Redundancy – what’s going on?

16 12 2008

I’ve been writing quite a lot recently on employees’ rights when selected for redundancy  and have covered most of the main issues on rights, selection criteria and compensation.  I thought it might be helpful to set out, on a no names basis of course, the general trends I am seeing from the clients from financial services companies coming in to the office.

1. Consultation – often  ignored.  If more than 20 people are placed at risk in one “establishment”, basically one office (although the law is not entirely clear on this point), within a 90 day period (or 100 people in a 90 day period)  then the employer must consult with the affected staff for at least one (three) months.  Some employers are not doing this or are paying one month’s salary as compensation for the failure to consult. 

2. Selection criteria – often not disclosed. Many people I am seeing have little or no idea why they have been selected and HR often won’t disclose what an individual’s score against the selection criteria is, let alone how that person scored against his/her comparators. 

3.  Compensation packages – not always as generous as in the past.  General custom and practice in the City in the past has been to pay one month per year of service by way of enhancement.  This is still happening, but is not of universal application.  We are seeing two weeks per year in some cases and, in smaller businesses, just the basic statutory entitlement (notice money plus a statutory redundancy payment of £330 p.w p.a of service). 

4. Bonuses – very few people have pro-rated bonus clauses in their contracts of employment.  In most cases employees will be on discretionary bonus schemes which stipulate that that person is in employment (and not under notice) when the bonus is paid, which is often in February/March.  Anyone whose employment is due to terminate before the bonus season commences is going to have difficulties in arguing for a payment in respect of bonus. The law is not at all supportive of employees seeking to challenge a low or non-existent bonus.  Many of the employees I am seeing at the moment seem very surprised at learning this and seem to think that they should be paid a bonus whatever – despite the fact that the banking world, not to mention the rest of the economy, is in meltdown.  It’s time to wake up to the new reality guys.

5. Options/Restricted stock Units –  Much depends on the terms of the Scheme rules.  Some schemes allow a window of time for the stock or options to be traded following termination.  In many cases the options are well under water and currently valueless. 

6.       HR/Employers’ Lawyers – quite often they are taking a very hard line on the packages offered and are refusing to negotiate, unless there is evidence of unfairness.  I have seen a number of people recently where redundancy has been cited as the reason for terminating employment but, in reality, the real reason is often different – and probably unfair.  The current climate makes it easier for employers to get rid of those employees they see as being difficult or aren’t seen as being up to standard.

It’s not possible to generalise all the time though, but we are certainly seeing more people with “issues” on redundancy at the moment than we did back in 2002/2003 the last time there were mass redundancies.  Please also remember that if you do have “issues” with your selection or the package offered the legal fees offered by the employer will probably not be sufficient to cover a solicitor to argue the case fully for you – legal fees on offer seem to be around £400 – 500 inc/exc VAT.  That is enough to give advice on the terms of the agreement and your general rights but is not sufficient to cover negotiating a better package or challenging the reason behind the termination of your employment.

Please give me a call on 0207 464 8433 or email me at for more advice.