Redundancy: Pooling and Selection

The Employment Law Team at Myersons solicitors continue their series on Redundancy Guidance for employers

In the first part of this series on how to manage a redundancy process, we discussed what a redundancy situation is and how a business can formulate robust redundancy proposals before embarking on a redundancy process.

Once an employer has identified that there is a redundancy situation, it needs to consider which employees are at risk of redundancy. In this article, we will be delving into the all-important area of pooling and selection, which is where the employer decides which “pool” of employees are affected by the redundancy situation and what the criteria and scoring process will be for then selecting individuals from within that pool for redundancy. Getting this wrong can lead to successful legal claims from employees, including unfair dismissal and discrimination claims.

How should an employer correctly pool employees in a redundancy situation?

There is no statutory definition setting out how an employer must pool employees. The guidance on this has developed for many years through case law.

There could be a business closure situation that would not need to pool, and select employees for redundancy since all employees working within that business or branch are to be made redundant. This article, however, will focus on situations where pooling and selection is required.

If a recognised trade union is involved, the employer will normally be expected to discuss its choice of pool with the trade union or, in the event of a collective consultation process (triggered where an employer proposes 20 or more redundancy dismissals, at a single establishment, over 90 days), with elected employee representatives.

In deciding whether a redundancy selection was unfair, an Employment Tribunal will decide whether the employer’s choice of pool was within the range of reasonable responses that a reasonable employer could have adopted in the circumstances.

Fortunately, the employer sets the pool, meaning that it is hard for the chosen pool to be challenged as unfair if careful thought is applied. That is not to say the pool can’t be deemed unfair or discriminatory, only that it is difficult for an employee to establish this when a pool is formed for objective business reasons.

There is no need to limit the pool to employees that complete the same or similar work, though this could be an important factor. An employer can draw from a wider pool of employees if necessary and reasonable. In most cases, it will make sense for the employer to keep the pool relatively narrow so that the process is more contained and so there is less scope for employees to compare themselves to others and complain.

In setting the pool, an employer will need to consider a range of factors, including:

• What type of work is ceasing or diminishing.
• The extent to which employees are doing similar work (possibly even those at other locations).
• The extent to which employees’ jobs and skillsets are interchangeable.
• Whether the employer has genuinely applied its mind to the composition of the pool.
• Where applicable, whether the pool was agreed with the union or employee representatives.

A sensible starting point for drawing up the pool is to consider what the employees do in practice regarding their day-to-day activities and the terms of their contract, rather than simply going off what their contract or job title says.

Can an employer have a redundancy pool with one employee in it?

It is possible to have a redundancy situation that only impacts a single employee. Generally, an individual redundancy process will be justified where an employee occupies a unique role distinctly affected by the redundancy situation. However, employers must be careful when taking this approach, as Employment Tribunals will carefully scrutinise such decisions.

How does an employer use fair selection criteria in a redundancy process?

Once a pool is chosen, an employer must adopt reasonable selection criteria for putting employees at risk of redundancy.

Where relevant, the selection criteria should be discussed with any recognised trade unions at the start of the exercise or with employee representatives in a collective consultation scenario.

Unless there are prior agreements on selection criteria with trade unions or employee representatives or set out in company policies, the selection criteria can be anything the employer likes. However, the redundancy selection criteria should be both objective and capable of independent verification to be reasonable. This means that the criteria should be measurable and evidenced rather than based on personal opinion.

Potentially fair selection criteria include:

• Performance and ability

It is helpful if there are existing performance targets or written performance records to be drawn on as evidence; otherwise, the manager’s general view on performance will need to be used.

• Length of service

A “last in, first out” approach used to be common practice in redundancy situations, but it is now widely accepted that length of service will be unfair if used on its own. However, if combined with other factors, an employer can give reasonable weight to length of service as a means of rewarding loyalty (whilst this could also be viewed as age discrimination, case law has shown it can be justified in the right circumstances).

• Attendance records.

However, this should not account for absences caused by disabilities or by pregnancy and maternity leave. Organised absence records are helpful in selection processes. 

• Disciplinary records.

An employer might make points deductions for any past disciplinary sanctions that an employee has received. Again, written records are useful evidence here.

It is good practice to have two managers complete the scoring separately. The averages of their two sets of scores can then be used to select the lowest-scoring employees for redundancy from the pool. This averaging system can be useful to support the objectivity of the selection, especially if there is a lack of evidence and written records.

Can an employer use subjective selection criteria?

An employer should, so far as possible, rely on objective selection criteria, as they are far more likely to be deemed reasonable by an Employment Tribunal and they can also be better supported by evidence. Subjective criteria should be avoided, but a manager may need to use their general opinion where the business has not kept written records, and there is a lack of evidence to draw on.

Examples of selection criteria that the Employment Tribunal has found to be subjective and unfair include:

• An employee who, in the opinion of a manager, “would keep the company viable”;
• An employee who they felt was “suited to the needs of the business under the new operating conditions”;
• An employee seen as “someone who could bring cost savings to the business”; and
• The use of “attitude” as a selection criterion.

An employer should look for objective scoring criteria that it can support with evidence. Factors that might be seen as subjective or discriminatory should be avoided. In addition, factors which put part-time employees at a disadvantage will be unfair, such as giving weighting in the scores to employees on full-time hours.

How should an employer communicate redundancy selection scores to employees?

An employer should take a patient approach in discussing its selection process with employees.

Some employers can be defensive and be reluctant to divulge information about the selection process. However, we find that this normally only leads to suspicion and complaints, and there have been cases where a failure to sufficiently divulge the workings of the selection process made the dismissal unfair.

If the selection criteria and scoring has been planned properly using the principles outlined in this article, there is no reason not to provide employees with the selection criteria. Employees should be given sufficient time to question the selection criteria and their score. An employer might even ask employees to score themselves to factor this into the scoring process and better justify its scores.

An employee may ask to see how their colleagues were scored. Whilst there is no obligation on an employer to provide this, again, a transparent approach helps. The employer may choose to provide anonymised details of all the scores to show where they ended up in the scoring but without disclosing identities.

Summary

The more thought an employer puts into the pooling and selection process, and the more transparent and patient they are in their discussions with employees, the less likely the employer is to receive legal claims from unhappy employees. Moreover, in the event of a claim, an Employment Tribunal is more likely to find the process (and the eventual dismissal) to be fair and reasonable.

In part three of this series, we will be exploring how redundancy consultation meetings should be handled, the need to consider suitable alternatives to redundancy and tricky issues that might arise in consultation.

You can also try the Myerson HR Portal on a free trial which includes redundancy documents for an individual process.

If you have questions or would like more information regarding the general guidance in this article, you can contact the Employment Team at Myerson Solicitors.