding of Employment Law and would be happy to help your business handle the period of change. Do not hesitate to contact us via email, [email protected], or phone, 0333 006 9489, for a no obligation chat to find out whether our services are right for you.
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