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Making the best of bad times

With the phrase “credit crunch” now deeply entrenched into our vocabulary, most observers agree that the British economy is undeniably in the midst of the most severe downturn since the recession of the early 1990’s. However, the old saying “to make the best of a bad situation” still rings true.

Consequently, now is a good moment for HR professionals to consider whether or not it is possible to legally part company with underperforming or incompetent employees citing the reason of redundancy due to the “economy”.  This article seeks to examine this question and analyse how HR professionals might safely take advantage of the downturn.

What legislation to turn to

It is in fact relatively simple to use an economic downturn to clear out underperforming employees, with far less risk of having to face a successful Tribunal claim.

The route for doing this is through the Statutory Redundancy Procedure, under Section 139 of the Employment Rights Act 1996. This section prescribes that redundancy can occur in three situations (paraphrasing the legislation):

1. The actual or anticipated closure of the whole business
2. The actual or anticipated closure of the business at a particular work place
3. The actual or anticipated reduction in the need for employees to carry out work of a particular type.

During an economic downturn it is not inconceivable that there is going to be an actual or anticipated diminution in work for employees or a revised need for employees to carry out a particular task. In that case, a redundancy situation will have arisen.

So, how would an employer manage this redundancy situation to clear out underperforming employees?

The Process & Criteria

There will most likely be a pool of candidates who face being made redundant. This pool will contain both good and poor performers.   As in all redundancy cases these candidates will be judged against measurable and fairly applied criteria, which objectively target the entire pool of candidates.

Here in lies the solution to weeding out underperforming employees. As employers you decide which selection criteria to use (as long as you apply them fairly and the criteria is measurable). Such selection criteria may include absence and sickness records, skills, productivity skills and targets met and disciplinary records.

Considering that your aim is to target underperforming employees make sure that the performance related criteria are weighted by a percentage factor. The final result will be that the failings and shortcomings of under performers will be given additional priority – thereby making their selection for redundancy more likely from the initial pool of candidates.  This would be acceptable to a Tribunal.

In managing this process, it is important to restate that the selection criteria must be measurable and fairly applied if you want to avoid interference from a Tribunal.

Things to avoid

A word of caution is needed when scoring on criteria such as absences. Employers must not count absences which might be connected to a disability either suffered or claimed by the employee. Nor should they be connected with a reason such as pregnancy. If you were to include such absences then you could face a discrimination allegation as well as a claim that the employee was unfairly dismissed.

It is clear therefore that just by using existing legislation, employers have the opportunity to refine their workforce and ensure only those adding value to their business operation remain employed. The economic slow down does in effect provide the perfect alibi to let go anybody whose performance is not up to scratch.

Fair Handling required

To make sure no successful unfair dismissal claims arise from a redundancy the employer must handle the process correctly and follow fair procedures.  The employer must show that the employee(s) concerned have been given as much advance warning as is practicable, that they have been consulted individually and the selection for redundancy has been made against a set of fair and objective criteria (as discussed above).

Bumping

What if the under performer that you want to target is working in a role not affected by the redundancies.  In this situation it might still be possible to have recourse to “bumping”.  Suppose you wanted to target a supervisor “Joe” who was under performing but the redundancy situation applied to a different category of employee, say a foreman.  You could move one of the existing foremen to the supervisor’s position and make Joe redundant instead.

A word of caution here because “bumping” is not always safe as it looks obviously manipulated.  However, Tribunals do recognise that “bumping” is a practice used in the workplace and will regard it as a redundancy or at least as a dismissal for some other substantial reason so long as redundancy consultation procedures have been followed. 

In House policy issues

There are a number of issues of which HR professionals should be aware.  Firstly, some larger companies have redundancy selection policies and criteria in their employee documentation.  If these are correctly drafted then they should already be tailored to select weak employees.  If not and you wish to apply slightly different criteria then you should be able to do so because employee handbooks are usually stated not to be contractually binding.  However, you will get off on a bad footing with the Tribunal because the process will look “stage managed”.   You could also create difficulties with the unions if your workforce is unionised.

If your company does have a stated policy for dealing with redundancies this highlights the importance of ensuring that the criteria is properly drafted and weighted to select under performers.  Good times or bad, it always makes sense to target under performers.

Redundancies are becoming increasingly common and every indication points to a likely increase over the coming months.  Employment Tribunals are getting used to the idea that in the economic climate there are likely to be a number of genuine redundancy situations and that employers are likely to want to target under performing employees through this process.  As long as there is a statutory redundancy situation and measurable criteria are used and consistently applied then employers will have a strong hand.  It is therefore going to be a lot more difficult for employees to claim that they were made redundant unfairly.  Consequently there is at least some good news in this economic downturn for HR Managers

Author: David Malamatenios

Publication: Employers Law Magazine

Date: September 2008