Redundancies are not only traumatic for the employees who lose their job but can also be disruptive and demotivating for the employees who remain. It is therefore clearly good business practice and good industrial relations practice for employers to avoid redundancies whenever they can. It is also advisable from a legal perspective. An employer that dismisses employees for redundancy without first consulting with its employee representatives on whether there might be alternatives may face a legal claim (warning and consultation).
It is therefore important for a company to explore whether the development that has led it to consider redundancies could be addressed in some other way. If the challenge is to cut labour costs, for example, the company might be able to achieve savings by negotiating reductions in wages or other benefits with its recognised trade union or with the workforce. It might also be possible to make savings by restricting recruitment, reducing the use of agency staff and external contractors or cutting overtime working.
If a company is considering reducing its use of temporary employees as an alternative to making permanent employees redundant, it needs to bear three legal considerations in mind. The first is that temporary employees may qualify for protection from unfair dismissal and the right to receive a redundancy payment, if they have the appropriate length of service. The company is therefore under the same obligations to follow the statutory minimum dismissal procedure and to act reasonably in dismissing them for redundancy as it is in relation to the permanent workforce. For employees on fixed-term contracts, this applies whether they are dismissed mid-contract or their contracts are not renewed (fixed-term contracts).
The second consideration is that it is unlawful for an employer to treat fixed-term employees less favourably than permanent employees unless it has objective justification for doing so (equal treatment principle ), meaning that a company will need to be in a position to justify a decision to make fixed-term contract employees redundant before permanent employees. The Government guidance on the Regulations ( Contracts of employment links ) suggests that where fixed-term employees have been brought in specifically to complete particular tasks or to cover for a peak in demand, the employer is likely to be justified in making them redundant at the end of their contracts.
The third legal consideration relates to discrimination and arises for instance where a much larger proportion of the company's temporary employees than of its permanent employees are of a particular sex or racial group. In those circumstances, it may amount to indirect sex or race discrimination to make the temporary employees redundant first, unless the company can objectively justify its strategy on the basis of a real business need. Companies can obtain advice on this issue from their Association.