Redundancy: Reduction in Headcount not Essential

The EAT has held that a reduction in headcount is not required in order for there to be a redundancy situation.

In Fauchon v Packman Lucas Associates, a book-keeper was asked to reduce her hours because of a downturn in business and the introduction of new accounting software which meant that there was less work for her to do.  When she refused she was dismissed.  The tribunal found that her dismissal was by reason of redundancy.

Before the EAT, the employer sought to argue that there has to be a reduction in the number of employees before a dismissal can be regarded as by reason of redundancy.  The EAT disagreed.  This would be focussing purely on the question of whether there was a reduced need for employees and ignoring whether there was a reduced need for work of a particular kind.  It is necessary to consider the whole of the statutory definition of redundancy and not just one aspect of it.

There may be cases where the needs of the employer’s business are for fewer employees to do the same amount of work.  If employees are dismissed as a result, their dismissals will be by reason of redundancy. But likewise if, as here, the amount of work available for the same number of employees is reduced, then any resulting dismissals will also be by reason of redundancy. 

This case demonstrates that if an employer needs the same number of employees but needs them to work reduced hours as it has less work for them to do, any resulting dismissals will be by reason of redundancy.  Employers considering going down the route of reducing employee hours in response to a business downturn will therefore need to take possible redundancy costs into account.