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Charities: common pitfalls in handling redundancies

Posted: 04/09/2020

Covid-19 has dramatically changed every aspect of our society, from the way we socialise, to our economy, and the way we work. The charity sector has without doubt been particularly affected by the pandemic. With no indication of when things may improve, or indeed if they can resume, difficult decisions now need to be taken to prepare for the new tomorrow and to protect sustainability in the longer term. Unfortunately, for many charities, this will mean considering compulsory redundancies. We set out below some common pitfalls in handling this situation.

Is there an actual redundancy situation?

Redundancy is a potentially fair reason to end employment, provided that the circumstances meet the statutory definition. A redundancy situation can arise in one of three ways:

  • closure of the entire business;
  • closure of the employee's workplace; or
  • a diminished need for employees to carry out work of a particular kind in a particular place. This could be a need to reduce headcount or a change of focus in the business.

In some instances, such as a reorganisation, the proposal may not automatically come within the definition of a redundancy and such situations need to be carefully considered.

Is the selection pool for redundancy correctly defined?

Where only some employees will be made redundant, the charity will need to consider the selection pool, ie the group of affected employees at risk of redundancy, and how it will select employees from that group by applying fair selection criteria. Care should be taken where employees perform similar but not identical work, where they provide cover during periods of absence and where they have similar skills or perform similar jobs. In those circumstances, it is likely to be necessary to include such employees in a selection pool.

Are the selection criteria objective?

As far as possible, your selection criteria should be objective and measureable by reference to appraisal and employee performance. You should also avoid choosing any criteria which could indirectly discriminate. For example, length of service has the potential to indirectly discriminate so this should begiven a low weighting or removed where other criteria are sufficient.

Don’t forget reasonable adjustments may need to be made when applying the criteria to employees with a disability where a failure to do so would place them at a substantial disadvantage compared to employees without a disability.

Furlough leave should not be used as a selection criterion as this opens up a risk of allegations of discrimination, given it would include employees with caring responsibilities or disabilities meaning they have to shield. If performance is used as a selection criterion then the furlough period should not be taken into account (eg where the level of sales or output is relevant).

To limit subjectivity and, therefore, claims of personal bias or discrimination, scores should, as far as possible, be based on objective and verifiable evidence and two managers should score employees.

Are you following a fair process?

Remember, collective consultation obligations are imposed on an employer where it is proposing making 20 or more employees redundant at the same establishment within a 90-day period. Additional minimum consultation timescales apply where an employer proposes to make 100 or more employees redundant at the same establishment within a 90-day period.

If there are 19 or fewer employees affected by the proposals then the charity has greater flexibility in terms of the consultation process to be followed. For example, it may be possible to complete the consultation process over a period of a few weeks, depending on the issues raised during consultation.

There is no statutory obligation to hold an appeal in a redundancy process. However, as a matter of best practice, appeals should be offered to ensure a fair procedure. It also provides the charity with an opportunity to address any procedural irregularities or issues which may have arisen.

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Penningtons Manches Cooper LLP

Penningtons Manches Cooper LLP is a limited liability partnership registered in England and Wales with registered number OC311575 and is authorised and regulated by the Solicitors Regulation Authority under number 419867.

Penningtons Manches Cooper LLP