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Recently, Sports Direct’s owners have got themselves into trouble regarding the way they have allegedly handled the closure of their subsidiary company, USC. The interesting thing is, you might think that we’re going to talk about an employment tribunal here, however you’d be wrong — this is in fact being treated as a criminal case. But, why?

The truth is, should a company not give the proper notice to government regarding closure of their business and mass redundancies, the company, and sometimes the senior directors or managers involved, could face a criminal charge and, if convicted, a fine of up to £5,000. In this case, it is alleged that Sports Direct only gave 15 minutes’ notice to their staff, thereby breaking the law.

And if you think that as a small business this news doesn’t apply to you, think again. This applies when any company is looking to downsize by 20 staff in any 90 day period; and whilst not a regular occurrence, this is certainly within the realms of small business – especially if you are faced with closing down a whole company or branch.

Managing staff redundancy on a large scale

When facing this kind of larger scale redundancy (of over 20 employees and up to 99), you need to do something called ‘collective consultation’ with your staff. And even if you aren’t sure whether you will need to make redundancies in the end, the rules apply to any proposed redundancies. So should you find yourself in a situation where you can’t support 20 or so extra staff, as soon as you think you might have to make this number of redundancies you need to give a minimum of 30 days’ notice to the Redundancy Payments Service (RPS) before the first redundancy dismissal will take effect.

Unless something truly catastrophic happens, 30 days is more than enough time for you to give notice, so it’s important to do so.

This month-long period is also the minimum amount of time you need to consult with your staff for (unless you have over 100 employees), as you should ideally inform your employees as soon as you feel something is going wrong. The consultation period with your staff is just as important a part of redundancy as notifying the RPS, as if you get it wrong you could end up in a tribunal; so it’s important to get the process right.

Managing redundancy – the proper process

So here’s how you manage redundancy:

1. As soon as you feel that your staff’s jobs are at risk of redundancy, you need to let those who could be affected know. This is the first rule of the process that you must keep in mind. The best way to do this is in a company meeting — especially in the case of mass redundancies — setting out:
a) why this is happening
b) the number of staff affected
c) how you are going to select employees
d) how you will carry out the redundancy process
e) how redundancy pay will be calculated

2. Consult with elected representatives, trade unions, or with staff on an individual basis if there are no representatives. During this consultation you need to provide them with details of the outlined proposals and respond to any requests for further information.

3. It is recommended that you also seek volunteers for redundancy too — if you have people willing to leave voluntarily, and it doesn’t have an adverse impact on the business, then you should allow them to — it can certainly make your life that much easier!

4. In any event you’ll need to hold a final individual meeting, and listen to the employees concerns before making your final decisions. The outcome of this meeting will be confirmed in writing, and if making staff redundant you’ll need to issue you them with formal notice of redundancy, and give them the opportunity to raise an appeal.

5. Remember at all times throughout the process, and right up until the date employment ends you should be looking for alternatives to redundancy if at all possible, as well as keeping your employees informed as to the efforts you are making.

Failure to follow this process can result in claims for unfair dismissal.

Redundancy pay

Once you have managed the selection of staff to make redundant, you will need to calculate redundancy pay. Unless the company is insolvent, statutory redundancy pay is paid at the following rates for those that have 2 years’ continuous service, and have not opted for early retirement instead:

  • 1.5 weeks’ pay for each year of employment after their 41st birthday
  • a week’s pay for each year of employment after their 22nd birthday
  • half a week’s pay for each year of employment up to their 22nd birthday

Remember though, there is a cap of 20 years’ service, weekly pay cannot exceed £475, and the max statutory redundancy is £14,250.

However, if you are in the situation where you are laying off large numbers of staff, it may be that your company will is unable to provide redundancy pay at all. In this case, you will need to report to the Insolvency Service and they can help to pay redundancy for those staff that are affected.

So remember, should you be making large scale redundancies, it is important to keep all parties informed as soon as you become aware of an issue. Not only does this avoid any tribunal claims from departing staff, but also a potential criminal charge too!