Redundancies in the technology sector – employment law considerations
After years of growth, progress and development within the technology sector, the tides seem to be turning following reports of significant redundancies being made across the industry.
In 2022, the technology sector was regularly making headlines for laying-off staff and/or making staff redundant. Unfortunately, this trend has continued into 2023, with ongoing reports of technology companies taking steps to reduce their headcount and cut their overheads. This does not appear to be slowing down following the alleged mass redundancy exercise which Meta completed in May 2023, where they have reportedly taken steps to remove 10,000 roles from the business structure.
Given the increasing headlines on redundancy within the technology sector, we thought that it would be helpful to set out some of the key employment law considerations that should be taken into account in any redundancy process within the UK.
At the outset, the word “redundancy” has a specific definition in law and it will only arise where one of the following circumstances apply:
- Business closure
- Workplace closure
- Reduction in work coming in or an expectation of a reduction in work coming in (e.g. loss of customer or contract)
- Reduced need for staff due to automation or change in the way things are done.
At the start of any redundancy process, employers should give thought to the business case for proposing to make redundancies. The business case should set out why a “redundancy” situation has been triggered (i.e. which of the above circumstances apply) and what impact this is likely to have on the business.
Employers must be careful when carrying out this exercise, and throughout any consultation process, to reduce the risk of employees successfully raising claims at the Employment Tribunal related to the process or, if applicable, their dismissal.
It is important to note that whilst only those with two years’ service or more can raise unfair dismissal claims (related to the fairness of the decision to make their role redundant and/or the fairness of the process), all employees (notwithstanding their length of service) can raise claims for discrimination (for example, if they feel that they have been unfairly selected for redundancy because of a protected characteristic, i.e. their age, gender, sex, disability).
In order for a redundancy process to be fair, employers will need to consult with those at risk of redundancy – this can be one person if there is a single role redundancy or if there is more than one employee carrying out a certain role, a selection process should be carried out to objectively score employees and identify those with the lowest scores who are at risk of redundancy. There may be a requirement to consult with elected representatives, rather than the individual employees, depending on how many employees are at risk of redundancy.
Consultation should be meaningful, whereby an employer should explore the proposal with the employees, obtaining their views/feedback before any final decisions are made. Generally speaking, employers should have no fewer than two consultation meetings with employees before any decisions are made. Of course, more meetings may be required depending on the circumstances and the employee(s) responses.
It is worth noting that only employees with two or more years of continuous service with the organisation who are dismissed by reason of redundancy will be entitled to a statutory redundancy payment. This is calculated in accordance with a statutory formula, based on length of service, age and current weekly pay, subject to the statutory cap which is currently £643 per week.
As employment law experts, we can guide employers through a redundancy exercise and advise employees on their position. To arrange a no obligation confidential chat with a member of BTO’s employment law team, please email email@example.com or call us on Glasgow: 0141 225 5291 / Edinburgh: 0131 222 2951.