Redundancy | How to do it properly
Looking for practical advice on making redundancies during the coronavirus pandemic and other common employment scenarios? Visit our free Coronavirus Advice Hub for answers.
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 in this situation, process is everything.
In a nutshell, the key ingredients to a fair redundancy process are:
Avoid mistakes by following 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).
Is this a redundancy situation?
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 people 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:
You must warn all your employees of a potential redundancy situation and that it may affect them.
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.
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 may include employees’ attendance record, disciplinary record, 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 younger employees who may not have worked for you as 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, giving the employee grounds 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.
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.
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.
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.
If you decide to make someone redundant, after considering all alternative options, you should invite the employee in question to another meeting and clearly explain your decision, the details of 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.
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.
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 it comes to redundancy:
- 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.
Facing a redundancy situation?
Redundancy can be a stressful time for all involved. It’s also a highly complex area of employment law, meaning the margin for error is high. Professional support from an Employment Law specialist can help you to approach the situation more confidently, achieve your objectives and reduce the risk of claims arising from mishandled procedures.