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There are few more difficult tasks than firing employees, especially those that have been trusted colleagues. But it is something many directors of struggling internet and hi-tech firms have had to deal with over the past years, and if the slowdown worsens the pain could become general.
Most employers will naturally want to minimise the pain of redundancy, for themselves and for the unfortunate victims. But besides the human factor there are strong commercial and legal considerations for getting it right.
It is important to be clear about the law: infringements could bring court charges of unfair dismissal, facing fines of up to £50,000. An EU directive states that businesses making more than 20 employees redundant must provide a 30-day consultation period, or 90 days if the number is 100 or more. However as a precaution legal and HR specialists recommend a consultation period also where fewer people are involved.
The aim is to provide a period of consultation during which alternatives can be identified. Perhaps the individuals at risk can be reskilled for work in other departments, or persuaded to jobshare. Or some members of staff may wish to opt for voluntary redundancy.
"If you want to avoid any suggestion of unfair dismissal you need to comply with certain procedures," says Ronnie Fox, employment specialist at City law firm Fox Williams. "If there is a union it will have to be consulted, otherwise there needs to be prior discussions with each individual."
However Fox concedes that in practice such consultations are often perfunctory, because by the time they take place the employer's mind has been made up.
The selection of employees for redundancy has to be obviously fair: don't give grounds for legal action by appearing to discriminate against women or ethnic minorities. Factors such as length of service, relevant skills and performance can more safely be taken into account.
It is also important to ensure that compensation is adequate. The statutory amount depends on age, length of continuous employment, and gross average earnings, with a current cap of £7,200. In certain circumstances you may be able to pay a pension instead of a redundancy payment.
According to Fox, many companies are paying a bit over the odds. Being generous makes sense, he points out, since it makes it harder for the employee to convince a court that they have been unfairly treated. It is good practice to ensure that no one leaves with a chip on their shoulder, he adds, and remaining colleagues will also want to see the redundancy being properly handled.
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