Local government update

Local authorities have been grappling with the burden of reducing budgets for some time. If we hoped that the so-called ‘green shoots of recovery’ signalled an end to budget reductions we are likely to be disappointed. In June the Chancellor, George Osborne, said that due to a £20bn black hole in the public finances austerity measures would have to continue
until 2020.

The outcome of next year’s general election is unlikely to have any immediate impact on austerity measures, following Labour’s recent commitment to adhere to government spending plans for 2015/16 at least.

With staff employment costs representing the lion’s share of most budgets, staff numbers have been, and will remain, a target for reductions. If significant job cuts have not already happened, then they seem unavoidable. Many local authorities have gone through the process of seeking volunteers to reduce the staff bill and may now be facing the prospect of making compulsory redundancies.

While it is clearly a worrying and unsettling time for management and staff alike, the need to balance the books may present an opportunity for local authorities to improve their service provision and ensure its sustainability for the future.

Redundancy v restructure

Understandably, local authorities have been
keen to utilise measures other than compulsory redundancies in recent times, but recruitment freezes and voluntary staff departures may
no longer achieve the cost savings and the transformation of service delivery and working practices that authorities require. In addition, incentivising voluntary departures through enhanced redundancy packages for those with long service and immediate access to pension benefits may not be as affordable in the future.

As pressures on budgets and resources intensify, an alternative approach for authorities may be to redesign the structure of certain services. By considering the primary function of a service anew, an authority can determine how the service can best be delivered and how the service should be structured, in the most effective way, without being bound by the constraints of existing arrangements. This may also present authorities with the opportunity to consider adopting new terms and conditions as part of the restructure in an effort to reduce costs and minimise the need for further
job losses.

The process of restructure can be an unsettling time for staff and management alike, but the positive effect that a successful restructuring exercise can have should not be underestimated. Restructuring can provide opportunities for staff development and growth, and ensure the sustainability of the service and safeguard jobs going forward.

A successful restructure

The first stage of any restructuring exercise will
be planning and strategy. Setting in place a route map, identifying the key stages in the process, the timescales and who should be responsible, will ensure that any flaws in the process are identified early and that legal requirements such as consultation periods are factored in.

It stands to reason that getting employees
and any recognised unions on board with the restructuring process from the outset will assist in making the process as productive as possible for all involved.

Communicating the authority’s case for restructuring to the workforce can help in achieving employee buy-in and minimise the threat of industrial action. If expressed in terms of avoiding the loss of a greater number of jobs, the necessity
of the exercise and the reasonableness of the proposals is often more evident.

Any authority embarking on a restructuring exercise will need to bear in mind statutory duties
to inform and consult, and the timescales involved under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE), and the Trade Union and Labour Relations (Consolidation) Act 1992 (TULCRA).

Changes to legislation in recent years has
helped reduce the timescales involved. In relation
to collective consultation, from April 2013 the minimum consultation period before dismissals takes effect is 45 days (where 100 or more redundancies are proposed) and 30 days (where 20 or more redundancies are proposed). In addition, changes made to TUPE in January 2014 now allow pre-transfer consultation for redundancy to start prior to the transfer, provided notification is provided in writing and is agreed. Both of these measures help to reduce the consultation periods required in any restructuring process.

Restructuring exercise

The second stage will be to determine the scope of the restructure. A wholesale service review will require consideration of the primary function of
the service and an analysis of what’s nice and
what’s necessary; i.e. what the authority is obliged to provide and what are added extras which may not be strictly necessary and may no longer be financially viable.

Consideration should be given at this stage to whether a new service delivery model should be adopted. Once the appropriate service delivery model has been determined, new roles can be created within the new structure which match
up with the skills requirements of the redesigned service. The creation of new roles can provide clarity in terms of duties and responsibilities for staff and avoid duplication of roles, thus streamlining the service.

Adopting a new service delivery model may well result in a local authority adopting a commissioning role for a particular service and outsourcing work, whether to a staff-owned mutual, non-controlled trust or a private sector partner. This will result in a transfer of staff and the engagement of the TUPE regulations. There may also be a desire to make changes to the terms and conditions of employees within the new structure. While considered by many to be a barrier to change, a TUPE transfer can provide opportunities to make changes, provided the correct strategy is adopted. If TUPE is engaged then any changes will need to be planned carefully and undertaken in the context of the wider restructure. The Court of Appeal’s decision in the case of Hazel and another v The Manchester College [2014] EWCA Civ 72 demonstrates this. The dismissals in this case were ultimately unfair because the claimants were no longer at risk of redundancy when they were required to sign up to changes in their terms and conditions, and hence the dismissals did not entail the changes in the workforce which are an
essential component of the ‘ETO’ defence (economic, technical and organisational reasons). However, had there been greater synchronicity between the redundancies and the changes to terms and conditions then this would not necessarily have been the case.

Know your workforce

Having the right employees in the right roles will be a key consideration in ensuring the success and sustainability of any service going forward. It is certainly worth investing time at the outset in identifying the skills and competencies that are required in the new structure and the existing employees who possess the necessary skills. This planning will ensure that skills gaps will not develop within the restructured service.

There may be a reluctance to depart from established redundancy procedures which may have been adopted some time ago, but it is a long-established principle that employers can depart from existing redundancy policies without resulting dismissals being rendered unfair and there may be considerable advantages in a restructuring process to deviate from the more traditional methods of selecting for redundancy.

Restructuring a service will undoubtedly require a degree of change moving forward and potentially a different skills mix; this presents an opportunity to assess the employability of the workforce.

Appointing employees to new posts, as opposed to selecting them for redundancy, gives an authority a greater degree of flexibility in the employees it retains. The Employment Appeal Tribunal established in the case of Darlington Memorial NHS Hospital v Edwards EAT/678/ 95 that where new job roles or new job descriptions are created in a restructure an employer is not under a duty to carry out the type of exercise that would be required when deciding who to select for redundancy.

The process of selecting for a traditional redundancy exercise is based on objective criteria looking at past performance whereas appointing employees following an interview process allows the candidate who will work best in the structure going forward to be appointed, even if this is based on a subjective view (Williams v Compair Maxam UKEAT/372/81). As the employer, the authority simply needs to act fairly and reasonably in making the appointment (Morgan v The Welsh Rugby Union UKEAT/0314/10).

Adopting a well-planned, holistic approach to any service restructure should better equip an authority to achieve a smoother journey and better outcome. SJ

Kim Howell is partner and head of the public sector employment team at Geldards