Who Controls Selection under ‘Voluntary’ Redundancy? The Case of the Redundant Mineworkers Payments Scheme

AuthorVictoria Wass
DOIhttp://doi.org/10.1111/j.1467-8543.1996.tb00651.x
Publication Date01 Jun 1996
Britkh
Journal
of
Industrial
Relations
34:2
June
19%
ooo7-1080
pp.
249-265
Who Controls Selection under
'Voluntary' Redundancy? The Case
of
the Redundant Mineworkers
Payments Scheme
Victoria Wass
Voluntary redundancy schemes which offer extra-statutory redundancy
payments are ojlen used
as
a
mechanism for implementing redundancy in
Britain.
This
paper reports the impact of one such scheme, the Redundant
Mineworkers Payments Scheme of
1984,
on the scale of
and
selection for
redundancy in the coal industry.
Formal
agreements, and ultimately statutory
obligations, which restrict managerial control over scale
and
selection in
redundancy were bypassed by compensation offers
made
informally to
individuals. It
is
demonstrated that, even under
a
scheme based entirely
upon self-selection, the employer, through control over the structure of
compensation, retains control over selection. The scale and selection effects
facilitated by voluntary redundancy schemes have important implications for
equity in the workplace
and
efficiency
in
the external labour market.
1.
Introduction
Redundancy is the product
of
disequilibrium in the internal labour market
where the intentions
of
employers in respect
of
voluntary separations exceed
those
of
employees.
In
Britain, public policy in the
form of
the Redundancy
Payments Act
1965
sought to resolve
this
mismatch
of
intentions by
according the right
of
dismissal to employers. In return, redundant workers
with at least
two
years
of
continuous job tenure receive a compensation
payment. Employees are afforded a degree
of
employment protection under
the Employment Protection (Consolidation) Act
of
1978
in which a
redundancy is distinguished from an
unfair
dismissal by a requirement that it
results from diminishing labour requirements
of
the
firm,
that selection is
fair
and that prior notice is given. The available evidence relating to the
management
of
redundancy both
ex ante,
in the
form of
collective
Victoria
Wass
is
at
the
Cardiff
Business
School,
University
of
Wales
College
of
Cardiff.
8
Blackwell
Publishers Ltd/London
School
of
Economics
19%.
Published
by
BlafLweU
Publishers
LuL
108
Cowley
Road.
Oxford, OX4 lJF, and
238
Main
Street,
Cambridge,
MA
02141,
USA.
250
British Journal
of
lndustrial Relations
agreements, and
ex post,
in the form of procedures actually implemented by
hs,
indicate that voluntary redundancy schemes and extra-statutory
redundancy payments (ESRP) are widely used in Britain, particularly in the
unionized sector (Booth 1987: 401).’ In the 1990 Workplace Industrial
Relations Survey, 21 per cent of establishments that reduced their work-
force during 1990 used a voluntary redundancy scheme (Millward
et al.
1992:
321). In terms
of
redundancy payments, a survey of trade unions revealed
that
88
per cent bargain over redundancy payments (Booth 1987:
409,
and,
in a survey of establishments that had claimed against the Redundancy Fund
in 1981,42 per cent of redundant workers who were eligible for statutory
compensation were found to have received enhanced redundancy payments
(IMS 1981a: iv). In 1992,
60
per cent of workers whose redundancy was
effected under a voluntary scheme and over half of workers affected by
compulsory redundancy received ESRP (Employment Department 1993:
319).
Voluntary redundancy is generally defined as a dismissal secured through
the consent of the worker (see Lewis 1986: 41). Consent notwithstanding, all
redundancies are a form of enforced labour mobility (MacKay and Jones
1989:
53-4)
in which an element of compulsion distinguishes a voluntary
redundancy from a voluntary quit. In practice, what differentiates a
voluntary redundancy
from
a compulsory redundancy
is
the method of
selection such that a redundancy scheme is classified as voluntary where
control over termination of a contract of employment rests nominally with
the employee and redundancy is self-selected rather than management-
selected.
This paper uses a case study from the coal industry to demonstrate the
extent to which an employer is able to control the scale and distribution
of
redundancies under a voluntary redundancy scheme.
A
model is developed
in which the individual collier’s decision about whether to take redundancy
or to relocate to an alternative colliery is determined jointly by the financial
incentives under the redundancy scheme, which are controlled by the
employer, and by
his
economic attachment to the job. In the coal industry,
job attachment arises because a miner’s employment prospects within the
industry are better than in the external labour market on account of, among
other things, skills that are specific to the mining industry.
The Redundant Mineworkers Payments Scheme of 1984 (henceforth
RMPS 1984) governed dismissals from the coal industry between March
1984 and March 1986. RMPS 1984 is a rare example of a redundancy scheme
based
entirely
on employee self-selection: Two important implications
follow from this. First, if it is demonstrated that redundancy outcomes
(redundancy or relocation to another colliery) are employer-determined
under a redundancy scheme which most closely resembles a voluntary quit,
then the concept of voluntary choice for workers in redundancy is indeed
shown to be inappropriate. Second, in terms of methodology, since
redundancy outcomes are not affected directly by employer selection
(compulsory redundancy) or by the exclusion of certain groups from
8
Blackwell Publishers
LtdlLondon
School
of
Economics
1996.

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