Redundancy Selection Pools – Don’t Get Caught Out

Redundancy can occur where a business decides to close or relocate, or if a business has a diminished requirement for employees to do work of a particular kind.  Before selecting an employee for dismissal on the grounds of redundancy, your business must consider from which pool of employees redundancy selection should be made. Otherwise the dismissal is likely to be unfair.

Two Employment Appeal Tribunal (EAT) decisions have confirmed that it is not always unfair to choose a redundancy pool that is the same size as the number of redundancies being made.  However, a business should only choose this option if there are strong reasons for doing so and it should remain wary of overstating the commercial risks of a wider pool.

In the first case, the EAT held that it was fair for a book distributor to use a selection pool of one employee where it was ceasing its operations in China and the claimant was the only employee who had been sent to China.  However, in the second case, the EAT held that a redundancy dismissal was unfair where a selection pool of just one employee (a pension scheme actuary) was used by the employer.

There are no fixed rules about how a redundancy pool should be defined.  As long as your business can show that your choice of pool was reasonable in the circumstances, it will be difficult for an employee (or an employment tribunal) to challenge your decision.

Your business may be reluctant to draw up a wide pool, even if it would be technically correct to do so, because of the impact that it could have on the morale of your employees.  By identifying a narrow pool, or only consulting with those individuals provisionally selected for redundancy, you may be more vulnerable to claims of unfair dismissal.  Your business must decide whether the risks to morale and other costs of widening the pool outweigh the risk (and cost) of claims.

More information