Redundancies: what is pooling?

“Pooling” is a term that comes up in many redundancy situations but employers and employees are often confused as to what it means. Put simply, when more than one person does a job and there is a need to remove some (but not all) of those roles from the business, pooling is a way that the employer can fairly identify who should be made redundant.

Let’s say that a shop has five sales assistants but the employer identifies that there is really only a need for two. All five assistants should be pooled together before a decision is made about who stays and goes. It’s not fair to pick any three for redundancy without following this process.

When is pooling relevant?

“Redundancy”, as defined in the Employment Rights Act 1996, can mean several types of scenario; for example, closing down a particular place of work, removing a particular team or department from the organisation, or even the business ceasing to provide a particular service or good which means the individuals providing that work are no longer needed. Often, particularly with redundancy situations in smaller businesses, only one type of role is put at risk of redundancy, or there is only one person in each type of role which is identified as being at risk. In those circumstances, the need for pooling does not arise.

However, where there are multiple individuals in a particular role or at a particular tier of seniority and the employer needs to reduce the number of people in that role or at that level, they will need to place all the relevant employees who are at risk of redundancy into a “pool”.

How to identify the correct pool

A redundancy pool is typically comprised of employees doing similar work or who work at a similar level. Where a pool is needed, the employer must consider what the appropriate grouping will be (rather than making an arbitrary decision) or it risks any subsequent dismissals being challenged by way of an unfair dismissal claim in the Employment Tribunal (where the employee has the requisite two years’ service).

However, there are no fixed rules about how to define a pool and employers generally have broad discretion and flexibility to identify what the appropriate pool is providing that they genuinely apply their mind to this exercise.

Factors that are likely to be relevant to identifying a pool are:

• What type of work is no longer needed or is reducing.
• The extent to which employees are doing similar work.
• The extent to which employees’ jobs are interchangeable.

Employers are generally keen to keep a pool as limited as possible to minimise the disruption to the workforce.  Whilst this can be open to challenge by at-risk employees (in whose interest it is to have more individuals within the pool to reduce their chance of being dismissed), a narrow pool can, in certain circumstances, be reasonable.

How to choose who in the pool should be dismissed

In order to be reasonable, the decision to dismiss individuals within the redundancy pool must be based on selection criteria which are, as far as possible, objective, measurable and capable of independent verification.

Selection based purely on subjective personal opinion (e.g., a poor relationship between a manager and an employee) is likely to be unfair in many cases. Criteria which are expressed in insufficiently precise terms can also be open to challenge.

Typical criteria include performance, length of service, attendance and disciplinary records. Clearly, good record-keeping will assist an employer in this regard, as seeking to rely on, for example, poor performance can be challenging for an employer where concerns around employee performance are not documented. Employers should also be mindful of avoiding criteria that are in any way discriminatory.  This may not always be readily apparent at first instance. For example, using attendance or sickness records can disadvantage disabled employees.

Employers have discretion as to whether to attach a particular significance to certain criteria as against others however they should be able to justify weighting a particular criterion in this way.

Once criteria are identified, the employer must apply them fairly to each of the employees within the pool and “score” them accordingly. The outcome of that scoring process should inform who within the pool should be selected for redundancy. The employer should disclose individual scores to each employee, explaining how they were arrived at, and give the employee a chance to challenge their individual markings as part of their individual consultation process before any final decision on redundancy is made.