Good redundancy procedures

Given the complexity of the law regarding redundancies, it is highly recommended to have good redundancy procedures and policies in place to avoid procedural flaws and to ensure that there is fairness in the selection process. Part of the policy may detail the provision of assistance to employees to find alternative work.

The Acas booklet Redundancy handling provides useful guidelines for managers in formulating a redundancy policy or when facing the possible implementation of redundancies. It outlines ways of avoiding actual redundancy dismissals, as well as a good management practice. For small businesses making fewer than 20 people redundant, there is a step-by-step guide on the Acas website at: aspx?articleid=747

Re-hiring former employees

What are the implications for hiring people you have previously made redundant? The attraction is obvious: these are people who know the organisation, know the job and you already know they have the right skills. Questions to consider are: continuity of employment, tax implications and equal pay. Generally, if there is a gap of a week or more between redundancy and re-hiring, then continuity of employment is broken and the employee has to re-build the service required for certain employment rights (e.g. unfair dismissal). However, if a pattern of cessation of work followed by re-engagement occurs, then continuity of service may be established.

Another issue is the clawing back of redundancy payments, particularly enhanced payments. Generally, redundancy payments cannot be clawed back: the exception is if the company has introduced a contractual clause allowing claw back. However, claw-back clauses have the effect of preserving continuity of employment, regardless of the length of break between redundancy and re-hiring. On the other side of the coin, because the first £30,000 of redundancy payments is tax-free, HM Revenue & Customs is likely to take an interest and start considering the possibility of sham arrangements if employees are re- hired too quickly. Obviously, a claw-back arrangement negates any hint of sham arrangements – but so does a record of a carefully thought out decision-making process.