With the credit crunch seemingly here for the long-term, we are seeing more and more companies making redundancies in an attempt to help ensure they survive this difficult trading period.

Martin de Ridder, associate solicitor at Staffordshire law firm Ansons LLP warns companies to be careful as the process of redundancy is far from straight forward:  “It is important that an employer implements a fair selection and consultation procedure.  What is required may vary depending on the size of the firm and the number of redundancies being made.  If these procedures are ignored then businesses could leave themselves exposed to the risk of unfair dismissal claims.

“Even if a company has made redundancies in the past it should be aware that employment law has changed significantly over the last couple of years and tried and tested selection procedures such as 'last in, first out' could now be interpreted as falling foul of the age discrimination legislation.”

It is difficult for an employee to succeed in an unfair dismissal claim provided the employer has followed a fair procedure. It is important to understand however, that even if a fair procedure has been followed it will not necessarily prevent an aggrieved employee submitting a claim to an employment tribunal.  Even if the employer can successfully defend the action the tribunal is unlikely to make the employee pay the employer's legal costs, which could be between £5,000 and £10,000.

There are steps that employers can take to try to ensure that employees do not complain to a tribunal after redundancy. 
Martin explains: “If it seems likely that an employee will bring a claim an employer can offer a 'compromise agreement'.  A compromise agreement is a legally binding document which is entered into by the employer and employee which has the effect of turning the redundancy package into a 'full and final' settlement of any claims the employee may have against the employer.”

Compromise agreements are not new and have been used for a long time in employment law disputes, usually following the termination of employment.  The primary aim of a compromise agreement is to protect the employer against claims from the employee who has been dismissed. Solicitors are usually approached by the employee for independent legal advice or by the employer to help draw-up the compromise agreement.  It must be stressed that a compromise agreement should be drafted by a legally qualified person to ensure it meets the relevant statutory requirements.  If you feel it may be appropriate to utilise a compromise agreement you should contact a solicitor.

You can request a free copy of Ansons Guide to Redundancy by sending an email to mderidder@ansonsllp.com