Redundancy | How to do it properly
Handling redundancies is usually an extremely daunting task for employers. However, sometimes, it is a necessary business decision.
With employers now contemplating their post-COVID-19 future, redundancies are never far from the headlines. Redundancy is a particular complex area of employment law, and for employers who find themselves looking to make workers redundant, the process is everything.
In a nutshell, the key ingredients to a fair redundancy process are:
- Warning employees of redundancies;
- Creating and applying a fair and non-discriminatory scoring criteria;
- Consulting with employees; and
- Exploring suitable alternative employment options.
Avoid mistakes with our simple guide
We take you step-by-step through the process you need to follow when carrying out small-scale redundancies (fewer than 20 redundancies in 90 days).
Avoid mistakes with our simple guide
Start by asking yourself the following questions:
- Are you closing the business for which the employee was employed?
- Are you closing the place of business where the employee was employed to work?
- Is there a reduced requirement for employees to carry out work of a particular kind?
If the answer to any of these questions is yes, you are in a redundancy situation. To be certain, contact Ellis Whittam for Employment Law advice before proceeding to clarify whether your particular circumstance is in fact a redundancy situation.
It is important to note that you must not use redundancy as an excuse to dismiss an employee who has bad performance or a poor attendance record or who has committed misconduct. These issues should be handled in accordance with the particular procedures outlined in your Employee Handbook.
Is redundancy the only option?
Redundancy should always be the last resort. Before initiating redundancy measures, you should explore all other options, which may include restricting overtime, imposing a recruitment freeze or temporarily withdrawing non-contractual benefits as a means of keeping costs down.
Similarly, you should also consider whether you can make workers redundant while funding is available via the Job Retention Scheme (“furlough scheme”) as this was designed specifically to help employers avoid job losses.
If it is a redundancy situation and it is the only option, follow our 7-step process:
Step 1: Warn people of the potential of redundancy
You must warn all your employees of a potential redundancy situation and that it may affect them.
Step 2: Identify the redundancy pool
If you are shutting down a workplace, selection is not an issue. However, in other redundancy situations, you may need to identify the redundancy pool from which to select those employees who may be potentially made redundant. The pool should include individuals who are undertaking the same or similar work duties or who provide cover for each other, or whose skills are interchangeable.
Step 3: Decide on the selection criteria
You should create a scoring criteria – employee(s) in the pool will receive scores against this list and the employee/s with the lowest score will be selected for redundancy.
All the criteria you use must be fair, objective and non-discriminatory. Examples of such criteria are attendance record, disciplinary records, skills, experience and work performance. Any records you use must be fully accurate and up-to-date.
Be careful when considering:
- Length of service – Make sure that you are not discriminating on the basis of age, for example, as it is likely that this will disproportionately affect more young people who may not have worked for you too long.
- Absence record – Absences due to maternity leave, pregnancy and disability should not be taken into account.
Remember, you may decide to give a different weighting to different criteria depending on what you most value and need for your business.
You cannot select people for redundancy based on a discriminatory reason as this would give rise to a discrimination claim and is likely to make the dismissal unfair, with the employee being able to seek compensation in an Employment Tribunal. You cannot select an employee based on their age, gender, marital status, sexual orientation, race, disability, religion, belief, or gender reassignment. You cannot select them for being pregnant, being on maternity leave or paternity leave or exercising any of their statutory rights. Likewise, it is not permissible to select them for whistleblowing, being a part-time employee or being a member of a trade union.
Step 4: Consult with employees as a group
You must meet with all the employees in the redundancy pool and explain the reasons for the redundancies; how many jobs are at risk; why they are in the pool; the selection criteria; and the alternatives you are considering to dismissal. You should ask them if they have any suggestions to avoid redundancies and if there are any requests for voluntary redundancy.
It is essential to confirm what was discussed in the meeting in writing.
Step 5: Apply the selection criteria
You should score all the employees in the pool, ensuring that you are fair and consistent when applying the criteria. If possible, try to have more than one person involved to make the process as objective as possible.
Make sure you keep written records of the individual employee assessments.
Step 6: Consult with employees individually
You must write to all the employees who have been provisionally selected for redundancy, inviting them to a meeting. They are permitted to be accompanied by a trade union representative or colleague.
You must consult with each employee individually and discuss their scores, the proposal to select them for redundancy and all opportunities for alternative employment. If an employee unreasonably refuses to accept a suitable alternative employment you offer, they may lose their right to statutory redundancy pay.
After the meeting, you should take action on any proposals to prevent redundancies, consider any employee representations or challenges to scores and think about alternative employment options.
Step 7: Dismiss the employee
If you decide to make a worker redundant, after considering all alternative options, you should invite the employee in question to another meeting and clearly explain your decision, explain their redundancy package and their right to take time off work to seek alternative employment.
You should write to the employee to confirm their dismissal, clearly stating their termination date. You may either pay the required amount of notice or make a payment in lieu.
You must offer the employee the right of appeal.
What are the rules surrounding making one employee redundant?
If the employee holds a unique role within the organisation, the redundancy procedure for one employee is more straightforward than making one or more people redundant from a group, or pool, of employees who share the same job role. However, there are still some rules to follow.
In the first instance, even when making one employee redundant, you will still need to make sure that this is a genuine redundancy situation, i.e. a reduction in the requirement for employees to carry out this particular role. This is where a business case supporting the redundancy (and, for example, giving details of where the employee’s responsibilities will lie post-dismissal) will help.
You will also need to consider if the employee is truly unique or whether their role is interchangeable with another employee. If it is, you should consider pooling them together and devising selection criteria. In order to effect a fair redundancy dismissal, you will also need to consider whether there is any alternative employment within the organisation that should be offered to them. Finally, consultation underpins the entire process, and that will include discussing all of the above with employee in addition to ways to potentially avoid the redundancy altogether.
Things to remember when making employees redundant:
- Different procedures apply for small-scale redundancies/making one employee redundant than in collective redundancies (20 redundancies in a 90-day period).
- In individual consultation cases, there is no time limit for how long the period of consultation should be. However, the redundancy consultation period for one employee should be long enough for meaningful consultation to take place.
- If between 20 and 99 employees are potentially affected, consultation must start at least 30 days prior to the first dismissal taking effect. If you are proposing to make 100 or more employees redundant, the minimum consultation period is 45 days. No
dismissals can take effect before the end of those periods.
- An employee who will have two years’ service by the termination date and who is working their notice for redundancy is entitled to reasonable time off to look for another job.
Paying employees statutory redundancy pay
An employee has the right to statutory redundancy pay if they have worked for you for two years or more. The amount they receive will depend on their age and their length of service, but at present, redundancy pay is capped at £538 per week for 20 years. This means that the maximum statutory redundancy pay an employee can receive is £16,140.
Some employers may provide their employees with a contractual right to enhanced redundancy payments – check your Contracts of Employment for any such provisions.
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Despite your best efforts, and the various support mechanisms offered by the government, redundancies may be a reality. Indeed, according to a recent survey, 44% of employers are planning redundancies once the furlough scheme ends.
If you’re not confident in approaching and managing redundancy appropriately, our Employment Law specialists can answer your questions, help you to devise a selection matrix that fulfils your organisation’s needs and guide you through the steps required to ensure a fair redundancy procedure.
For more information about our redundancy support for employers, call 0345 226 8393 or visit our free Back to Business Hub for further guidance and document templates.
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