Staff Redundancies in the Context of COVID-19

We’ll look back at 2020 as a year defined by COVID-19. Despite the challenging nature of the economic landscape we have endured (and will continue to manage during this recovery phase), the reality is that employers’ obligations to their employees remain intact. This of course extends to redundancies.

The starting point – Considering whether redundancies are necessary

For many businesses, redundancies are an unfortunate outcome of a difficult situation, and it’s important to get it right so that everyone can follow the best course moving forward.

It’s not enough for an employer to feel that their business is suffering and that cashflow is down – a factual and financial analysis of their business has to show that this is indeed the case. Any conclusion that redundancies are necessary must be correct and genuine, and the employer must be able to demonstrate that the proposed change – such as restructuring or redundancy – is needed for the business’s survival, health and resilience.

This is especially important because, if an employer wants or needs to propose a restructure, then that proposal (and the basis for it) has to be put forward to the affected employee or employees – along with any relevant information and documentation.

If an employer is putting forward a case for restructure or redundancy, then the facts have to be correct and verifiable, otherwise the consultation process will be undermined by less-than-accurate information. Again, a restructure shouldn’t be based on what an employer feels, but rather on the evidence that supports the decision.

Can employees who refused to agree to a reduction in pay be first on the list for redundancy?

Making an employee first on the list for redundancy simply because they refused a reduction in pay can’t be considered a genuine motive. Remember that redundancies are about positions, not people; the motive for redundancy must be role- and business-related, otherwise the process will be undermined and could lead to personal grievance claims.

On the other hand, removing a staff member who is more expensive than another staff member in a similar role could be an acceptable motive. That said care needs to be taken. There is a risk that an employee could claim that they are being disadvantaged because they wanted to stick to their terms of their employment, or were not in a position to agree to a reduction in pay. As a general proposition, the criteria used to select which employee may be made redundant should be a matter of consultation and must be objectively fair.

Before you take any steps, get some legal advice

The current circumstances are stressful for employers and employment issues are, unfortunately, more complex and difficult to navigate at the moment.

We’re advising our clients not to rush in to redundancies without first receiving tailored advice specific to their business. Advice now will reduce the risk of personal grievances later when employers will be working hard to regain their losses and get their businesses back on track.

Talk to us

We are employment law specialists. If you need any advice or guidance in this difficult time, please contact Heather Collins.

Disclaimer: The information contained in this publication is of a general nature and is not intended as legal advice. It is important that you seek legal advice that is specific to your circumstances.

Heather Collins

Position: Associate
DDI: +64 3 545 6702

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