The news of the collapse of the Carillion group will have been met with horror by many business owners and tens of thousands employees, across many different sectors of the UK economy and beyond.

The knock-on effect of such a catastrophic failure causes widespread ripples with often disastrous consequences for those caught up in them.

Carillion was a huge organisation. It managed nearly 500 public sector contracts and employed 19,500 staff in the UK. Not forgetting the numerous companies who are caught up in the misery of the collapse. Such as Balfour Beatty at the larger end of the scale, who will be affected to the tune of £45m.

Then there are the smaller companies who are left in significant financial difficulties, either due to unpaid invoices or simply the absence of their biggest customer.

The fact that such a large organisation has collapsed, leaving behind it significant debts owed to its suppliers, will result in an urgent need for immediate cost savings.  This will particularly be the case for any business that was dependent upon its contract with Carillion for work, and given its scale, this is likely to be a common scenario.

So, like any company who has lost work and has urgent cost savings to make, it’s almost certain that assessing the case for redundancies will be high on the list.

There are some very clear golden rules when you are making redundancies and it’s essential that you address the following points and plan appropriately:

ONE.

How many employees do you need to make redundant?

If it is 20 or more you will have to undertake a collective consultation process with elected employee representatives for either 30 days (20-99 employees) or 45 days (100 or more employees).

If you fail to do this or get the process wrong, the penalty is up to 90 days’ pay for every affected employee.  Do the maths – this is a significant risk to your business and it is essential that you get this process right.

TWO.

Make sure you get the communications right.  Remember, this isn’t just about those you are having to make redundant but everyone who stays will also be looking to see how you manage the situation.  Even if you make the redundancies in a legally compliant way, if you don’t do it with a degree of empathy or concern for those affected it may well have a longer term impact on whether those employees that survive the process will actually choose to stay with you.

THREE.

Identify where your business needs to reduce the number of people employed.  Remember, it’s about the roles not individuals. This can never be an exercise of targeting individuals. If you do that the process will be fundamentally flawed and unfair.

FOUR.

Ensure that your managers are equipped to undertake the process in a legally compliant and compassionate manner.  They will need guidance and support to be able to do this.

FIVE.

You will then need to select the individuals who are to be made redundant in a fair manner through the use of selection pools and scoring systems.  This requires logic and planning. If challenged in an employment tribunal you will need to be in a position to justify why you chose to structure the redundancies the way you did.

SIX.

Consultation, consultation, consultation. Underpinning the entire process is consultation with the affected employees. They must, individually, have the opportunity to question what you are doing, to query and challenge any scores that have resulted in their selection and to bring forward ideas about other ways to avoid making them redundant.

Businesses often see the urgent need to reduce cost as the overwhelming need – this urgent need overriding, or putting at risk, legal compliance and employee engagement.  That’s not to say that redundancies cannot be undertaken with a degree of urgency but careful thought must be given to the risks involved.