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Tribute
David Layton: an appreciation
I first met David Layton in 1978 when I joined Incomes Data Services, the pay and employment research company
he founded in 1966 at the ripe young age of 52. By the time I joined, some 31 years ago, IDS was an established
organisation, extremely well known in industrial relations circles and among management and trade union
negotiators. Later, David was to hand over the reins to his son Mark. But he still kept an active interest in the
company until his eighties, eventually retiring from the Board in 2001. Today it continues under the
ThomsonReuters umbrella. I was delighted last year when David attended a party we held to celebrate the 1,000th
edition of the IDS Report, of which he was the first editor.
David Layton was an inspiration to several generations of people who have worked at IDS over the years. He was both
a friend and mentor to many of those here who worked with him and there is a lasting legacy of David in IDS today
of evidence-based research and the pursuit of excellence.
From the outset he gathered together expertise in industrial relations and blended that with enthusiastic staff who
became tomorrow’s experts. He was well connected and made friends easily.
IDS at the beginning was an ambitious project, but it grew as a business as the expertise fostered by David on pay
and labour law became vital in the stressful world of industrial relations in the late 1960s and early 1970s – a
time of incomes policies, strikes and State intervention into collective agreements.
In the period of conflict over the Industrial Relations Act in 1971–72, the Heath Government called for all collective
agreements to be legally binding. At this time, it was David who introduced the world to a young lady called Tina
Lea. He advised that her name was to be written on all collective agreements to maintain their voluntary nature.
Tina Lea was, of course, an acronym for ‘This Is Not A Legally Enforceable Agreement’.
David’s approach to research and publishing was important to IDS’s success. The Laytonian philosophy could be
summed up as follows:
• Find out what is really going on
• Do the research, build the evidence
• Do empirical research, but set it in a context
• Talk to the parties involved
• Seek an independent position
• Don’t be afraid to say what you think
David put this into practice and encouraged the staff to follow him, and those principles are still evident in the
research published by IDS today.
An example of David’s approach is his timely intervention in the middle of the miners’ strike in February 1974,
when he pointed out that the figures being used to compare miners’ pay with that
of other workers were flawed, because the National Coal Board had been
including holiday pay in the miners’ earnings, while this was not the case for
comparator industries. He showed they were not comparing like with like.
This bombshell had a huge impact in the media and in political circles at the time.
And in preparing this appreciation, I looked again at the photo of David on the
front page of the Evening Standard at the time – which called David Layton ‘the
man who did his sums’ – and was reminded by the twinkle in his eye of some of
his other qualities. He was full of fun and energy and was perfectly at ease
challenging the status quo.
These were qualities that endeared him to his staff. He wanted people to work
hard on the detail of their research, but didn’t want a monkish, dour atmosphere
in the office. He wanted a bit of fun, and probably realised we needed it as an
antidote to finding out about the National Joint Council for sheep-shearing or the
Joint Industrial Council for the paper bag industry. I remember him saying to me:
‘Are you enjoying doing what you do?’ And the truth was that we did enjoy what
we were doing.
Alastair Hatchett, Head of IDS Pay & HR Services - 11.8.09
David Layton: Born 5 July
1914, died 31 July 2009.
Managing redundancy
IDS HR Study 902 • September 2009

Page 2 Overview
Employers are seeking to avoid redundancies
3 Redundancy and the UK economy
The latest redundancy data from the Labour Force Survey; unemployment and the
claimant count; the Bank of England inflation report; economic forecasts
7 Redundancy survey 2009
The findings of our 2009 redundancy survey of 143 UK employers
12 Handling the redundancy process
A duty to consult; statutory redundancy payments; voluntary redundancy;
alternatives to redundancy; selecting staff for redundancy; enhanced redundancy
payments; maintaining employee morale
22 Redundancy – legal issues
Age discrimination; contractual status of redundancy policies; collective consultation;
procedural fairness
25 Case studies
Komatsu UK responds to recession; Incommunities agrees to voluntary redundancies;
BT offers redeployment and time out to cut costs; Successful restructure at
Cambridge Building Society

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 overview
A last resort
In this recession, unlike those of the past, employers seem to be making considerable efforts to
retain skilled employees and limit the need for redundancy. A variety of methods have been
employed to cut costs without losing jobs, including natural wastage, redeployment, pay freezes
and short-time working. Despite these efforts over a quarter of a million people in the UK were
made redundant in the second quarter of 2009.
The 2009 inflation report from the Bank of
England shows that output has fallen more
markedly during this recession than at the same
point in the recessions of the 1980s and 1990s.
However, the impact on employment has been
less severe. One explanation is that employers
are going to greater lengths in this recession to
limit the need for redundancies. By finding
alternative ways of cutting costs – other than
cutting jobs – employers are seeking to retain
the core of their talent base and put themselves
in a better position when the economy
improves.
Seeking alternatives to redundancy
The results of our 2009 redundancy survey (see
page 7) indicate that restricting or suspending
external recruitment, followed by reviewing the
employment of temporary workers, are the most
common methods used by employers to limit the
need for redundancies. Most companies also
seek to redeploy staff at risk of redundancy,
when possible.
In the midst of recession, some of the hardest-hit
companies have frozen or cut pay – pay
settlement data collected by IDS Pay Report
reveals that so far this year just over a third of
settlements have been pay freezes. Short-time
working arrangements have also been
introduced by some employers. By cutting the
number of shifts or working hours on a
temporary basis, companies are seeking to
respond to the fall in demand while keeping staff
on the books.
Offering voluntary redundancy
Despite their efforts to reduce costs without
losing staff, many employers are still having to
make job cuts. Some or all of the necessary
headcount reduction may be achieved through
voluntary redundancy, particularly if
preferential severance terms are offered. But
employers need to consider such applications
carefully to ensure that they do not lose staff
with vital skills or knowledge.
2 IDS HR Study 902 • September 2009
Managing the process
Of course, there are instances – site closures, for
example – when compulsory redundancies are
likely to be unavoidable. In such circumstances,
it is important that employers handle the process
in an efficient, fair and considerate manner to
limit damage to the reputation of the business
and minimise the impact on staff – both those
who leave and those who stay.
In addition to the statutory consultation period
with employee representatives, it is good practice
to provide staff with regular progress updates on
the redundancy exercise as well as information
on business performance. Engaging in open and
honest communications can help allay
employees’ concerns and prevent a loss of trust
or engagement with the business.
Offering enhanced redundancy terms that go
beyond the statutory minimum is one way of
softening the blow. Many employers also offer
specialist outplacement services, which can
provide individuals with invaluable support in
finding another job or pursuing a different career.
It is understandable that employers focus most of
their efforts on those who are leaving. But this can
also be a stressful time for managers. They are
usually responsible for breaking the news,
handling the selection process and managing
change within their teams. To ensure they are able
to carry out these responsibilities effectively, they
should be offered adequate training, support from
HR and access to any additional help they require.
Avoiding survivor syndrome
Moreover, employers should not think that the
work stops once all employees dismissed during
a redundancy exercise have left. Those who
remain may experience survivor syndrome,
which can have a major impact on their levels of
motivation and performance. Providing ongoing
support – including counselling or occupational
health services, where necessary – and timely
communications can be crucial in ensuring
changes bed in and normal service is resumed
quickly.

Redundancy and the UK economy
In the second quarter of 2009, 277,000 people in the UK were made redundant – 150,000 more than
during the same period in the previous year. Below we look in detail at redundancy levels and rates
since the beginning of 2007. We also discuss recent unemployment figures, some findings from the
Bank of England’s latest Inflation Report and economic forecasts for 2010.
Level of redundancies
The number of redundancies rose sharply in the
fourth quarter of 2008, mirroring the onset of
the economic recession. According to figures
from the Labour Force Survey (LFS), 259,000
people were made redundant in the fourth
quarter of 2008 compared to 156,000 the
previous quarter. In the first quarter of 2008,
there were 111,000 redundancies. (The graph at
the top of page 4 shows the number of
redundancies in each quarter since the beginning
of 2007.)
The greatest number of redundancies recorded
over the past three years was in the first quarter
of 2009, when 286,000 people were made
redundant. In the second quarter, the number of
redundancies fell slightly to 277,000.
Redundancies falling among women
Looking at the figures for men and women, two
different pictures emerge. The number of women
made redundant each quarter rose uniformly
from 36,000 in the first quarter of 2008 – the
lowest level over the last two years – to a peak of
103,000 in the first quarter of 2009. The
number fell to 87,000 in the second quarter of
this year.
By contrast, the number of redundancies being
made among men saw a dramatic increase in the
last quarter of 2008 – rising to 177,000 from
91,000 in quarter three. The number of
redundancies made in each quarter since then
has continued to rise steadily, reaching 190,000
in the second quarter of 2009. This trend
probably reflects the gender bias in the sectors
and occupations that have so far been hit hardest
by the economic recession.
Redundancy rates
The redundancy rate1 for the second quarter of
2009 was 11.0 per 1,000 employees, according
to the LFS. This was down from a peak of 11.3
per 1,000 employees in the first quarter of the
year. But it still represents a considerable
increase on the redundancy rate of 4.4 per 1,000
employees recorded at the beginning of 2008.
IDS HR Study 902 • September 2009
analysis
Sectoral trends
Redundancy rates vary significantly across
different industries (see the graph at the bottom
of page 4). LFS figures for the second quarter of
2009 show that employees in construction were
the most likely to be made redundant, with a
rate of 27.9 redundancies per 1,000 employees.
The second highest rate of redundancies was in
manufacturing (20.1 per 1,000), closely
followed by the banking, finance and insurance
industry (18.1 per 1,000).
This reflects the fact that the companies hit
hardest by the economic recession so far have
been those involved with house building –
including those that produce machinery for the
construction sector and goods for home buyers
or movers. Manufacturers of high-end goods
have also been hit – although there are some
signs of recovery in the car industry – as has the
finance sector in general.
Unemployment
The LFS produces a measure of unemployment
that follows the internationally agreed definition
recommended by the International Labour
Organisation (ILO). According to the LFS, the
number of unemployed people was 2.43 million
in the three months to June 2009, up 220,000
from the three months to March 2009 and up
750,000 from a year earlier. The unemployment
rate (the proportion of all economically active
people) was 7.8 per cent in the three months to
June 2009, up 0.7 percentage points from the
three months to March 2009 and 2.4 percentage
points from a year earlier.
Claimant count
The claimant count2 for July 2009 was 1.58
million, up 709,000 since the start of the year.
1
The redundancy rate is the ratio of the redundancy
level for the given quarter to the number of employees
in the previous quarter, multiplied by 1,000
2
The claimant count measures the number of people
claiming Jobseeker’s Allowance; figures are taken from
the JobCentre Plus administrative system and published
each month by the ONS
3
Managing redundancy

Level of redundancies

Number of
people (000s)
300 All 277

Men
250
Women

190
200

145
150

94 87
100

52
50

0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
2007 2008 2009

Source: Labour Force Survey

Redundancy rates by industry

Rate per 1,000 employees

Construction 27.9

Manufacturing 20.1

Banking, finance and insurance 18.1

Distribution, hotels and restaurants 9.9

Transport and communication 9.1

Public sector 2.1

0 5 10 15 20 25 30
Source: Labour Force Survey, Q2 (April–June) 2009

4 IDS HR Study 902 • September 2009


Apart from a sudden surge in February 2009, the
increase each month on the claimant count has
shown a downward trend since November 2008
(see the graph at the top of page 6). It rose again
slightly in July 2009.
Inflow and outflow
The claimant count is a limited measure of
unemployment as it only takes account of those
eligible to claim Jobseeker’s Allowance. It has a
fluid and complex dynamic. At the same time
that people are joining the count, others are
leaving it. Moreover, those signing on are not
just those who have been made redundant –
people who have not been actively seeking
employment may rejoin the count. And those
leaving the count may have found work or may
have signed off for other reasons – such as
embarking on further education, for example.
Inflows to the claimant count over the last three
years reached a peak of 362,500 in March 2009
(see the graph at the bottom of page 6).
Following that, they plateaued for a time. They
increased by 2,300 in July to stand at 355,800.
Over the same period, outflows from the
claimant count have shown a steady increase.
The number of people who stopped claiming
Jobseeker’s Allowance in July 2009 was 335,700
– the highest outflow figure since January 1997,
when 350,300 left the claimant count. This
suggests that although unemployment is rising,
there are still jobs available.
Recession’s impact on labour market
The 2009 inflation report from the Bank of
England looks at the effect of the recession on
the labour market – arguing that this is likely to
be a key determinant of the timing and strength
of recovery. It does this by comparing output (in
terms of GDP), employment and average hours
in the current economic recession with those at
IDS HR Study 902 • September 2009
Analysis
similar points during the recessions of the 1980s
and 1990s.
In terms of GDP, the current recession does not
compare favourably. Output is estimated to have
fallen by 5.7 per cent since this recession began.
At the same point of recession in the 1980s it had
fallen by 4.7 per cent; and by 2.5 per cent in the
1990s. However, the impact on employment and
average hours has not been as severe.
Short-time working and pay moderation
During the current recession, employment has
fallen by 1.7 per cent, compared with a 2.4 per
cent decline in the 1980s and a 3.4 per cent fall
in the 1990s. The Bank of England’s report
argues that an increased use of flexible working
practices and pay moderation have helped limit
the fall in employment in this recession.
Average hours have fallen by 1.4 per cent since
the recession began. The report claims that this
will have been associated with a significant
reduction in costs. It attributes the fall in hours
to the adoption of short-time working practices
and temporary plant closures. However, average
hours fell much further during the 1980s and
1990s. On this basis, the report argues that
weakness in pay may have been a more
important factor in moderating the fall in
employment so far.
Economic forecasts
HM Treasury publishes a comparison of
independent forecasts for the UK economy every
month. Taking an average of new forecasts, its
August report suggests that GDP will fall by 4.3
per cent in 2009. However, on average the
forecasters predict growth of 1 per cent in 2010.
On the same basis, claimant unemployment for
the fourth quarter of 2009 is predicted to be
1.82 million. By the last quarter of 2010, it is
forecast to have risen to 2.14 million.
5
Managing redundancy

Claimant count and changes on month

2000
200 Level
Changes on month

Claimant count level (thousands)

1500
Changes on month (thousands)

145

1000
90

500

35

0
Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul
-20
2007 2008 2009

Source: JobCentre Plus administrative system, published each month by the ONS

Claimant count flow

400
Inflow
Outflow

320
Thousands

240

160

80

0 Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul
2007 2008 2009

Source: JobCentre Plus administrative system, published each month by the ONS

6 IDS HR Study 902 • September 2009

 Analysis

Redundancy survey 2009

Of the 143 respondents to our 2009 redundancy survey, 127 made redundancies over the past 12
months. Nearly a quarter made more than 100 employees redundant, although the same proportion
made only 1 to 10 redundancies. Over half anticipated having to make further redundancies in the
next 12 months.

Reasons for redundancy cent of respondents had offered voluntary

Restructuring was the most cited reason for
making redundancies (70 per cent of
respondents). While some organisations have
restructured to improve organisational
efficiency, for many this has been spurred on by
the economic downturn and loss of business.
Over half (56.7 per cent) of those organisations
that made redundancies did so as a result of
reduced business or a loss of a contract. Just over
a fifth (21.6 per cent) of respondents made
redundancies following a site or plant closure.
Better than statutory severance
Over two-thirds of respondents (68.7 per cent)
offered better than statutory redundancy
payments for at least some groups of staff. And
most of these (64.1 per cent of respondents)
operate better than statutory severance terms for
all employees. A few respondents added that
their improved redundancy terms are offered
only to those who apply for voluntary
redundancy – those made redundant
compulsorily are paid at the statutory rate. One
respondent noted that redundancy terms could
vary slightly for different groups of staff as a
result of TUPE transfers.
Compulsory redundancy
The majority of respondents (84.1 per cent) that
made staff redundant in the previous 12 months
made compulsory redundancies. Employers that
recognise trade unions were less likely to have
made compulsory redundancies than those
without recognised trade unions (78.5 per cent
versus 93.6 per cent respectively).
redundancy and just 16.7 per cent of those in
professional & business services.
Early retirement
Offering early retirement was far less common,
although 39.1 per cent of respondents had
provided this option for staff. Again, employers
with recognised trade unions (42 per cent) were
more likely to offer early retirement than non-
unionised organisations (34 per cent).
Early retirement was offered by 60 per cent of
respondents from the health sector, and just
under this proportion by those in local
government (57.1 per cent) and engineering
(56.3 per cent). No organisations from the retail
or IT, telecommunications and media sectors
offered it. This may reflect the age demographics
of the workforces within these sectors.
Alternatives to redundancy
We asked survey participants what alternatives
they had explored to try to avoid redundancies
(see the graph below). The method most
Reasons for redundancy
%
80
70.0
70
60 56.7
50
40

Offering voluntary redundancy 30

21.7
Two-thirds (66.7 per cent) of respondents
20
offered voluntary redundancy. Unionised
10.8
workforces were more likely to have been
10 5.8
offered voluntary redundancy than those with
no recognised union (73.8 per cent versus 54.3 0
per cent respectively).
g

es /

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g
sin act
in

s f

n
es n o
s

os la
ur

ci
bu tr

e
cl e/p

ur
sin io
ct

d on

so

Voluntary redundancy was most likely to be

ru

bu cat
t
ce f c

Si

ut
st

lo
du o
Re

offered in engineering (87.5 per cent) and

Re
re ss
Lo

education (86.7 per cent). In health, only 20 per

IDS HR Study 902 • September 2009 7

Managing redundancy
Made compulsory redundancies
No
15.9%
Yes
84.1%
Voluntary redundancy offered
No
33.3%
No
66.7%
commonly cited by respondents was to restrict
or suspend external recruitment (78.8 per cent).
One company operated a recruitment ban for
roles in the salary range of £16,000 to £25,000,
which was lifted after six months.
Other common methods included natural
wastage (76.3 per cent), reviewing the
employment of temporary staff (71.2 per cent),
and redeploying and retraining employees (76.3
per cent). Just over half (52.5 per cent) of the
respondents said they had sought to reduce
overtime to cut costs and avoid redundancy.
The impact of the economic recession on
business has led some organisations to look at
other ways to cut costs without having to lose
staff with valuable skills. For some, this has
involved seeking to cut working time. Nearly a
fifth (19.5 per cent) of respondents moved to
8 IDS HR Study 902 • September 2009
Early retirement offered
Yes
39.1%
No
60.9%
Anticipating more redundancies
Yes
55.6%
No
44.4%
short-time working in an effort to limit the need
for redundancy. Offering sabbaticals or reduced
working weeks was used as an alternative by
15.3 per cent of respondents. One organisation
operated shutdowns over five consecutive weeks
to try to alleviate the need for redundancies but
still ultimately had to lose some staff.
Just over one in ten (11.9 per cent) respondents
asked staff to take voluntary pay cuts. But
employers were more likely to seek a cut in the
paybill by reducing or deferring bonus or
commission payments (18.6 per cent).
Other actions taken in an effort to avoid
redundancies included applying a pay freeze.
Low inflation has made it easier for many
employers to moderate pay increases in 2009. A
couple of respondents noted that as they had
been forced to close entire sites, seeking
 Analysis

Alternatives to redundancy

Restricting/suspending external recruitment 78.8

Natural wastage 76.3

Reviewing the employment of temporary staff 71.2

Redeploying and retraining employees 68.6

Reducing overtime 52.5

Moving to short-time working 19.5

Reduced or deferred bonus or commission payments 18.6

Recalling subcontracted work where practicable 16.9

Offering sabbaticals or reduced working weeks 15.3

Voluntary pay cuts 11.9

Lay-offs 11.0

Terminating the contracts of employees working 11.0

beyond normal retirement age

Deferring the start of new joiners (eg graduates) 6.8

Other 5.1

Decreasing employer pension contributions 0.8

%

0 10 20 30 40 50 60 70 80

IDS HR Study 902 • September 2009 9

Managing redundancy
Employers’ top tips on managing redundancy
Consider the alternatives
‘Before you consider redundancies, be very clear that there are no
alternatives.’
‘If trade unions put forward alternative proposals, listen to them
seriously.’
Plan carefully
‘Have a detailed plan from the outset.’
‘Try to only cut once. Death by a thousand cuts saps the organisation’s
morale.’
‘Ensure you understand the real costs of redundancy, including early
retirement benefits and capital costs to pension funds.’
‘Make sure you are up to date with relevant case law.’
‘Put in place a comprehensive appeals process internally to minimise
external involvement/tribunal.’
Communicate clearly and often
‘Consult, consult and consult some more.’
‘Communication throughout the process is key to those directly
affected as well as the rest of the business.’
‘Don’t let the redundancies be a shock. Engage staff on the issues
facing them.’
Stick to your process
‘Follow the statutory dismissal code very carefully.’
‘Follow your laid-down procedure to the letter.’
Show compassion
‘Realise that you are dealing with a human being who is going
through a possibly life-changing event.’
‘Treat people with dignity and respect.’
Use objective selection criteria
‘Be transparent, caring and firm, and use objective criteria.’
‘Ensure the pools for redundancy selection are defined as closely as
possible.’
‘Make sure that line managers required to carry out the selection
process do so fairly and are confident that they could defend their
scoring decisions at a tribunal if required.’
Consider the tax implications
‘Clarify the situation as to whether you tax or do not tax your PILON
(payment in lieu of notice) clauses.’
‘Watch out for the tax implications of automatic PILONs.’
Offer outplacement support
‘Outplacement is extremely valuable (for most candidates).’
‘If you can afford it, I’d really encourage you to provide outplacement
coaching.’
alternatives to redundancy had not been
possible.
One respondent commented that more could be
done in terms of looking at alternatives to
redundancy: ‘We stop recruiting and we don’t
backfill people who have left, but we don’t
consider reduced working hours, sabbaticals or
10
other alternatives.’ Another company reported
that it had avoided redundancies so far using
‘every other alternative imaginable’.
Selection criteria
When selecting employees for redundancy, most
employers look at their relevant skills and
competencies (93.1 per cent). Performance and
quality of work (79.4 per cent), disciplinary
record (67.6 per cent) and attendance record
(61.8 per cent) are also likely to be taken into
account. Just over a quarter (25.5 per cent) of
respondents use length of service as a selection
criterion. One respondent noted that as the
redundancies made were voluntary, cost was an
important factor when weighing up applications.
Offering outplacement
Just under half (45.7 per cent) of respondents
offered outplacement support to employees
during their last round of redundancies. Of those
that did, the majority offered this support on-site.
One respondent noted that outplacement was
extremely valuable and feedback had been
excellent – although some staff would have
preferred the equivalent in cash. Another
respondent reported that there had been a low
take-up of outplacement when offered in the past:
‘It’s almost like individuals just want to leave and
not have contact again with the company.’
Support for employees who stay
Most respondents agreed that the key to
engaging staff who kept their jobs following a
redundancy programme is thorough
communication. They argued that effective
communications before, during and after the
exercise can help minimise survivor syndrome
and reassure remaining employees about their
own future at the company.
A number of companies highlighted the value of
explaining why the change was necessary and
placing redundancies in the context of business
performance and objectives. They also said that
employees should be kept informed about how
the redundancy programme is progressing. One
company identified the importance of stating
clearly to survivors how it had helped those who
had lost their jobs.
Many employers commented that
communications should not end there. Following
the redundancy exercise, staff should be given
regular information on how the company is
IDS HR Study 902 • September 2009
 Analysis

performing. It is key that they understand and feel Redundancy selection criteria
engaged with the future prospects of the business.
A wide range of communication channels were Relevant skills and
93.1
used by respondents, including e-mails, face-to- competencies
face meetings and company presentations. One Performance and 79.4
company noted that communication should be quality of work

carried out regularly and in bite-size chunks – Disciplinary record 67.6

not via long, drawn-out memos. Another said
that senior managers should operate an open- Attendance record 61.8
door policy and be ready to explain their
Qualifications and
business decisions. experience
50.0

Some employers said they used employee General conduct and 46.1
attitude surveys to help engage staff in the attitude

decision-making process and to inform action Versatility and 40.2

plans. A number of companies also highlighted adaptability
the importance of ongoing training – both to Length of service 25.5
help employees understand and adapt to the
change, and to restore morale. Other 17.6 %

Employee assistance programmes, occupational 0 20 40 60 80 100

health services and telephone counselling were
all offered to help employees still in post
following redundancies. Others mentioned
providing support through HR, trade unions
and professional associations.
For those employees who have been redeployed,
respondents said they offer retraining and
extended trial periods. Ensuring staff received a
warm welcome in their new roles was also
considered important.
did not anticipate redundancies), and financial
services (60 per cent).
In contrast, all the respondents in the IT,
telecommunications and media sector thought
redundancies may be necessary. Nearly 90 per
cent of local government respondents
anticipated redundancies, 81.8 per cent of other
private services employers and 77.8 per cent of
not-for-profit organisations.

Future prospects We asked respondents to estimate the number of

Over half (55.6 per cent) of respondents
anticipated having to make further redundancies
in the next 12 months. Looking at the responses
by sector it is evident that levels of optimism
about future prospects varied.
None of the respondents from the retail sector
anticipated making redundancies in the next 12
months. Levels of optimism were also quite high
in central government and health (66.7 per cent
redundancies they expected to make in the next
12 months. While some were already planning
further site closures – and one expected a
possible 1,000 or more redundancies – almost
three quarters of those employers that provided
an estimate expected fewer than 50 job losses.
The general theme was one of uncertainty. As
one respondent put it: ‘I don’t know yet – and
there may not be any. But it seems common sense
in today’s climate that there will be more.’

IDS HR Study 902 • September 2009 11

Managing redundancy
Handling the redundancy process
A redundancy exercise can have a significant impact, not only on the individuals affected but on
remaining staff and the employer brand. Therefore, it is important that employers manage the
process effectively and considerately. This involves ensuring that employees are given full
consultation and seeking ways to minimise the number of compulsory redundancies. Enhanced
severance packages and comprehensive outplacement support often serve to soften the blow to
those affected, while ongoing and transparent communications can help maintain the morale of
employees who stay.
Duty to consult
An employer has a statutory duty to inform and
consult appropriate staff representatives if it is
proposing to make at least 20 employees
redundant – termed a collective redundancy
situation. Such consultation may also be
required in the case of voluntary redundancy – ie
if the employer is contemplating 20 or more
redundancies and is not sure whether there will
be sufficient volunteers.
In addition, all affected employees should be
individually consulted on the reasons why they
have been selected for redundancy and the
possibility of finding them alternative work.
Failure to do so could lead to a claim for unfair
dismissal.
Consulting in good time
The law states that consultation must begin ‘in
good time’ – ie sufficiently early to allow
meaningful consultation to take place – and it
must be completed before any redundancy
notices are issued. Where the employer proposes
to make 100 or more employees redundant
within a 90-day period, consultation must begin
at least 90 days before the first dismissal takes
place. Where the employer proposes to make
between 20 and 99 employees redundant,
consultation must begin at least 30 days before
the first dismissal. These times are not based on
the number of staff actually dismissed but on the
number the organisation is proposing to dismiss.
The nature of consultation
Employers are required to consult on ways of:
● avoiding the dismissals
● reducing the number of employees to be
dismissed
● mitigating the consequences of the dismissals.
The consultation must also be undertaken ‘with
a view to reaching agreement with the
appropriate representatives’. This does not mean
12
that an actual agreement has to be reached.
However, representatives should be given
enough information to be able to take a useful
and constructive part in the discussions.
Disclosure of information
The consultation period begins when the
employer provides the following information –
in writing – to the appropriate representatives:
● the reasons for the redundancies
● the number and descriptions of jobs that it
proposes to make redundant
● the total number of employees of that
description employed at the establishment
concerned
● the proposed criteria for selecting employees
to be dismissed
● the proposed method for how dismissals will
be carried out, including timescales
● the proposed method of calculating any
redundancy payments the employer chooses
to make over and above statutory redundancy
pay.
Appointing representatives
An employer is obliged to consult with trade
unions where recognised – they cannot be
bypassed in favour of other employee
representatives. Even if the employees the
organisation is proposing to dismiss are not
actually members of a particular union, it may
still have to be consulted if it is recognised for
that particular class of employee.
Where there is no recognised union, the
employer must consult with ‘other appropriate
representatives of these employees’. These may
be existing representatives, such as those
appointed to a staff council or information and
consultation forum, or they may be specially
elected for the purpose. If affected employees fail
to appoint any representatives having had a
genuine opportunity to do so, the employer may
IDS HR Study 902 • September 2009

fulfil its obligations by providing relevant
information directly to those employees.
The duty to consult also extends to
representatives of employees whose jobs are not
directly threatened but who may nevertheless be
either directly or indirectly affected by the
proposed redundancies.
Individual consultation
Once collective consultation has begun,
employers are obliged to consult on a one-to-one
basis with those employees who are potentially
directly affected. These meetings are typically
conducted by line managers, although a member
of HR may also be present. Employees have the
right be accompanied by a trade union
representative or other colleague.
Some employers provide line managers with
detailed guidance to ensure they cover all the
important elements associated with the
redundancy process, such as:
● ensuring individuals understand the reasons
for the proposed redundancies
● checking that individuals understand why
they have been selected as part of the
redundancy pool
● asking individuals if there are any points that
they would like to raise.
These meetings may be used to gather
employees’ preferences – ie would they prefer to
be redeployed or to exit the company.
How many meetings are required?
Legislation does not define how many
consultation meetings should take place and the
number required will vary according to the
situation and the employees involved. However,
it is recognised good practice to hold at least two
individual consultation meetings. At
Incommunities Group, applicants for voluntary
redundancy were provided with two or, if
necessary, three consultation meetings.
Some organisations hold these meetings
immediately after the official redundancy
announcement has been made. At Komatsu UK,
a few individual consultations took place prior to
the company-wide announcement to ensure that
those affected found out in a private meeting.
Sharing selection scores
Where a scoring process has been followed to
select which members of staff will be made
IDS HR Study 902 • September 2009
Analysis
Statutory redundancy payments
All employees who have completed at least two years’ service are
entitled to a lump sum payment if they are dismissed for the reason of
redundancy. The level of this statutory redundancy pay is based on the
individual’s length of continuous service and the age of the employee
during that service, and on weekly pay, as follows:
● half a week's pay for each full year of service where the employee’s
age during the year is less than 22
● one week's pay for each full year of service where the employee’s
age is 22 or above, but less than 41
● 1½ weeks' pay for each full year of service where the employee is
41 or over.
Where an employee’s service crosses two age bands, the payments
calculated for each band should be added together. For example, if
the employee is 49 years old and has 15 years’ service, he or she will be
entitled to 19 weeks redundancy pay. The 19 weeks’ entitlement is
based on one week’s pay for each completed year of service between
age 34 and 41 and 1½ weeks’ pay for each completed year of service
between age 41 and 49.
Definition of a week’s pay
A week’s statutory redundancy pay is defined as the amount to which
an employee is entitled under his or her contract when he or she
works a normal week. If the employee’s working hours vary, or where
there are no normal working hours, pay is averaged over the previous
12 weeks.
In addition, a limit is placed on the level of a week’s pay for the
purposes of calculating statutory payments. This changes annually in
line with the Retail Prices Index – from 1 February 2009, the limit is £350.
redundant, employees have the right to see their
selection scores and to be told how the
thresholds were applied. However, they do not
have the right to see other individual’s scores.
Employees identified as at risk of redundancy in
February 2009 at Komatsu were provided their
ratings and given the opportunity to challenge
them if they felt they did not adequately reflect
their skills and competencies.
Announcing the redundancies
Given the sensitivity of the issues and the
personal impact on employees and their families,
employers should carefully consider how they
announce a redundancy exercise. The principle
aim is, as far as possible, to ensure that staff are
informed using the right channels and receive a
consistent message. Simply sending a text
message or e-mailing the news is not generally
accepted as good management practice. Many
organisations adopt a cascade approach, with
directors and managers informed first, followed
by trade union representatives and finally the
rest of staff.
13
Managing redundancy
Managing the process
The senior management team given the
responsibility for making the announcement of a
closure or a large number of redundancies often
meets off site a few days beforehand to finalise
the planned sequence of events. Many
organisations draw up detailed schedules to set
out the exact timing of who is to be told what
and when. These schedules also typically assign
managers to groups of staff to which they are
responsible for delivering the news. Managers
may also be provided with a checklist to ensure
that they follow an agreed procedure. Komatsu,
for example, followed a strict timetable on the
morning of the announcement, which detailed
exactly who would be informed at what time, by
whom and where.
Ensuring a consistent message
Managers are typically provided with scripts to
read from when delivering the news to make sure
that a consistent and accurate announcement is
made to all employees. These may include set
answers to a variety of questions that are likely
to be asked by employees. Alternatively, answers
to any frequently asked questions may be
distributed to employees following the
announcement to avoid the possibility that
different managers give varying responses.
Logistical challenges
Logistical challenges may present themselves
where a number of dispersed locations are
Voluntary redundancy
To minimise the number of compulsory redundancies, many
organisations first seek volunteers. It is generally preferable to lose
staff who want to leave. Voluntary redundancy is typically offered on
enhanced terms to encourage employees to apply.
The offer of voluntary redundancy may be open to all employees or
limited to a certain group. It is typically announced in a company-wide
e-mail communication or staff newsletter. Employees who wish to
take voluntary redundancy usually have to discuss their application
with their line manager and submit a standard form.
Employers retain the right to refuse an application for voluntary
redundancy to ensure that any specific skills, knowledge or experience
are retained and high performers are kept within the organisation. If
there are more volunteers than positions identified at risk,
organisations must carefully consider which applications are accepted
and base their decisions on objective and fair criteria. At the same time,
many organisations allow employees to withdraw their application up
until a specific cut-off date.
If an application for voluntary redundancy is refused, organisations
should provide the individual with full feedback on the reasons why
this decision has been taken. After all, this is likely to be someone
whose skills are valued and who the company wants to retain.
14
involved in a redundancy. Some employers deal
with this problem by scheduling simultaneous
announcements at each affected site, often
requiring a high degree of organisation.
Timing the announcement
Issues can sometimes arise over the exact timing
of the announcement. It can be difficult to
reconcile the desire to tell staff what is going on
as soon as possible with the need to show
caution given the chance that plans could change
and final decisions may still be outstanding.
However, it is preferable that employees hear the
news first hand rather than on the radio coming
to work or in the local press, which may mean
having to make an announcement before the key
decisions have been made.
At Komatsu, for example, managers announced
the news to their teams at a specified time on one
day to ensure that employees heard the news at
the same time and to prevent rumours from
circulating. Similarly, Cambridge Building
Society made a company-wide announcement to
inform employees of the intention to restructure
the organisation and then presented the formal
details once finalised.
When making the announcement, there is much
to be said for getting to the point as quickly as
possible and not delaying by providing too much
background information. This, of course, needs
to be balanced against presenting staff with
enough detail that they understand why the
redundancies are necessary.
Who delivers the bad news?
One important decision that has to be made
when dealing with a redundancy programme is
whether the local management team should
break the news, or whether this responsibility
should rest with a senior manager from head
office. There is no ‘one size fits all’ solution here
and often much will depend on the
organisation’s structure and culture.
The argument for passing the responsibility to
senior managers is that it may make life easier
for the local management team that will have to
maintain the co-operation of employees up until
the date they leave or the site closes. However,
there is the risk that employees may see this as
local managers ducking the issue or copping out.
Moreover, line managers may actually be better
placed than their more senior colleagues to make
the announcement given their day-to-day
working relationships with those affected.
IDS HR Study 902 • September 2009

Line managers are usually responsible for
contacting any employees in their teams who are
absent on the day of the group announcement,
either by phone or by letter.
Access to employee support
Staff information packs are generally handed out
at the announcement to provide employees with
HR contacts if they require any further
information. Contact details for any supplier of
outplacement assistance the organisation may
have appointed are also typically included.
Where an employer offers staff a counselling
service or employee assistance programme,
details of these provisions may be provided.
Training managers
Given the importance attached to getting the
redundancy announcement right, managers
often receive training in how best to deliver the
news. This may include guidance on handling
media enquiries and managing the reaction of
employees. Komatsu, for example, provided
managers who were responsible for conducting
individual consultation meetings with individual
coaching sessions, if required.
Beyond the announcement, employers should
also do their best to equip managers with the
skills, knowledge and information required to
successfully manage organisational change. This
may include producing dedicated company
handbooks or guidance notes outlining their
responsibilities and the processes they need to
follow during the redundancy exercise.
Ongoing communications
The redundancy announcement marks the start
of a communications process that should be
continued throughout the period of
organisational change. Some companies, for
example, encourage managers to hold regular
team meetings to discuss any concerns and
answer questions. Others provide regular
updates via newsletters or by e-mail to inform
staff of changes and how they affect them.
Alternatively, employers may invite two-way
communication with the senior management
team by opening a dedicated e-mail box to
which staff can submit their questions and
concerns.
Limiting redundancies
All our case study companies have made efforts
to keep the number of compulsory redundancies
to an absolute minimum. When a reduction in
IDS HR Study 902 • September 2009
Analysis
headcount is necessary, voluntary redundancy
and early retirement may be offered to
employees in the first instance (see the box on
page 14). Beyond this, there are a number of
initiatives employees may use to cut costs and try
to avoid, or at least limit, compulsory
redundancies (see the box below).
Redeploying employees
Employers must consider suitable alternative roles
within their organisation for individuals at risk of
redundancy. Moving employees to a different part
of the business not only saves jobs, but can also
help a company retain key skills and expertise.
For example, BT redeployed customer service
engineers to its call centre to fill a skills shortage.
However, for this option to work there need to
be vacant roles available. To accommodate this,
the employer may rely on natural wastage – by
not recruiting to any roles that might need to be
filled. Cambridge Building Society, for example,
waited to fill any vacant positions with
employees who were at risk of redundancy
rather than take on new starters.
Matching employees to alternative roles
Some employers establish redeployment teams
during times of redundancy to match displaced
employees with vacant roles within the business.
They often try to increase the chances of
achieving successful redeployments by giving
these individuals preferences over other
candidates for available roles for a limited time.
Trial periods
Employees who are offered alternative
employment are typically entitled to a minimum
statutory trial period of four weeks. Where
Alternatives to redundancy
● natural wastage
● introducing short-term working arrangements
● redeploying staff
● freezing or reducing pay
● restricting or suspending external recruitment
● reviewing the employment of temporary staff
or contractors
● reducing overtime
● offering sabbaticals
● making lay-offs
● deferring the start date of new joiners and
graduates
● asking staff to take voluntary pay cuts
● reducing or deferring bonus payments
● decreasing employer pension contributions.
15
Managing redundancy
Measures taken in the car industry to limit redundancies
The main theme evident in how firms are dealing
with this recession is their efforts to retain a skilled
workforce. Almost all the major manufacturers have
cut numbers through voluntary redundancies and
cuts in temporary staff. Motor companies have now
introduced a variety of cost-cutting measures in
order to stave off compulsory redundancies.
Vauxhall
Vauxhall, for example, introduced a package of
measures at its Ellesmere Port plant in February in
accordance with a European Framework
Agreement issued for GM Europe. The measures,
agreed with unions in return for reassurance on no
compulsory redundancies, include a shorter
working week, with subsidies for the loss of basic
pay, and the implementation of a temporary
‘corridor agreement’, enabling employees to
continue to ‘bank’ unworked hours at full pay.
Under the agreement, all full-time employees will
work a basic working week of 30 hours, down from
38 hours, effective from 16 February 2009. The
working week has been cut to four days, with no
production on Fridays. This loss of eight hours on
the working week will be supplemented by the
company at the rate of 50 per cent of basic pay.
Employees will therefore in effect receive 34 hours
of base pay a week for 30 hours’ work, with the loss
of four hours’ pay. Employees will continue to
receive a shift premium of 33½ per cent where
applicable and also retain the weekly plant
productivity bonus of £33, although this has been
reduced pro rata to around £28 a week.
Jaguar and Land Rover
Jaguar and Land Rover, under the new
management of Tata Motors, also agreed a package
of measures with trade unions to avoid compulsory
redundancies over the next two years. The package
includes a 12-month pay freeze for all Jaguar and
Land Rover employees, effective from November
2009, changes to the working week, and
amendments to the defined benefit pension
schemes. The framework agreement covers
employees at the manufacturing site in Halewood,
Merseyside, sites in and around the West Midlands
region, and the company headquarters in Gaydon,
Warwickshire. Three negotiating groups were
involved in negotiations, covering Jaguar hourly
paid, Jaguar salaried, and Land Rover (all
employees). It was agreed that the working week
for hourly-paid employees be reduced by two hours,
effective for a two-year period from 1 March 2009.
However, in an offsetting move, weekly pay will
only be cut by one hour. As different groups of
manual employees have varying working weeks,
the application of the reduction in hours affects
each group differently. By contrast, the working
week for salaried, white-collar staff across all sites
This is a version of a box that first appeared in IDS Pay Report 1028, July 2009
16
will increase from 37 to 40 hours with no increase to
pay, effective for a two-year period from 1 April
2009. From 1 September 2009, employee
contributions to defined benefit pension schemes
will be increased by 1 per cent and a pensions salary
sacrifice arrangement will also be introduced from
1 September for all members of the defined benefit
pension schemes.
Honda
Although at Honda around 1,300 employees have
already taken voluntary redundancy this year, the
company has estimated that a further 490 remain
surplus at the Swindon plant. To ‘absorb’ the costs
associated with these additional employees and
enable the company to keep them on at the site,
Honda has negotiated a labour cost reduction deal
that follows a previous agreement on a 12-month
pay freeze and the introduction of a flexible
working hours policy. To preserve jobs for the ten-
month duration of the deal, pay has been
temporarily reduced with effect from 1 June 2009.
Non-management employees will see their pay cut
by 3 per cent while managers will receive a basic pay
cut of 5 per cent, effective until 31 March 2010. In
addition to the temporary cut in basic pay, the
package of measures includes a suspension of the
company bonus scheme, changes to car lease
contributions and a temporary one-year opt-out
option for members of the defined benefit pension
scheme. As a supplementary measure, employees
have been given six additional days’ paid holiday. A
review will be carried out of the accumulated
savings from the various measures after six months.
If enough savings have been made, then basic pay
may be reinstated earlier than stipulated.
Toyota
Toyota, having cut all agency jobs by the end of
2008, opened up a voluntary redundancy scheme in
response to requests from employee
representatives. Following a decision to freeze basic
pay for 2009, Toyota reached further agreement in
March on a reduction in working time to help secure
long-term employment at the company’s two UK
sites at Burnaston and Deeside. Basic contractual
working hours are 39 a week but working time has
been reduced by 10 per cent, by cutting two shifts a
month, effective for a 12-month period from 1 April
2009. This reduction in shifts will take place every
second Friday, introducing a nine-day fortnight.
Employees will experience loss in earnings in line
with this, although basic pay will not be cut. Due to
an increase in recent demand following the
introduction of the car scrappage scheme in the UK,
working time will be temporarily increased by three
shifts in August and Sepetember to boost
production.
IDS HR Study 902 • September 2009

individuals decide during this time not to accept
the position, they usually retain their entitlement
to a redundancy payment – providing they reject
the job because it is not a suitable alternative or
because of valid personal reasons. Cambridge
Building Society provided a six-week trial period
to employees who moved to a different branch
following its restructuring exercise in 2009, at
the end of which they could choose to stay on or
opt for redundancy.
Red-circling pay and benefits
Many organisations red-circle or protect
employees’ former pay and benefits packages if
they are redeployed to a role in a lower grade
than their previous job. At Incommunities, for
example, those redeployed had their basic salary
and benefits red-circled for five years.
Relocation assistance
Where employees are redeployed to an
alternative role in a new location, employers
usually provide relocation assistance. This
generally covers costs associated with moving
house, such as solicitor’s fees and stamp duty.
Cambridge Building Society, for example,
provided compensation for any additional
travelling costs incurred by employees
redeployed to a different branch.
Offering secondments
A few organisations have used schemes where
employees are seconded or loaned out for a fixed
period of time in an effort to avoid making
redundancies. BT, for example, has loaned out a
small number of employees to other companies
where redeployment is not available.
Reducing working hours
The impact of the economic recession has led
some employers in the hardest hit sectors to
introduce short-time working to cut costs. Under
a short-time working arrangement, employees
are laid off for a number of contractual days
each week or for a specified number of hours
during a working day. Such arrangements may
include: non-production days, a reduction in the
number of shifts, shortened shifts, the
introduction of fixed holidays, and reduced
working hours.
Pay freezes
Some employers have also sought to minimise
the need for redundancies by freezing or cutting
pay. For example, Jaguar and Land Rover
introduced a pay freeze for all employees,
IDS HR Study 902 • September 2009
Analysis
effective from November 2009. Meanwhile, in a
bid to preserve jobs, Honda has temporarily
reduced pay with effect from 1 June 2009. Non-
management employees will see their pay cut by
3 per cent while managers will receive a cut in
basic pay of 5 per cent, effective until 31 March
2010. Other employers that have introduced pay
freezes include: Argos, Whitbread Restaurants,
Mothercare and GE Healthcare.
On the basis of 235 settlements covering over
2.6 million employees, IDS Pay Report estimates
the median pay settlement across the whole
economy as 2 per cent for the three months to
the end of June 2009. A closer look at these
settlement figures reveals a pattern of freezes at
one end of the scale and awards worth 2 per cent
or more at the other.
Meanwhile, the latest inflation figures show that
annual inflation as measured by the Retail Prices
Index (RPI) has reached its lowest level since
records began, falling by 1.6 per cent in the year
to June 2009. The June figure represents the
fourth consecutive month of negative inflation.
This has undoubtedly made it easier for employers
to negotiate pay freezes and cuts with staff.
Selecting staff for redundancy
Establishing the redundancy pool
When carrying out a redundancy exercise, an
employer should begin by identifying the group
of employees from which those who are to be
made redundant will be drawn. This will usually
include those who perform a similar type of role
in a particular department, work at a relevant
location, or whose work has either ceased or
diminished. The identified employees belong to
the ‘pool for selection’ and it is to these
individuals that an organisation will apply the
appropriate selection criteria to determine who
will be made redundant.
In assessing the fairness of dismissals, tribunals
first look to the pool from which the selection
was made, since the application of otherwise fair
selection criteria to the wrong employees is likely
to result in unfair dismissal. An employer needs
to be able to justify its choice of selection pool by
showing it was based on rational considerations
– this may include selecting not only all those
employees doing the same work, but also those
doing similar work or whose skills are
interchangeable.
17
Managing redundancy
Typical redundancy selection criteria
Employers generally use the following criteria to
select employees from a group of those identified
as at risk of redundancy:
● performance and quality of work
● qualifications and experience
● relevant skills and competencies
● general conduct and attitude
● versatility and adaptability
● disciplinary record
● attendance records
● length of service.
Fair selection criteria
In establishing selection criteria, careful
consideration must be taken to ensure that they
are fair and applied in a clear, reasonable and
objective manner. Examples of typical selection
criteria are shown in the box above.
Many employers discuss the selection criteria to
be used when making redundancies with
employee or recognised trade union
representatives. Komatsu, for example, agreed
its criteria with the trade union representative
and its staff advisory council.
Employers must avoid factors that may be
discriminatory on any grounds – either directly
or indirectly – when choosing and applying the
selection criteria. It is generally considered best
practice to use a points system when scoring
individuals against the criteria to ensure that any
decisions are fair and justifiable.
Some organisations apply weightings to certain
selection criterion to make sure that those
considered most important – in terms of carrying
out a role effectively and achieving long-term
business goals – have a greater bearing on the
final score. At Komatsu, for example,
performance was given a higher weighting than
length of service.
Applying the criteria
To help ensure accuracy, objectivity and
consistency, the selection process is typically
carried out by at least two assessors with a good
knowledge of the individuals being evaluated
and the work they perform. Some organisations
may ask a senior manager not involved in the
initial process to audit the results.
Providing guidelines on scoring
To help assessors when scoring employees,
detailed notes on each of the selection criteria
may be provided. These often give a breakdown
18
of how points should be allocated, with examples
of the evidence required to score a one, two,
three, four or five on a standard five-point scale.
Many employers also produce more general
advice to assist managers in scoring individuals
fairly. These typically stress that:
● assessments should be objective and, where
possible, supported with documented and
verifiable evidence; detailed notes should be
kept at all stages of the assessment process for
reference in case of appeal
● assessors should not allow preconceived
opinions to influence the assessment
● there should be no discrimination on the
grounds of sex, sexual orientation, race,
disability, age, religion or belief, union
membership, pregnancy or employment
status (ie part-time or fixed term); managers
should be aware of instances where an
employee’s disability could directly affect his
or her ratings on attendance, for example
● assessors should be able to justify their scores
at the internal appeal stage and at any
potential employment tribunal proceedings.
Appealing against a redundancy decision
Employers usually provide an appeals process
for employees who feel that the selection criteria
have been unfairly applied in their case. Some
use a more senior member of management or
trade union representation to consider such
grievances and how to remedy them.
Enhanced redundancy payments
Employers often aim to soften the blow of
redundancy by offering severance payments in
excess of the statutory minimum (see the box on
page 13). The main ways of doing this are by:
● removing the earnings cap on the value of a
week’s pay; or
● increasing the number of weeks’ pay given for
each year of service.
Some companies do both while others also
provide further ex gratia payments. However,
employers offering an enhanced redundancy
package must be careful that it does not unfairly
discriminate against employees on the basis of age.
Offering a loyalty bonus
Where employers want to hold on to members of
staff for a certain amount of time – to see a
project through to completion, for example, or
IDS HR Study 902 • September 2009

to ensure an orderly closure of a site – they may
offer additional payments as an incentive.
Payments might also be made conditional on
employee co-operation and flexibility, as a well
as on regular attendance at work up until the
agreed leaving date.
Pay in lieu of notice
Some organisations provide employees who are
being made redundant with the option of taking
pay in lieu of their normal notice period. Others
may choose to ask staff to serve part of their
notice period and pay the remainder of their
entitlement in lieu.
Pension arrangements
Employers may offer to enhance employees’
pensions as part of the redundancy terms, or –
more commonly – to allow staff to retire early in
lieu of a redundancy payment. However, such
moves may become increasingly rare given the
current climate of pension scheme deficits.
Incommunities offered two options to
employees who opted for voluntary redundancy.
Employees were offered the choice of taking
their enhanced severance package as a lump
sum, or using the difference between this and the
statutory redundancy payment to ‘buy’ an
augmented pension service.
Treatment of employee benefits
In most cases, benefits cease immediately when
an employee leaves a company through
redundancy, although some items with annual
renewal dates – such as insurance cover – might
continue until the current term expires. Some
employers give staff the option of continuing
certain benefits at their own cost. For example,
employees are often able to buy their company
car at the market rate.
The tax position
Where an employee has been made redundant, the
first £30,000 of any ex gratia payment – including
any statutory redundancy payment – is exempt
from tax. Only the balance is taxable – at the
employee’s marginal rate of income tax. However,
the tax may be payable on the full sum if the
employee’s contract allows for compensation.
Seeking new employment
Granting time off
Employees under notice of potential redundancy
are entitled to reasonable time off during work
IDS HR Study 902 • September 2009
Analysis
Notifying the Department for Business Innovation
and Skills
Employers have a statutory duty to notify the Department for
Business, Innovation and Skills (BIS) if they propose to dismiss 20 or
more employees as redundant at one establishment within a period of
90 days. This is so that government departments and agencies and the
JobCentre Plus Rapid Response Service can be alerted and prepared to
take any appropriate measures to assist or retrain the affected
employees.
BIS must receive notification of the redundancies a specified minimum
time before the first dismissal takes effect:
● at least 30 days if between 20 and 99 employees are likely to be
dismissed as redundant at one establishment within a period of
90 days or less
● at least 90 days if 100 or more employees may be dismissed as
redundant at one establishment within a period of 90 days or less.
The notification must be submitted using a standard, two-page HR1
form. This requires employers to provide the following details:
● contact address and numbers
● establishment where the redundancies are proposed
● reasons for redundancies
● the number of staff employed at the site and the number of
possible redundancies
● timing of the redundancies
● method of selection
● consultation details.
Further information is available from www.bis.gov.uk
hours to look for alternative work or to make
arrangements for training for future
employment. Employers may also allocate some
training funds to help employees ‘skill up’ or
retrain for a specific job or trade.
While there are no strict rules about how much
leave should be granted, the length of time
should be ‘reasonable’. This can depend on the
circumstances – for example, how difficult it is
to find a job in certain areas, or the distance of
travel required to attend interviews.
However, the statutory entitlement to payment
for time off to search for alternative employment
is limited to two-fifths of one week’s pay – ie up
to two days if the employee works a five-day
week. Any reasonable time off required above
and beyond this entitlement to paid leave can be
taken unpaid.
Outplacement assistance
Many employers arrange outplacement assistance
to further support employees who are made
redundant and help them deal with the challenge
of finding another job. This is typically arranged
through a third-party outplacement provider.
19
Managing redundancy
The main goals of an outplacement service are to
improve employees’ job search skills, provide
them with some career advice and help them to
find a suitable vacancy. This can be particularly
valuable for staff who have been with the
company for a long time and are suddenly faced
with having to find a new job – they may not
have updated their CV or attended a job
interview for years.
Workshops and seminars
Key elements of any outplacement provision are
the seminars and workshops offered to
employees. These can be general group sessions
or more focused one-to-one meetings. Typical
seminar or workshop topics include:
● coping with redundancy
● job-search processes
● completing application forms
● CV preparation
● interview techniques
● presentation skills
● body language
● writing letters/using the phone
● assessment centres
● financial planning
● effective networking
● starting your own business
● pre-retirement planning.
Additionally, some providers offer training
courses in change management for those
managers who are responsible for breaking the
news of redundancies. These generally cover
practical issues, such as carefully scripting
announcements, and dealing with employee
questions and reactions.
Providing counselling
Many outplacement providers offer counselling
services to help support staff throughout the
redundancy process. They are often able to be on
site immediately after a redundancy
announcement to provide a ‘pick up’ counselling
service. This is intended to help employees come
to terms with the news, offer them reassurance,
listen and address their concerns, and generally
help them get through the first few days. After
this, employees affected by redundancy –
whether directly or indirectly – may be given
access to a confidential helpline or may be able
20
to refer themselves for one-to-one meetings with
counsellors.
Analysing skills and experience
An important first step in helping employees find
alternative employment is to identify their skills
and experience. Many providers will offer to
meet staff to carry out a detailed personal skills
analysis to evaluate the transferable skills that
employees possess. In some cases, psychometric
tests or aptitude assessments may also be given.
The resulting profile can often highlight possible
education and training opportunities individuals
may wish to pursue if they are considering
starting a new career.
Improving job search skills
Nearly all outplacement providers run group
workshops to offer guidance on general job
search skills, including preparing CVs and
application letters. Some also provide more in-
depth training, such as role-playing exercises
aimed at improving interview techniques.
Offering access to available vacancies
The majority of outplacement providers should
have access to a wide selection of up-to-date job
vacancies. These lists should be monitored and
positions no longer available should be removed
regularly. Many suppliers either have their own
databases of job opportunities or have links to
third-party systems that hold these details.
Searchable databases of vacancies are typically
available online, enabling employees to search
for jobs under many different criteria, including
job type, location and starting salary. Staff may
also choose to opt to receive e-mail alerts of any
suitable new vacancies as soon as these are
added to the system.
An on-site presence
For major redundancy programmes or site
closures, it is common for employers to arrange
for an outplacement specialist to have an on-site
presence for the duration of the exercise – as at
Komatsu, for example. On-site support affords
employees easy access to training and
development workshops, as well as any job-
searching resources provided by the firm.
Wider benefits
By arranging outplacement support,
organisations not only offer practical assistance
to those who are being made redundant; they
also send the right signals to those who remain.
In addition, arranging such support can help
protect the corporate brand during a time of
negative press and help demonstrate to existing
IDS HR Study 902 • September 2009

and prospective employees that, despite making
redundancies, the organisation aims to support
its staff at all times.
Generally, the cost of providing outplacement
assistance is small in relation to the overall
severance costs associated with a redundancy
exercise and most employers consider it money
well spent.
Maintaining employee morale
Due to the effect on employee morale and well-
being, a large-scale change programme or
redundancy exercise can often have a negative
impact on efficiency and business performance.
Therefore, organisations may consider
introducing measures to boost employee
engagement and provide additional motivation
to those staff still in post. Cambridge Building
Society, for example, implemented a new
performance management system following its
major change programme to help employees
perform to the best of their abilities in their new
roles. It also rolled out annual career reviews to
ensure staff are provided with encouragement
and opportunities to progress.
Avoiding survivor syndrome
Following a redundancy programme, companies
need keep in mind the potential impact on those
who are left behind. Staff who have kept their
jobs often experience survivor syndrome. This
IDS HR Study 902 • September 2009
Analysis
can have a major impact on motivation and
performance levels and, in the most serious
cases, lead to stress and depression.
Organisations can seek to minimise the impact
on remaining individuals by engaging in honest,
open and regular communication during the
process and beyond. It is also important that the
redundancy selection process used is fair and
objective, and line managers are provided with
training and support to help them deal with any
concerns or identified problems in their teams.
The worst affected employees may be directed to
occupational health or an employee assistance
programme for help.
Preparing for the upturn
Employers must also be wise to the danger of
being perceived as too opportunistic during a
time of economic recession. If staff feel that the
company has made unnecessary job cuts or
handled the process unfairly, this is certain to
have a harmful effect on engagement and
morale. Moreover, in such circumstances,
individuals are more likely to leave their
employer when the economy is out of recession.
If they are to retain skilled and experienced
members of staff in the long-term, it is important
that organisations are seen to do all they can to
minimise the number of job cuts necessary and
explain why any measures to reduce expenditure
have to be taken.
21
Managing redundancy
Redundancy – legal issues
A redundancy exercise involves a wide range of
legal issues across the employment law
spectrum. In the following pages we do not
cover the issue of an employee’s entitlement to a
statutory redundancy payment (for details of
this see the IDS Employment Law Handbook
‘Redundancy’), but instead focus on four
matters that have attracted the majority of
debate and case law in recent years: the
contractual status of enhanced redundancy
policies; the collective consultation regime
introduced by the EC Collective Redundancies
Directive (No.98/59); the short-lived statutory
dismissal procedures; and the impact of the
Employment Equality (Age) Regulations 2006
on the redundancy process.
Age discrimination
The Employment Equality (Age) Regulations
2006, which came into force on 1 October 2006,
had a profound effect on most aspects of
employment law. In terms of redundancy, the
Age Regulations called into question the
legitimacy of long-held practices, such as using
LIFO – last in, first out – as a means of selecting
employees for redundancy, and the payment of
differing levels of redundancy pay on the basis of
an employee’s age.
The definitions of the key concepts of
discrimination are found in Reg 3. First is direct
discrimination, which under Reg 3(1)(a) occurs
where ‘on grounds of B’s age’ A treats B less
favourably ‘than he or she treats or would treat
other persons ... and A cannot show the
treatment ... to be a proportionate means of
achieving a legitimate aim’. Reg 3(1)(b) states that
indirect discrimination occurs where: (i) the
employer applies a provision, criterion or practice
(PCP) that disadvantages persons of the same age
group as the claimant when compared to other
persons; (ii) the claimant is personally
disadvantaged for that reason; and (iii) the
employer is unable to show that the PCP is a
proportionate means of achieving a legitimate aim.
In the context of redundancy, another provision
of relevance is Reg 33. This provides for an
exclusion from the operation of the Age
Regulations for those schemes which mirror the
age bands and multipliers that apply to the
statutory redundancy payments scheme under
the Employment Rights Act 1996. Where a
scheme is not covered by the exclusion in Reg
22
33, and varies the amount payable on the basis
of an employee’s age, it will amount to less
favourable treatment under Reg 3(1)(a) and
must be objectively justified as a proportionate
means of achieving a legitimate aim.
The question of what amounts to justification
for less favourable treatment or discriminatory
PCPs will always depend on the individual
circumstances of the case. There has, however,
been some recent case law to demonstrate that
courts and tribunals are being relatively
sympathetic to employers. In MacCulloch v
Imperial Chemical Industries plc and Loxley v
BAE Systems Land Systems (Munitions and
Ordnance) Ltd EAT 2008 ICR 1334; 1348 –
cases concerning direct discrimination in
contractual redundancy schemes not covered by
Reg 33 – the then president of the EAT, Mr
Justice Elias, held that two decisions of
employment tribunals could not stand as they
had not undertaken a proper analysis of
objective justification. However, in remitting the
cases, he gave enlightening views on what
circumstances might give rise to justification.
In MacCulloch, Elias P endorsed the employer’s
objective of rewarding loyalty as the reason for
linking payments to length of service. He also
approved the tribunal’s findings that
encouraging turnover and creating opportunities
for junior staff are, in principle, capable of being
legitimate aims that might be furthered by
increasing payments for older workers and that
it could be legitimate to pay more to older
workers as they are particularly vulnerable in the
job market. Moreover, the tribunal had been
entitled to draw on its own experience in this
respect rather than looking to the employer for
evidence of the obstacles faced by older workers.
Meanwhile in Loxley, Elias P held that excluding
an employee entitled to immediate pension
benefits from a redundancy scheme altogether,
or reducing the benefits paid under it, may be
justified, but that a tribunal would need to
thoroughly assess the impact on the employee.
Remitting the case, he stated that it might be that
Mr Loxley’s pension entitlement, even if taken
earlier than he would otherwise have wished, is
far more valuable than any redundancy
entitlement. Although the tribunal appeared to
have had a lot of financial information about the
various benefits, it had failed to analyse that
IDS HR Study 902 • September 2009

information in its judgment. Also of interest is
Elias P’s warning that the fact that a scheme is
collectively agreed does not guarantee that it will
be justified.
The Court of Appeal has also considered the
question of objective justification in the case of
Rolls Royce plc v Unite the Union 2009 EWCA
Civ 387. Rolls Royce sought a declaration that a
length of service criterion in a collectively agreed
redundancy policy was indirectly discriminatory.
However, the Court refused, holding that the
inclusion of the criterion pursued a legitimate
aim of rewarding loyalty and creating a stable
workforce in the context of a fair redundancy
selection process. On the question of whether
the use of the criterion was a proportionate
means of achieving this aim, the Court observed
that that length of service was just one of many
criteria used, was consistent with the
overarching concept of fairness, and was not of
itself determinative of the selection. The Court
further noted that there was no evidence to
contradict the union’s statement that the
criterion was accepted by younger employees.
To some extent, the Court’s decision gives the
green light to employers to continue using length
of service as a criterion in redundancy selection.
However, it would still seem to be the case that
using it as the sole criterion for redundancy
selection would struggle to pass the hurdle of
objective justification.
Contractual status of policies
Many employers have policies setting out what
will happen, and what employees will receive, in
the event of redundancies. If such a policy is
included in the contract of employment, it will
undoubtedly have contractual status, and if an
employee does not receive that to which he or
she is entitled, a claim for breach of contract
may be brought in the civil courts or an
employment tribunal.
However, the mere fact that the policy is not
contained in the contract of employment may
not be the end of the matter. In Keeley v Fosroc
International Ltd 2006 EWCA Civ 1277, the
Court of Appeal held that a clause in a ‘staff
handbook’ providing for an enhanced
redundancy payment was a contractual term
that could be enforced by an employee. The fact
that the provision was part of a document that
included non-contractual matters – such as
statements of principles or practice – did not
prevent it from being incorporated by reference
IDS HR Study 902 • September 2009
Analysis
into the claimant’s contract of employment,
since the Court concluded that it was part of the
‘financial bargain’ for which the employee
exchanged his services, and therefore was clearly
contractual in nature.
Collective consultation
Section 188(1) of the Trade Union and Labour
Relations (Consolidation) Act 1992 provides
that where an employer proposes to make 20 or
more employees redundant at one establishment
within 90 days or less, it must consult
appropriate representatives of the employees
who might be affected. Consultation must begin
‘in good time’ and, in any event, where the
employer proposes to dismiss 100 or more
employees, at least 90 days before the first
dismissal takes effect – S.188(1A). Where an
independent trade union is recognised by the
employer, consultation takes place with the
representatives of that trade union – S.188(1B).
The extent of the consultation required by S.188
was addressed by the EAT in UK Coal Mining
Ltd v National Union of Mineworkers
(Northumberland Area) and anor 2008 ICR 163.
Prior to this case, tribunals had proceeded on the
premise that S.188 does not require consultation
about the reason(s) for the redundancy
dismissals. However, after analysing the wording
of Article 2(2) of the EC Collective Redundancies
Directive (No.98/59), which S.188 transposed
into domestic law, the EAT took a different view.
It considered that the reference in Article 2(2) to
‘consultation over the ways of avoiding
redundancies’ clearly envisaged consultation over
the business reasons behind the redundancies and
not simply consultation about the redundancies
per se. Moreover, the EAT held, it was possible to
give effect to S.188 so as to achieve the Directive’s
aim in this regard: where business closure and
redundancy dismissals were inextricably linked, a
duty to consult over the reasons for closure arose.
An employer who fails to comply with the
statutory requirements for consultation will be
liable to a protective award of up to 90 days’ pay
for each affected employee – S.189(2)
TULR(C)A. In Hutchins v Permacell Finesse Ltd
(in administration) EAT 0350/07, the tribunal
exercised its discretion to make a protective
award of 30 days’ pay in a case where the
employer had failed to carry out any form of
consultation whatsoever, and had offered no
evidence in mitigation or defence of its conduct.
The tribunal believed that it was ‘just and
equitable’ to make an award which was
23
Managing redundancy
proportionate to the 30-day consultation period
that the claimant had been entitled to in the
circumstances. The EAT, however, overturned the
decision, the tribunal having failed to follow the
guidance in Susie Radin Ltd v GMB and ors 2004
ICR 893, which held that a proper approach to a
case where there had been no consultation was to
start with the maximum 90-day protected period,
and reduce it only if there were mitigating
circumstances justifying a reduction.
Procedural fairness
A redundancy is a dismissal, and some
redundancies will inevitably lead to the
employee claiming that his or her dismissal was
not fair. One ground of complaint is that
redundancy was not the true reason for the
dismissal, while another is that the selection
process was substantively or procedurally unfair.
In 2004, statutory dismissal and disciplinary
procedures were introduced, along with the
sanction of a finding of automatically unfair
dismissal in cases where an employer had failed
to comply with the procedure. From the outset,
the procedures were not popular, and led to
complaints that they were complicating, rather
than simplifying, dispute resolution in the
workplace. This problem was keenly felt in the
context of redundancy.
On 6 April 2009, the Employment Act 2008
repealed the statutory procedures, meaning that
an employer’s procedural failures in carrying out
24
a dismissal will no longer result in the dismissal
being deemed automatically unfair. From now
on, most dismissal procedures will be subject to
the new Acas Code of Practice on Discipline and
Grievance – but the Code does not apply to
redundancies. Instead, for redundancies, the
guiding principles will be those that applied
prior to 2004. The leading case is Polkey v AE
Dayton Services Ltd 1988 ICR 142. There, the
House of Lords established that procedural
fairness is an integral part of the reasonableness
test for unfair dismissal. In the words of Lord
Bridge: ‘The employer will not normally act
reasonably unless he warns and consults any
employees affected or their representative,
adopts a fair basis on which to select for
redundancy and takes such steps as may be
reasonable to avoid or minimise the redundancy
by deployment within his own organisation.’
One aspect of the Polkey decision of particular
significance is the Law Lords’ ruling that a
procedurally defective redundancy dismissal will
not be rendered fair by the fact that, had the
employer followed a fair procedure, it would
have made no difference to the decision to
dismiss. While a tribunal should find such
dismissal to be unfair, it is permitted to make
what is known as a Polkey deduction from
compensation – a percentage adjustment of the
compensatory award to reflect the chances that
a dismissal would have occurred in any event.
IDS HR Study 902 • September 2009
 case studies

Page Page
Komatsu UK 25 BT 32
Incommunities Group 29 Cambridge Building Society 34

Komatsu UK responds to recession

Due to the economic recession, Komatsu UK has experienced a significant drop in orders in the past
year and is now predicting a slow recovery period. Despite several cost-cutting measures, it was left
with no alternative but to reduce its workforce. In the first instance, temporary contracts were
terminated and then permanent employees were offered voluntary redundancy. The company was
then forced to introduce a compulsory redundancy programme in January 2009. It has engaged in
full and frank consultations with its employee advisory council and recognised trade union, while
those who were made redundant received a better-than-statutory severance payment and
outplacement support.

Seeking alternatives Asking for volunteers

During 2008, Komatsu UK took a number of
measures to prevent compulsory redundancies.
These included: introducing a reduced working
week for production employees where hours
were ‘banked’ to be used at a later date;
terminating temporary contracts; and extending
shut-down periods. The company operates fixed
holiday periods in May, July and October each
year. As part of its bid to avoid redundancies, its
two-week summer holiday in July 2008 was
extended by one week, which was brought
forward from 2009 holiday entitlement.
Despite the cost-cutting measures that were
implemented, the number of people employed at
Komatsu’s main site in Chester-le-Street became
untenable due to a fall in orders and projected
sales figures. ‘We’ve maintained a job-for-life
culture for many years,’ says Tracey Wilson, HR
Manager at Komatsu. ‘And apart from a small
number of employees that we’ve had to let go
over the past few years due to minor
restructuring, this is the first time there has been
a large-scale programme of redundancies. We
did everything we possibly could to hold off
making compulsory redundancies.’
Forced to reduce headcount
Komatsu has reduced its workforce by more
than 50 per cent in just over a year – from 689
people in March 2008 to 301 in June 2009. ‘We
had employed people at a boom time when we
had lots of orders,’ says Wilson. ‘But
unfortunately when the recession hit and our
business was badly affected, we eventually had
to reduce our headcount.’
The 190 people employed on temporary
contracts were laid off first. Komatsu then asked
employees to apply for voluntary redundancy.
The company initially offered voluntary
redundancy on reduced terms in October 2008.
In January 2009, it asked for volunteers again,
offering the full Komatsu redundancy scheme
that applies when there are compulsory
redundancies.
The company accepted a total of 92 voluntary
applications for redundancy. ‘We did our best to
accept any requests as we prefered to lose
employees who wanted to go,’ says Wilson. ‘We
only had to refuse two applications because the
individuals involved had specific skills that we
needed to keep.’
The redundancy programme
Unfortunately, with insufficient volunteers for
redundancy, Komatsu was forced to carry out a
programme of compulsory redundancies. This
affected all groups of staff, including 33 ‘direct’
roles (ie those on the shopfloor) and 14 ‘indirect’
roles (ie those in support functions, such as sales
and marketing, health and safety, and accounts).
About Komatsu UK
The Komatsu Group was originally established in
Japan in 1921. It is one of the leaders in the
construction, mining and utility equipment
industry, manufacturing products, such as loaders,
excavators, and bulldozers. The Komatsu UK plant
in Chester-le-Street (near Durham) opened in 1985
and now employs around 300 people.

IDS HR Study 902 • September 2009 25

Managing redundancy
Managing redundancies
Wilson took the lead in managing the
redundancy programme. ‘At the time, we had
two new members of the HR team,’ she explains.
‘They weren’t fully CIPD qualified and only had
limited experience in dealing with such matters.
Therefore, I provided the HR team with training
sessions to explain the redundancy process and
its role.’
Announcing redundancies
On 19 January 2009, the company announced
the first round of compulsory redundancies. The
morning followed a strict timetable, which
detailed exactly who would be informed at what
time, by whom and where. The directors and
senior managers were informed first, followed
by communication to the company’s recognised
trade union (Unite) representative and its
Advisory Council Co-ordinator.
‘If you look at our timetable, you may think we
were being overly pedantic,’ says Wilson. ‘Yet it
ensured that we informed all employees
correctly before any rumours had the
opportunity to do the rounds.’
Informing certain affected individuals first
Komatsu then informed employees who were in
roles that were proposed as redundant and
where the individual concerned was the only
person doing that particular job. ‘We didn’t
want an employee sitting in a room full of their
colleagues and realising from what was said that
it was their unique role that was being proposed
as redundant,’ says Wilson. ‘By arranging one-
to-one meetings, individuals had the
opportunity to respond to the news in private
and ask any questions directly relating to them.’
Ensuring a consistent message
A company-wide announcement was made at
11.30am on the same day. Managers were
provided with a written statement to read out to
their teams to ensure that a consistent message
was given to all. They were also equipped with
a list of questions and answers to help them
respond to employees’ concerns. ‘I think staff
expected that there would be redundancies so
for many of them the announcement didn’t come
as a shock,’ says Wilson. ‘In fact, some feared
that it would be much worse.’
Reassuring staff
The announcement to all staff contained a clear
statement about the future of the plant. It
reassured employees that Komatsu had no
intention of closing down the site or ceasing to
trade. ‘We pre-empted any fears that this was
26
just the beginning and our intention was to close
down the site,’ says Wilson. ‘So we made it very
clear that this was not the plan.’
Komatsu recognised the importance of
informing employees why compulsory
redundancies were necessary. They were briefed
by their line managers on how many orders had
been placed, and what this meant in terms of
performance and projected sales figures. ‘If
employees can see for themselves why such
action has to be taken, they are more likely to
respond better to the news,’ says Wilson.
Consulting with employees
Consultation with employees took place over a
30-day period. All meetings were conducted by
individuals’ line managers with a member of HR
present. If managers felt that they needed
additional support in conducting interviews,
members of the HR team provided them with
individual coaching sessions.
Selecting employees
The selection criteria and redundancy pools
were agreed by 30 January 2009. The first
individual formal consultation meetings were
held on 3 and 4 February. A final decision was
then taken and employees were informed of the
decision by the end of February.
Agreeing selection criteria
The selection forms were initially based on the
company’s standard form used by managers
when they apply to convert a temporary member
of staff to a permanent employee. As part of the
consultation period, Komatsu agreed the final
selection criteria with the Unite representative
and its staff advisory council. The long-
established advisory council is made up of 11
representatives from each department and meets
with HR and management on a monthly basis.
The representatives are elected by employees and
do not have to be members of Unite. ‘Involving
the council helped us engage staff in the whole
process – they felt like we listened to their
opinions,’ says Wilson.
The selection criteria
The agreed selection criteria were:
● length of service
● skills and ability
● reliability and dependability
● sickness absence
● timekeeping
● performance.
IDS HR Study 902 • September 2009

Redundancy payments
Employees at Komatsu UK with more than two
years’ continuous service are entitled to a lump
sum calculated according to their age, length of
continuous service and salary, as follows:
● for each complete year of continuous service
between the ages of 18 and 21 – one week's
basic pay (not including any bonus or overtime
payments)
● for each complete year of continuous service
between the ages of 22 and 40 – two weeks’
basic pay
● for each complete year of continuous service
between the ages of 41 and 65 – three weeks'
basic pay.
The final criterion, performance, included:
quality of work; rate of work; safety and
housekeeping; improvement activities;
disciplinary record; planning and organisation
abilities; and drive and commitment. How this
criterion was used to assess individuals often
depended on the nature of their role. For
example, the rate of work was recorded for
employees working in assembly. However,
managers were advised to think carefully about
how the criterion was applied and provide an
explanation of why a particular score had been
given to each individual.
A weighting was agreed for each criterion.
Service, for example, was given a low
weighting, while performance was given a high
one. All those in the selection pool were given a
score of between five and 12 points for each
criterion and then ranked in order of their total
score. Those selected for compulsory
redundancy were those with the lowest rankings
in each selection pool.
Completing the forms
Team leaders were given the responsibility to
complete the selection forms. These were then
reviewed and checked by supervisors. To ensure
that the criteria had been applied consistently to
all staff, the HR Department also evaluated all
the completed selection forms.
Levelling the results
Where staff were doing similar work in different
areas of the business, HR and line management
completed a levelling exercise. For example, the
company employed fabrication staff in two
separate teams. ‘We wanted to keep our best
performers by ensuring the criteria had been
fairly and consistently applied by managers in
each area,’ says Wilson. ‘To do this, HR sat
down with both managers and went through
their scoring methods and reasons.’
IDS HR Study 902 • September 2009
Komatsu UK
Taking a final decision
Prior to a decision being taken, managers
conducted final individual consultations with all
those who were in jobs that were identified as at
risk. During these meetings, staff were presented
with their scores against each of the selection
criteria. This allowed individuals a chance to talk
with their managers about their rankings and
discuss how the selection criteria had been applied
in their case. They were also given the opportunity
to challenge their ratings if they did not feel they
adequately reflected their skills and competencies.
‘In some cases, these discussions affected the
ranking of individuals in a selection pool,’
explains Wilson. ‘If employees moved up in the
rankings after their final consultations,
inevitably others moved down. So we talked
with all staff about their individual ranking no
matter where they were placed in the selection
pool, rather than just to those with the lowest
rankings. We felt that this was the fairest way to
complete the process and gave us the
opportunity to inform all those in pool at the
same time. Then a final decision was taken and
all staff informed.’
Redeploying staff
There were limited opportunities for staff to be
redeployed as there were only seven open
vacancies at that time. These job openings were
mainly due to voluntary redundancies. Staff
were encouraged to apply for positions that they
considered suited their skills and experience. The
vacancies were mentioned in consultation
meetings, where appropriate, and advertised on
the staff noticeboard. Any suitable candidates
for such positions who had left the company due
to redundancy but who might be interested in
applying were sent details of the vacancies to
their home address.
Appealing against the decision
If employees wished to make an appeal against
a redundancy decision, they were asked to put it
in writing to HR. The appeals were reviewed by
the level of management above that which
completed the selection forms. An internal
investigation took place and the manager either
rejected or upheld the original decision. The
individual who appealed was notified of the
decision in writing and no further appeal was
then permitted.
Providing outplacement support
On-site outplacement support was provided by
an external supplier – Right Management – for
those made compulsorily redundant. The
27
Managing redundancy
provider conducted initial one-to-one briefings
with staff to find out what help they required. It
then helped employees to prepare their CVs and
search for jobs. ‘By giving them this practical
advice and remaining sensitive to their feelings,
the outplacement support helped to rebuild the
confidence of those affected,’ says Wilson. ‘The
providers have a strong background in HR and
have often been through the experience
themselves so are able to provide good advice
and relate to individuals.’
Encouraging employees to access the support
Wilson noted that a small number of employees
were reluctant to use the service on offer. ‘Some
employees understandably lacked self
confidence after being made redundant, which
stopped them from seeking the help offered by
the provider,’ she says. ‘In such cases, a member
of the HR team contacted them to talk to them
about the benefits of the service and encourage
them to get the support.’
Further redundancies
A second wave of redundancies, affecting just
over 50 members of staff, was announced in
February 2009. This was required because of a
strategic decision by Komatsu UK’s parent
company to centralise the remanufacturing part
of the business and reorganise the design and
development functions within Europe.
The consultation period for this group followed
the same pattern, but took place over a longer
period due to the timing of the changes taking
place and the total number of employees affected.
Gauging employee morale
The company first achieved Investors in People
accreditation in 1991. It is reassessed on an
annual basis and uses these regular reviews as a
business improvement tool. As part of the annual
assessment in June 2009, employees were
interviewed by an external assessor. They were
asked how they felt about the redundancy
programme. ‘The assessor’s feedback to us was
28
that employees understood why the redundancies
were necessary and felt that we handled the
process in the right way,’ says Wilson.
Future plans
Reducing ongoing expenditure
Komatsu has negotiated with its advisory council
and Unite a number of ongoing cost-cutting
measures that can be taken, if necessary, to limit
the need for any further redundancies. These
include a lay-off policy, which provides for up to
four weeks of unpaid leave for all staff during
2009. In addition, from May to July 2009,
employees are taking Fridays as unpaid leave.
‘Friday is our shortest working day of the week,’
says Wilson. ‘We will continue reviewing this
arrangement on a monthly basis but, as we are
predicting a slow recovery, we have negotiated
that the policy will run until March 2010.’
Giving back to the local community
‘We’ve had to significantly reduce production
and despite the redundancies employees are not
yet fully deployed in all areas,’ says Wilson. To
keep employee morale and engagement levels
up, HR has set up community projects for
employees to get involved in. For example, a
team of staff are working at a school for children
with special needs to improve its playground
equipment and external grounds.
Preparing for recovery
During the quiet period, the company is also
taking the opportunity to provide staff with
training and development opportunities. It has
used government funding to put employees
through the Train to Gain scheme. ‘We’ve
focused on improving employees’ business and
enterprise skills. We feel that we can learn from
this experience. We need to become as fit and
lean as possible during this slow period so that
we’re stronger and ready for the challenges
ahead,’ concludes Wilson.
IDS HR Study 902 • September 2009

Incommunities agrees voluntary redundancies
Following a review of governance arrangements and procedures within the organisation,
Incommunities identified a small number of redundant positions. Most of the necessary cuts were
achieved through three separate voluntary redundancy programmes. The company also redeployed
a small number of employees who were affected by the restructuring exercise in a bid to avoid
compulsory redundancies.
As a housing association, Incommunities’ main
objective is to provide the best service possible to
customers and the community. However, the
organisation also believes that it is important to
become more commercial in its approach and
increase revenue to promote future growth. In
2005, it began reviews of its governance
arrangements and structures, and its processes
and procedures to increase efficiency and reduce
the number of actions required to respond to
repairs requests. As a result, it identified a need
to reduce the overall number of posts.
Initially, Incommunities used natural wastage
and terminated contracts with agency staff to
reduce headcount. A few of the employees
affected by the restructuring were placed on a
redeployment list and encouraged to apply for
suitable positions available across the
organisation. However, voluntary redundancy
trawls in three areas of the business were the
main tools for achieving the further job cuts
required. Over the last four years,
Incommunities has accepted 67 applications for
voluntary redundancy, reducing its workforce to
1,026 employees in March 2009.
Communicating with staff
Incommunities recognises five trade unions:
Unison; GMB; TGWU; Unite; and UCATT. It
holds joint consultative meetings with union
representatives every six weeks. It also has
regular meetings with the union representatives
in each of its operational areas to discuss local
issues. The governance review, cost-saving
measures, redeployment of staff and the
voluntary redundancy programmes were
included on the agenda at these meetings. ‘These
discussions with the unions proved very
constructive,’ says Susan Laycock, Director of
Human Resources at Incommunities. ‘I think it
was really important to manage the change in
the best way possible. That meant keeping
employees informed from the outset and then
communicating with staff and their union
representatives on a regular basis.’
Voluntary redundancies
The organisation discussed the need for
voluntary redundancies with representatives of
IDS HR Study 902 • September 2009
Incommunities
its recognised trade unions at an early stage. The
redundancies affected three separate groups of
staff. The first trawl followed a review of the
senior management structure and applications
from employees at principal officer grade or
above were invited. The second round of
voluntary redundancies was open to all office-
based repairs and maintenance staff, and the
third to a limited number of posts in
neighbourhood services.
Asking for volunteers
Incommunities announced the voluntary
redundancy programmes in its staff newsletter.
In response, it had more applicants for
redundancy than there were positions identified
as at risk. ‘As we have a large number of
employees aged over 50 who have been with the
company for a long time, the opportunity to take
voluntary redundancy proved an attractive
proposition for many,’ explains Laycock.
Selecting on the basis of required skills
Once the applications were received, managers
completed a standard form for each individual.
This outlined the business case for either
supporting or rejecting the applicant. The form
asked for information on, for example, their
performance records and adaptability. It also
About the Incommunities Group
Incommunities aims to provide affordable and
high quality homes. It currently employs just over
1,000 people.
History
In 2003, Bradford Community Housing Trust Group
(BCHT) was formed and took over management of
around 24,000 homes, which were previously
owned by Bradford Council. Due to the size of the
organisation, BCHT was set up as group structure
with eight separate companies, each of which was
an employer in its own right and had its own
board. This meant that that there were around 100
board members.
Following a governance review, which was
completed by 2006, BCHT became one
organisation with two boards – a group board and
a housing association board. In 2008, BCHT was
rebranded and became Incommunities.
29
Managing redundancy
The redundancy policy at Incommunities
Avoiding compulsory redundancies
Incommunities policy establishes that it seeks to avoid compulsory
redundancies wherever possible. Its policy states that ‘all other
avenues must be explored to ensure that compulsory redundancy is a
last resort’.
Revising the policy
When Bradford Community Housing Trust Group was formed in 2003
(before its rebranding as Incommunities), employees were transferred
under TUPE from Bradford Council and the existing redundancy policy
was retained. The policy was then revised following the introduction
of age discrimination legislation in 2006. ‘We had to come up with a
voluntary redundancy package that was broadly comparable to
previous arrangements so the terms wouldn’t represent a breach of
contract,’ explains Susan Laycock, Director of Human Resources at
Incommunities. ‘But we had to balance this with the good practice
requirements set out by Schedule One of the Housing Act, and the
Good Practice Notes issued by the Housing Corporation, which state
that an employee can’t receive more than a year’s pay as part of a
severance package.’
‘As a caring and responsible housing association, we always put our
customers’ views first,’ continues Laycock. ‘It would therefore not be
appropriate to pay out large sums of money to employees, particularly
in a difficult economic climate.’
Voluntary redundancy arrangements
Staff who have been accepted for voluntary redundancy are given two
options. Their first option is to accept a one-off lump sum, calculated
by multiplying length of service by 2.2 weeks’ pay up to a maximum of
66 weeks’ pay. The calculation is based on pensionable pay, including
any contractual overtime.
Alternatively, they can choose to forgo a one-off lump sum in favour
of requesting Incommunities to purchase augmented pension service
on their behalf. In this case, they receive the statutory minimum
redundancy payment, based on age, length of service and the set limit
for weekly pay. The difference between the one-off lump sum
available in option one and the statutory redundancy payment is used
to purchase augmented service. There may be an adjustment to the
sum available for augmentation to reflect any additional costs the
organisation may incur and ensure that both options cost the same.
The policy reminds employees that members of the HR team and the
pension fund scheme managers are not able to give financial advice.
Therefore, it recommends that they discuss their options with an
independent financial adviser.
Compulsory redundancy payments
The payment for compulsory redundancy is the statutory minimum,
based on age, length of service and the set limit for weekly pay at the
time. The current formulae are:
● half a week's pay for each full year of service where age during the
year is under 22
● one week's pay for each full year of service where age during the
year is between 22 and 40
● one and a half weeks' pay for each full year of service where age
during year is 41 or older.
The current limit is £350 for gross weekly pay and statutory payments
are subject to a maximum claim of 20 weeks' service. Employees made
compulsorily redundant are not eligible for a lump sum compensation
payment or augmented pension.
30
asked managers if they would lose skills,
experience or knowledge that they could not
replace by any other means. The information
provided had to be objective and supported by
documented evidence.
To select individuals for voluntary redundancy,
Incommunities based the decision primarily on
each applicant’s relevant skills and experience
against the requirements set out by their line
manager. ‘We had to think very carefully about
what we took into consideration,’ says Laycock.
‘So we looked objectively at how our service
would be affected if we lost each individual.’
Consultation periods
Employees accepted for redundancy went
through a full consultation, involving two or, in
some cases, three meetings. These were attended
by line managers and HR. Laycock found that
two meetings were generally enough to cover all
the relevant information. In these discussions,
she explained how the redundancy payment had
been calculated and informed them that they had
two options – a one-off lump sum or an
augmented pension (see the box opposite).
Managers were required to complete a standard
form to record the main points of discussion,
any actions to be taken following the meeting
and when the employee had received all the
necessary documentation.
One-to-one meetings were also arranged with
employees whose applications were rejected to
explain the reasons behind the company’s
decision. ‘Obviously, some applicants were upset
that they hadn’t been accepted,’ says Laycock.
‘But we weren’t in a position to let everyone who
had applied leave.’
Withdrawing an application
Individuals were reminded during consultations
that it was their personal decision to apply for
redundancy and entirely voluntary. They were
given the option to withdraw their application up
to a defined ‘point of no return’. The cut-off was
set as the point at which the final options forms
needed to be sent to the West Yorkshire Pension
Scheme – shortly before the agreed leaving date.
Appealing against a decision
Employees who were declined voluntary
redundancy were offered the right to appeal.
They were required to submit their appeal in
writing within 15 days of receiving the
confirmation of the decision. ‘With hindsight, I
think that this wasn’t entirely appropriate as it
would have been difficult to change our
decision,’ says Laycock. ‘In retrospect, we
should have left a few more positions to play
IDS HR Study 902 • September 2009

with in case of appeal. That said, the procedure
did give employees the chance to talk to us about
how they were feeling. We were able to offer
them any necessary support to prevent them
from becoming demoralised.’
Farewell gathering
As many of the employees leaving voluntarily had
been with the organisation for a long time,
Incommunities put on a farewell gathering to
thank them for their contribution and to give
their colleagues a chance to say goodbye. ‘We
invited their partners and family members along
and presented each of them with a small gift,’ says
Laycock. ‘These small personal touches can make
all the difference to those leaving and show those
staying that we are a caring employer.’
Offering support to leavers
All employees who were made redundant were
given information, advice and guidance on
applying for other jobs, undertaking voluntary
work, and taking up new hobbies and interests.
Most of the leavers indicated that they would be
looking for part-time work only or retiring
completely. They were also directed to a local
charity that offered more in depth advice on the
same topics.
Incommunities also offered a two-day pre-
retirement course to employees. The course
offered practical advice on how to prepare for
retirement, help on managing finances, and
information on pensions. ‘It was very popular
with employees of all ages,’ says Laycock. ‘We
encourage people to start thinking about their
retirement in their thirties so they are prepared
when the time comes. Many of our employees
found these sessions very useful when deciding
whether or not to apply for voluntary
redundancy.’ The company also offered career
counselling and an off-site outplacement service,
provided by EEF (the Engineers Employers
Federation) to managers displaced as a
consequence of the review of the senior structure.
Redeploying staff
A few employees who were in ‘at risk’ jobs were
placed on a redeployment list. Redeployment is
also used by the company in certain other cases,
such as following disciplinary procedures or due
to medical reasons.
Informing employees
Once staff are identified as candidates for
redeployment, Laycock arranges a meeting with
them and their line manager to discuss the
process and provide details of any jobs that may
IDS HR Study 902 • September 2009
Incommunities
be suitable. At this meeting, she also asks
individuals where they would like the details of
any suitable jobs to be sent. Employees can
choose to be accompanied to the meeting by a
trade union representative or colleague.
Applying for jobs
Employees are encouraged to apply for jobs that
broadly match their skills and experience and
are at the same grade as, or at a lower grade
than, their existing role. ‘Some employees are
reluctant to move positions, but we provide
reassurance and talk to them about why the
change is necessary,’ says Laycock. ‘It is in their
own interest to apply for suitable jobs within the
organisation as unfortunately the alternative is
potentially compulsory redundancy.’
Managers follow the standard recruitment
process and interview suitable candidates.
However, they may appoint an employee if he or
she meets most, rather than all, the essential
criteria on the person specification – the gap in
skills can be bridged by additional training and
development. If after three months an individual
has not found a suitable position, his or her role
may then be considered redundant. The employee
is provided with a three-month notice period.
Red-circling pay and benefits
Where employees are redeployed to a job at a
lower grade, their basic salary and benefits are
protected for five years. They are provided with
a one-month trial period in the new role to ensure
that the move is acceptable to both parties. If the
new position is not acceptable, discussions take
place to understand why this is the case. If there
is a genuine mismatch of skills and experience to
the requirements of the job, further
redeployment opportunities are considered.
‘However, not liking the job is not an acceptable
reason for the redeployment to be considered
unsuccessful and, in such cases, redundancy is
the only alternative,’ says Laycock.
Morale maintained
Incommunities believes that, in the main, the
redundancies and cost-saving measures have not
had a negative effect on staff morale. ‘We made
sure that employees didn’t feel as though they
were being forced out as we gave them the
opportunity to change their minds and withdraw
their application. By handling it this way,
employees weren’t threatened and trust between
management and the workforce hasn’t been
broken. We make thirty-year business plans, so
we are prepared for the coming years and
positive about the future of Incommunities,’
concludes Laycock.
31
Managing redundancy
BT offers redeployment and time out to cut costs
The impact of the economic recession on BT’s business has forced it to make job cuts. However, the
company aims to retain as many of its key staff as possible to put it in the best position possible
when the upturn begins. The company is using a flexible workforce model to enable it to respond
quickly to changes in demand and redeploy highly skilled people. To reduce labour costs, it has
introduced a new time out package, which includes sabbaticals on reduced pay and other flexible
working arrangements.
Due to tough business conditions and a fall in
demand for its services, BT reduced its workforce
by over 15,000 in 2008. The company has
calculated that it will require around 15,000
fewer people by the end of 2009/2010 financial
year. ‘Unfortunately, we are not in a position
where we have a choice about this,’ says Tom
Keeney, Director of Employee Relations at BT.
‘So far, we have focused on reducing contractor
and agency staff and are doing our best to reduce
the number of direct employees through attrition
and voluntary means.’
Despite the necessary reductions, BT remains
focused on retaining as many of its highly skilled
and experienced staff as possible. ‘It’s expensive
to let good people go, when you consider the cost
of leaver payments. And if you then have to hire
people with similar skills when demand is on the
increase again, you also have the expense of
recruiting and training someone else,’ says
Keeney. ‘We’ve been looking at ways to keep
hold of key employees and reduce labour costs by
redeploying and retraining skilled workers, and
by offering a range of flexible working options.’
Redeploying individuals
BT’s resource model helps the company to keep
track of what skills are needed across the
business and what people it has available at any
one time. ‘We have a fairly sophisticated budget
and planning model, which allows us to respond
quickly in the short-term and plan for highs and
lows in demand for skills in the long-term,’ says
Keeney.
In one area there could be a surplus of a
particular skill, while in another there is a
shortage. BT tries to use retraining and
redeployment to move labour to where it is
needed. For example, some customer service
engineers were redeployed to its call centre for
this reason. ‘Like many other companies,
attracting and retaining skilled people for our
call centre can be difficult,’ says Keeney. ‘We
provide full training for the engineers before
they move and we find that their technical
knowledge helps us to provide an even better
level of customer service on the phone.’ BT
32
offers a level of pay protection for redeployed
staff. But in this particular case, as both groups
of staff were on the same grade with equivalent
salaries, this was not an issue.
‘If staff are willing to be flexible and accept
changes, so far we have generally been able to
find a position within the organisation for them,’
continues Keeney. ‘To succeed during this
difficult time, we have tried to get the whole
organisation to pull together and become
stronger as a unit.’
Loaning staff to other companies
BT has also rolled out a scheme whereby
employees are loaned to other companies. It uses
an employment agency to co-ordinate this
activity. The agency finds six to 12 months’
work for the chosen employees. The individuals
are paid by the host company but retain their
employment with BT. The employees can be
asked to change their current working practices
but retain their pay and conditions, which BT
recovers from the other company.
This arrangement works particularly well with
employees who the company has found difficult
to redeploy, such as those located in remote
areas. ‘We’re only talking about a few employees
here,’ says Keeney. ‘We don’t want these people
to leave because we know we may need their
skills in the future. It is inevitable that a few will
decide that they want to continue working with
the host company – that’s a risk we take. But the
expectation is that they will return to us with a
wider range of experiences and new skills.’
Time out package to reduce costs
BT introduced a ‘time out’ package in June
2009. This offers staff the opportunity to adapt
About BT
BT is a provider of communications solutions and
services, operating in 170 countries. It consists
principally of seven lines of business: BT Global
Services, Openreach, BT Retail, BT Design, BT
Operate, BT Fleet and BT Wholesale. The company
employs over 100,000 people.
IDS HR Study 902 • September 2009

their hours to suit them and improve their work-
life balance. Meanwhile, the company hopes to
benefit by reducing labour costs. The package
brings together some existing flexible working
arrangements that have been offered by the
company for some time and a couple of new
initiatives.
The company runs a quarterly staff survey as a
way of listening to employees’ views and taking
feedback onboard. It used this to gauge potential
levels of interest in its new flexible working
initiatives before they were introduced.
Part-paid sabbaticals
As part of the time out package, BT has
commenced a pilot whereby small numbers of
employees can now apply to take a sabbatical
usually for a period of three to six months on
25 per cent of their normal salary. They are able to
spend the time as they wish – for example, taking
an extended holiday, looking after family or
pursuing personal interests. The main exception
to this is for activities that represent a conflict of
interest, such as working for a competitor.
Reduced working hours
The time out package also now includes the
option of reducing normal working hours.
Employees taking this option receive a financial
incentive in the form of a one-off payment. The
amount depends on the reduced hours agreed.
Their salary is pro rated on the basis of the
number of contracted hours. The hours worked
vary to suit the individual. For example, some
employees who have children have applied for
term-time working to help them save on
childcare costs and better manage their family
responsibilities.
IDS HR Study 902 • September 2009
BT
Applying to work flexibly
Not all options are available to all staff. BT has
targeted the groups it thinks particular
arrangements will appeal to most. Employees
who are eligible submit an application, which is
then signed off by the individual’s line manager
and HR. ‘It’s only been running for about six
weeks,’ says Keeney. ‘The take up has been
moderate so far – but that’s what we expected.
We’re aware that not everyone is in a position to
take a drop in salary. However, some employees
are benefiting from working reduced hours and
welcome the opportunity to take some time out.’
The use of the time out options in each area of
BTs business depends on the needs of the
customer and the demographics of the group.
‘We wanted employees to be aware of what
options are available to them,’ says Keeney. ‘But,
at the same time, we know from our research
that for some front-line staff what we are
offering is not of interest, either for financial or
personal reasons. For some groups of staff, these
options are not available because we need the
employees to be there full-time for operational
reasons.’
Engaging staff in a recession
‘The economic recession has forced us to make
some difficult decisions. We’ve had to seek ways
of reducing cost – and wherever possible have
done so without making redundancies,’
concludes Keeney. ‘At all times we have tried to
maintain two-way communication with our
workforce and a good professional relationship
with the trade unions. We recognise that it is
absolutely vital that we continue to engage our
employees if we are going to prosper as a
business in the long-term.’
33
Managing redundancy
Successful restructure at Cambridge Building Society
At the end of 2007, Cambridge Building Society announced a major change programme to improve
its performance, increase its service and maximise the potential for an independent and sustainable
future. As a result, a new structure provided a number of newly created positions, and a small
number of redundant roles were identified. While the impact of the recession on its business has
been minimal, the Society had to make redundancies in its business development team in the
autumn of 2008. To soften the blow to affected individuals, it offers better-than-statutory
redundancy payments and outplacement support.
Managing change
Following the appointment of Stephen Mitcham
as Chief Executive and Director in 2007,
Cambridge Building Society conducted a full
strategic review of its operations. Its aim was to
ensure that it was in a position to deliver a
sustainable and financially strong performance.
The review resulted in a large-scale restructuring
exercise, which led to 16 redundancies.
Announcing the restructuring
Cambridge Building Society announced its
intention to review its business using a company-
wide presentation in December 2007.
Employees were then kept informed of any
further developments on a regular basis
throughout the following year via internally
appointed communication co-ordinators.
At the end of 2008, the Society formally
presented the details of its change programme,
explaining to all employees how it would work
and the effect on them as individuals. ‘We
viewed the restructuring programme as bringing
in exciting opportunities to improve our
business, and offering employees the chance to
take on additional responsibilities and develop
their skills,’ says Louise Bateman, Head of
People at Cambridge Building Society.
‘Obviously, change can be daunting for staff so
we ensured that they were given advance notice
and plenty of detailed information to better
prepare them for the restructuring. We didn’t
rush the programme and engaged in honest,
open communication with all those affected to
allay any concerns.’
Overseeing the programme
The Society appointed a Change Programme
Director to manage the restructuring process. A
steering committee was also established to
ensure good project governance and oversight of
deliverables, timescales, budgets and resources.
The change programme had 13 separate work
streams overseen by work stream leaders who
were drawn from across the Society’s executive
and management team. The Programme
34
Director provided monthly updates
supplemented by quarterly presentations to the
board. In addition, one of the Non-Executive
Directors acted as ‘well-informed director’.
Restructuring the branch network
As part of the changes, a ‘branch optimisation’
work stream was established. An outcome of
this was the development of a new tiering system
for the society’s branches. The branches were
allocated to tiers on the basis of the local
customer base, opportunities for new business
and sales performance. Ten branches were rated
as tier one and the rest as either tier two or three.
The Society then implemented its new structure
to match the tiers.
New roles
A range of new positions were created to fit with
the new structure and replace existing jobs.
Most of these were on an equivalent level, while
some offered greater scope for employee
progression. Functions at the Society’s head
office were also restructured. The Society
created job descriptions to match each new
position.
‘While the restructuring programme meant that
the Society had to cut jobs in some areas, it also
allowed us to offer better career opportunities
for many employees,’ explains Bateman. ‘For
example, the role of Branch Manager was
About Cambridge Building Society
The Cambridge Building Society is an independent,
local, mutual Society. It aims to offer competitive
rates to both savers and borrowers; and to provide
a market leading service to the community from
conveniently situated branches. It employs over
175 people.
The Society’s head office remains in the centre of
Cambridge and supports a strong branch network
in the local area, including several branches in
Cambridge – branches in the majority of nearby
towns, such as Ely, Newmarket, Soham and St Ives –
and a further 11 branches in surrounding villages.
The Society has £1 billion of assets.
IDS HR Study 902 • September 2009

introduced in our tier one branches that were
previously managed by a supervisor, offering
employees the chance to apply for a promotion.’
Closing branches
During its strategic review, Cambridge Building
Society identified four of its 23 branches that
were not performing to expected business levels.
Based on its research, it decided that these
branches did not have the potential to improve.
‘Our branch network remains at the heart of our
business,’ says Bateman. ‘But we wanted to
ensure that we were using our resources to their
best potential.’
The Society closed the branches on 31 May
2009. All staff in these branches were identified
as ‘at risk’ of redundancy. However, due to the
initial restructuring programme, there were
newly-created positions at other branches that
had been held. ‘In the end, only a handful of
employees who were not found a suitable role in
another branch or did not want to move were
made compulsorily redundant,’ says Bateman.
Applying for the new positions
All employees were provided with information
about the new positions. They were then asked
to submit their CVs and completed application
forms for any suitable roles. To help them in
applying for the jobs, they were provided with
training on how to prepare an application form,
create a CV, perform at interview and give a
presentation. ‘We didn’t want employees to feel
nervous about the process or think that we were
trying to trip them up,’ says Bateman.
Matching employees to roles
The Society used an assessment centre approach
to match employees with jobs in the new
structure. The assessment centre comprised:
● a robust competency-based interview
● psychometric analysis
● observed role plays
● a presentation (for those applying for jobs at
supervisor level or above).
‘One of our objectives was to ensure that we had
the right people doing the right jobs,’ says
Bateman. ‘Therefore, we designed the
assessments so we could understand the skills
and talents of our employees better and take a
more objective approach to how we matched
them to positions within the new structure. This
process worked well and we now use it in the
recruitment of external candidates.’
IDS HR Study 902 • September 2009
Cambridge Building Society
Introducing a redundancy policy
Cambridge Building Society established its redundancy policy in 2008.
‘We introduced a policy at this time because the recession and our
impeding restructuring exercise meant that this was the first occasion
in our 158-year history we’d had to consider making redundancies,’
says Louise Bateman, Head of People at Cambridge Building Society.
The Society conducted research into the redundancy policies at local
firms and within its industry to ensure that the package offered would
be comparable to similar organisations. ‘We got feedback that many
local organisations were giving payments at the statutory minimum
level because of the impact of the recession on their business,’ says
Bateman. ‘However, we decided to offer a more generous package to
reflect the contribution over the years from our employees.’
Bateman drafted the policy document and asked a local law firm to
verify that it complied with relevant legislation. The final version was
introduced and made available to staff on the Society’s HR intranet.
The policy is designed to ensure that staff are fully consulted and
given the chance to make suggestions, and consider other
opportunities. ‘We feel it is very important to provide as much
information as possible as we recognise this is a very difficult time,’
continues Bateman. ‘As we provide enhanced payments, we offer
these within a compromise agreement. This means that the employee
is fully informed and the Society is protected.’
Considering alternative roles
In cases where employees’ applications for new
roles were unsuccessful, they had a further
meeting with Bateman or a member of the HR
team, and their line manager. At this meeting,
they were given full feedback on why they were
not suitable for the particular role. They were
then offered any alternative roles that matched
their skills and experience. In some instances,
employees were required to have a further
interview with the line manager of the
alternative role.
Redeploying staff
Most employees, who worked in one of the
branches that was closed down, were successfully
relocated to another branch. All of the Society’s
branches are located within a 20-mile radius of
the Cambridge area. Therefore, employees are
generally able to commute to all branches from
their home address. If they were moved to a
different branch and this involved additional
mileage on top of their normal commute, the
Society compensated them for the increased
travelling cost. Staff who were redeployed to a
role in a different branch were given a six-week
trial period, at the end of which they could chose
to stay on or opt for redundancy.
Seeking to limit redundancies
The Society sought to limit the number of
redundancies by reviewing the contracts of all
temporary staff, and through natural wastage.
‘Because four branches were due to close, we
35
Managing redundancy
Responding to the economic recession
Cambridge Building Society believes that, due to its careful
management of risks, it has not been too badly hit by the recession. ‘As
a mutual organisation, we’re not out to make huge profits,’ says Louise
Bateman, Head of People at Cambridge Building Society. ‘We follow
the mutual ethos and put our members first. We have avoided taking
risks with the products and services that we offer. Unfortunately, we
did have a drop in business levels as a result of the downturn and that
led to a small number of redundancies in one team.’
In late 2008, the Society identified three management positions in its
business development team as redundant. These positions involve
liaising with property development and mortgage brokers in the local
area to attract new mortgage business. ‘Because of the fall in the
market, we simply weren’t able to keep the team at the size it was,’
says Bateman.
The following criteria were used to rank individuals in the selection pool:
● attendance record
● performance and quality of work
● qualifications and experience
● relevant skills and competencies
● general conduct and attitude
● versatility and adaptability
● disciplinary record.
Employees in the pool were given a score against each criterion and
those with the lowest score were selected for redundancy. ‘This
involved difficult decisions and we wanted those selected to know
that it wasn’t their fault and they hadn’t done anything wrong,’ says
Bateman. ‘We made the selection process as objective as possible and
made efforts to help them to find other jobs by providing
outplacement support.’
looked carefully at staffing levels in each area of
the business,’ explains Bateman. ‘If we had
employees who had resigned or we’d released a
temporary member of staff, we waited to fill the
position with an individual who was at risk of
redundancy. We wanted to keep as many of our
people as possible.’
Offering voluntary redundancies
To further reduce the need for compulsory
redundancies, the Society offered employees the
chance to apply for voluntary redundancy, on
improved terms, or early retirement. ‘We wanted
to minimise the number of compulsory
redundancies,’ says Bateman. ‘We had a few
people who expressed interest in these options,
but only received one formal application.’
Making redundancies
The first job cuts took place at the top of the
organisation – the executive team was reduced
from eight to six members. ‘It wasn’t just those
on the lower grades that were affected by the
restructuring programme – we started at the
top,’ says Bateman. ‘The restructuring was
36
about making our business work more
effectively, rather than reducing headcount.’
At the branch level, ten individuals were made
compulsorily redundant. This was necessary in
cases where there were no suitable alternative
jobs available or an employee was not interested
in applying for a different role within the new
structure.
The Society established a redundancy policy in
2008 offering better than statutory redundancy
payments (see the box on page 35). This was
applied for all employees made compulsorily
redundant. The Society ensured that all
employees facing redundancy were consulted
with fully. It also asked them to sign compromise
agreements to manage the risk of a claim.
Providing outplacement support
Those employees who were made redundant
were offered off-site outplacement support. The
service was run by a local consultancy with
expertise in this area. It offered staff advice and
guidance on preparing their CVs and searching
for a new job. The consultant also helped
employees to hone their interview skills and
think about their career aspirations. ‘The
support didn’t just concentrate on the obvious
ways of finding a job – like looking through the
newspaper or signing up with a recruitment
agency,’ says Bateman. ‘It helped staff use their
networks and even think about making a career
change. We’ve had very positive feedback from
those who used it.’
Maintaining employee engagement
As the vast majority of staff were retained
following the restructure, the Society put in
place new systems to ensure that employees were
engaged and performing to the best of their
ability. For example, it introduced a new
performance management system – ‘What Good
Looks Like’. This encompasses a behavioural
competency framework based on the company’s
service principles and values. ‘As part of the
improvements to our branches, many of the new
roles had a greater focus on sales,’ says Bateman.
‘We ran workshops that were devised to help
employees to challenge and improve behaviours,
and encourage them to meet their targets.’
Managing employees
In addition, all line managers – from executives
through to supervisors – were provided with
training on coaching skills to assist them in
managing and engaging their teams more
effectively. They provide their direct reports with
quarterly appraisals to offer constructive
IDS HR Study 902 • September 2009

feedback, review progress and identify areas for
improvement.
Helping employees to progress
To ensure that employees progress at the right
time, the Society has also rolled out annual
career reviews with employees. ‘If individuals
want to move up in the organisation, we want to
know how we can support them and make this
happen,’ says Bateman. ‘If they are happy to stay
at the same level, that’s fine. But we don’t want
to lose talented people because we’re not
providing them with the necessary
encouragement and opportunities.’
Reviewing salary and benefits
The Society also introduced a new pay and
grading structure, and reviewed its benefits
package to ensure it was competitive when
compared with external benchmarks. As a
result, some improved benefits have been added
– for example, the Society provides employees
with an additional day’s leave on their birthday
and on the anniversary of their start date.
IDS HR Study 902 • September 2009
Cambridge Building Society
Positive impact
In the last quarter of 2008, Cambridge Building
Society’s staff opinion survey indicated that
employee engagement was very good. The
Society has seen an increase in performance
levels, with the results of its ‘mystery shopper’
survey also showing improvements.
‘As expected, engagement levels did take a dip at
certain stages during the restructure,’ says
Bateman. ‘On the whole, employees have
responded incredibly positively to the changes.
They are now even more focused on delivering
results and improving the business.’
Cambridge Building Society believes that it is
better prepared to deal with any challenges in
the coming years and is not expecting to make
further redundancies in the foreseeable future.
‘We are pleased with the results of our
restructuring exercise and feeling very good
about what the future holds,’ concludes
Bateman.
37
 September 2009
*256175*

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