Why Redundancy can be problematic for SME's
With economic growth remaining slow in the United Kingdom, and many companies struggling to make a profit, both employers and employees fear that redundancy will affect their workplace. Redundancy is a form of dismissal, and an employer is by law required to follow certain procedures if they intend to make parts of their workforce redundant. Failing to adhere to these can lead to employees claiming unfair dismissal at an employment tribunal.
Small companies and the working environment
For an employee it may be, at least to a large extent, irrelevant whether they are made redundant by a big or a small company. For many employees it is an emotionally difficult process that compels them to find a new job in order to avoid getting into financial difficulty. However, an employer will notice a difference as large corporations often have a well staffed human resource department, which most small companies lack.
HR is commonly in charge of communicating with those being made redundant. For a small business lacking these members of staff, the task often ends up on the shoulders of management. This can be difficult as there are often close working relationships between management and the general staff in small businesses. There are some initial things that any small company considering redundancy should be aware of.
Obligation to consult
As an employer you have an obligation to consult with your employees prior to redundancy, failure to do so can lead employees to making a claim for unfair dismissal at an employment tribunal. There are two forms of consultation:
A consultation is an opportunity for you as an employer to discuss the situation and alternatives with affected employees or their representatives. It is a good opportunity to be honest and listen to the employee and what suggestions they may have.
Do you have to pay redundancy pay?
An initial concern for your employees will be whether they are entitled to statutory redundancy pay. As an employer, you are obliged to provide such payment to employees who have been in continuous employment with the company for at least two years. However, prior to April 2012 the threshold was one year and, as such, you need to establish whether there are employees in your company who qualify for redundancy pay under this lower time threshold.
Guest Blog Post provided by Contact Law.