Some companies have an established procedure on how redundancies should be handled, which may have been agreed with their recognised trade unions. Having an established procedure can, however, limit a company's flexibility to deal with a redundancy situation in a way that meets its current business needs. As explained elsewhere in this Guide (incorporating terms ) a company's procedure can in some circumstances be part of an employee's terms and conditions of employment. If it is, the company may face breach of contract claims if it fails to follow it.
Many aspects of a redundancy procedure are unlikely to be incorporated into individual employees' contracts because they deal with issues, such as collective consultation, that are not relevant to individuals' rights. There are some aspects of redundancy procedures, however, such as selection criteria and redundancy payments, that do relate to the rights of individuals and so may be capable of becoming part of individuals' contracts.
A redundancy procedure will not become part of employees' contracts simply because the company routinely follows it when making redundancies. Nevertheless, the fact that the company follows the procedure could be used as evidence that it considers itself legally bound to do so. In order to avoid any uncertainty about the legal status of the procedure, the company should make clear to the workforce when the procedure is first adopted whether any part of it is intended to be incorporated into employees' contractual terms and conditions.
If a company negotiates with a trade union, it may decide to agree a procedure for handling redundancies with the union. Before finalising any agreement, the company should decide whether it wants any part of the procedure to become part of individual employees' contractual terms. It should then check whether the wording of the collective agreement achieves the results it wants. If its employees' contracts already contain a term that incorporates collective agreements, it will also need to clarify whether and to what extent this particular agreement is covered by that term.
Whether or not a company's redundancy procedure is contractual, if it has informed its workforce about the procedure and then fails to follow it, it may face claims for unfair dismissal. This is particularly likely where the procedure has been agreed with a trade union. A company should therefore always ensure that it has good reason for departing from an established procedure, even if it is not contractual. If a company wishes to depart from a contractual procedure, it will need to change its employees' contractual terms. The legal issues that arise when changing contracts are covered in elsewhere in this Guide ( Changes to contracts ).