Redundancy Procedure in the Isle of Man

Fiscal tightening, political uncertainty and global tensions can all lead to a gloomy economic outlook that has a trickle down effect on smaller jurisdictions such as the Isle of Man. But our economy has bucked global trends and long may that continue.

Nonetheless, when cuts have to be made some employers will contemplate shedding staff to reduce overheads so will look for a redundancy rulebook. There is much guidance on how to implement a redundancy programme but the internet is full of UK guidance where there are some significant different features. One such key difference is the UK’s statutory requirement to have collective consultation where 20 or more redundancies are proposed. UK employers sometimes fall foul of these stringent requirements.

Manx employers are not statutorily caught by this requirement but that does not obviate the need for consultation to be a key part of the redundancy process. In fact, a recent Court of Appeal case in England reviewed the type of consultation that should take place in cases where the statutory collective consultation provisions do not apply, so called small scale redundancies involving fewer than 20 staff. In the Isle of Man the majority of redundancies are likely to fall into the small scale category.

In the English case, the Employment Appeal Tribunal had earlier ruled that even for small scale redundancies the employer should undertake general workforce consultation as a standard step. That would represent a change from the general consideration that small scale redundancies do not require collective consultation in order to be a fair redundancy dismissal.

The Court of Appeal in October 2024 has overruled this and restored the original position whereby effectively each case is treated on its merits. General collective consultation with the workforce will not be needed in order for smaller redundancies to be fair because, the Court of Appeal felt, such matters could be dealt with as part of individual consultation with affected staff and in any event the adequacy of consultations should be addressed on a case to case basis depending on all of the circumstances. The Court of Appeal accepted that group meetings may be a useful way of gleaning staff views but their appropriateness would depend on the circumstances.

The main components therefore of a redundancy procedure for Isle of Man employers would therefore continue to be something along the lines of these steps (all of which should be set out in detail in an employer’s redundancy policy):-

• To avoid compulsory redundancies first consider: recruitment restrictions, invite volunteers or early retirement, lay off and short time working, flexible/home/part time working, job shares/splits and sabbaticals;
• Establish a clear process;
• Communicate with employees including collective consultation where needed;
• Establish fair redundancy criteria;
• Hold detailed consultations taking account of individual circumstances, explaining all the financial implications and comprehensively considering alternative positions;
• Ensure proper notice is given;
• Offer an appeals process;
• Offer general support including outplacement facility.

Retaining quality members of staff represents good long-term planning and fosters bilateral loyalty. Flexible, home and part time working are now so common that they must be factored into any process that involves a potential headcount reduction. In an economy that remains robust, Island employers should beware of proceeding too hastily to compulsory redundancies.

John Aycock is head of M&P Legal’s employment team and has over 30 years’ experience of advising on labour law matters in 3 different jurisdictions.