REDUNDANCY – IS IT A GOOD THING?

The almost universal portrayal of redundancy in the media is that it is a bad thing for the employee who is made redundant. There is no such thing as a universal law applicable to all situations so in some cases this will be true. The closure of the mine in the pit village, the closure of the only large factory in a small town undoubtedly lead to genuine hardship. Some people’s mental state is such that it is a bitter blow to recover from.

Anybody writing about this subject can only do so from their own experience so this article should not be taken as expressing a universal truth. However my experience of redundancy has been almost overwhelmingly positive. It even happened to me and the fairly miserable pay off I received was just enough for me to start my own business and we are still going some 25 years later.

Redundancy is simply defined under the Employment Rights Act 1996 as a diminishing need for work of the type the employee carries out or diminishing need in their place of work. In practice it seems to cover a great many situations – the company is making losses, the company is not making as much profit as it wants, part of the business is being outsourced, there is a restructure or reorganisation, the factory is closing etc. It is often used as cover or the “neutral option” for getting rid of a poor performing employee or one who is troublesome for some good or bad reason. In practice it really isn’t difficult for an employer to manoeuvre a redundancy situation if they want to.

That is not the end of the matter though. Having cleared that relatively low hurdle there is a clear and well worn procedural path employers have to follow. Redundancy law is very process driven and deceptively simple. Deceptively simple until you try to implement it. I am constantly amazed at how often employers get it wrong. There is clearly a disconnect between reading a redundancy process on paper or screen and following it through in person with an actual live human being.

My pet amateur psychological folksy theory on this is that human beings find it easy to be the bringers of good news but are awful at passing on bad news. Commonly it is not done at all, fudged or blurted out incoherently and brutally (never meant that way, of course). The effect is that the proper procedure is not followed and an unfair dismissal results from the failure to follow due process. It is why redundancy is often best left to professional HR people, lawyers or some third party who does not have any history or knowledge about the person being made redundant.

Broadly and very briefly the correct procedure goes as follows. Having identified that there is a redundancy situation the employer needs to identify exactly who is to be made redundant. Sometimes that is easy if an employer is, say, outsourcing the accounts function and has only one person in that role. Sometimes it is more difficult when there is a large department with multiple employees to be made redundant. Even more so when the work is similar or has the same level of difficulty as work in another department. Careful thought needs to be given to a scoring matrix in terms of the various criteria and the scoring weight to be given to each criteria. Having used the scoring matrix to identify who is in line to be made redundant the employer needs to consult with them to see if they have any comments on their scores and to make any appropriate adjustments. I have to say that in small companies it is very rare for scores to be adjusted. Usually there are good reasons why the scores were given in the first place. Once the selection exercise has been completed the employer needs to consider whether or not it has any alternative employment it can offer to the employees proposed to be made redundant. Sometimes the same work is not available but if  there is similar work, a suitability test and a trial period should be considered.

Throughout the process the employer needs to consult with the individual employee and in mass redundancies with employee representatives. That is one of the key areas where redundancy process goes wrong, I think, for two main reasons. Consultation often conflicts with commercial reality. What I mean by this is that by its very nature a redundancy process unsettles all of a workforce including those who are staying. It is very common for the best employees to feel nervous and starting to look for work elsewhere. The second reason is that consultation is difficult. As I have said, no-one wants to be the bearer of bad news.

There is no doubt that the actual day an employee is made redundant or is told they are being made redundant is a bad day. It is never pleasant to be told you are not wanted or not good enough or both. It seems to me though that from the day after things seem to get better. It is common for a workforce to be aware that there are problems at a company and there is the prospect or fear of being made redundant. This can hang over an employee’s head for a long time actually being made redundant  comes as a relief when it finally occurs. My dad used to say that human beings coped much better with bad news than uncertainty and I think he was dead right. He was a GP and I suspect the sort of medical uncertainty he dealt with was far worse than the legal uncertainty I deal with on a daily basis.

By the time I get to see people some days or maybe weeks later they have usually recovered their poise, their energy and their optimism. I may see them because they have a settlement agreement or because they want to explore the possibility of making a claim.

Forgive me because there are some fairly big generalisations here but whether we are looking at a claim or a settlement agreement the most important question is whether or not the employee has another job. In respect of the huge majority of claims invariably the most significant head of loss is future loss of wages. If someone has another job and let’s assume on the same salary and benefits package their claim in the Tribunal is likely to be small. In respect of a Settlement Agreement the sooner an employee finds work the more likely any settlement sum turns out to be a windfall. Invariably the advice is that you are much better off with a new job than a claim.

Clearly this will vary from industry to industry, where we are in the economic cycle and from area to area in the UK but my experience of practice in south central small town England is that people move on to other jobs very quickly and that often claims cannot be pursued because they are simply not worth enough money. Good for employees perhaps not so good for the legal profession though I don’t know of any lawyer who would not be delighted to be told their client had found employment.

I have now dealt with thousands of people who have been made redundant and after the initial shock the story is overwhelmingly positive. Lots of people find jobs quickly often on higher salaries. Sometimes there is more travel involved, sometimes less. Sometimes the hours are different, sometimes there is a different bonus or benefits structure. It is always different but rarely much worse than the old job.

Lots of employees have enough money to re-train, take a career break, travel, refurb the kitchen or do whatever. When a new job comes along they often have a new lease of life. I have come to the conclusion there are not many bad employees but there are plenty who are the proverbial square pegs in round holes, not enjoying their particular job, have issues with work colleagues, suffering issues in their personal life which spill over into work. Redundancy so often means getting out of a rut, discovering how much resilience you have, how resourceful, inventive and determined you are.

I am not blasé about redundancy but I am a lot more relaxed about it and hopeful for those subject to it. I have reached the conclusion that human beings have many bad qualities. We are unwise, greedy selfish, lack compassion and many more. However we are also clever, inventive, adaptable, determined and, again, many more. Redundancy seems to bring out the best in us. I am certainly not encouraging it or saying it is a good thing. I am just pointing out that it is not a reason for despair. Make it an opportunity to go again and open a new chapter in your life.