REDUNDANCY GUIDE FOR EMPLOYERS: SELECTION CRITERIA

UNDERSTANDING REDUNDANCY FOR EMPLOYERS

Redundancy is a form of dismissal where a job role is no longer needed. It can result from a business change, such as restructuring, cost-cutting, relocation or the introduction of new technology that decreases the need for certain roles. Let’s further explore redundancy selection criteria examples and how employers can apply them.

WHAT ARE THE THREE TYPES OF REDUNDANCY OPTIONS?

Not all redundancies are the same, and employers need to be versed in the three main types (voluntary, compulsory and collective), as each comes with its own specific procedures and legal requirements.

• Voluntary redundancy: This occurs when an employee offers to be made redundant after the employer invites volunteers or when they make the request themselves. The employer has the final decision and can choose whether to accept or decline the request based on business needs.
• Compulsory redundancy: The employer decides which roles will be made redundant based on fair and objective redundancy selection criteria. This method is necessary when voluntary redundancies do not achieve the required staff reductions.
• Collective redundancy: Occurs when an employer plans to make at least 20 employees redundant within a 90-day period. The employer is required to engage in a collective consultation with an employee representative to reduce the number of job losses. Any employer engaging in a collective redundancy needs to notify the government by submitting a HR1 form.

WHAT ARE THE REASONS BUSINESSES CONSIDER REDUNDANCY?

Businesses may consider redundancy when they need to adapt to closures, restructuring or relocation. Economic factors such as reduced revenue and rising operational costs can also result in redundancies. Even technological advancements can make certain roles redundant. Essentially, when a role is no longer needed, it becomes redundant.

REDUNDANCY SELECTION CRITERIA

The most common redundancy selection criteria involve assessing a range of factors such as performance, length of service, attendance and overall cost to the business. A well-structured process should combine objective and measurable criteria, supported by accurate records and applied consistently across all employees, ensuring a fair process. Let’s look at redundancy selection criteria examples in further detail.

• Performance and skills: This can be measured using recent appraisals, KPIs and performance reviews. Evaluating these allow businesses to retain the most capable employees.
• Length of service: The ‘old school’ way of “last in, first out” can no longer be used due to the Equality Act 2010, which covers age discrimination. However, length of service can still be used as part of a broader redundancy selection process, just not as the sole deciding factor.
• Attendance and absence: Attendance records are a good criterion to use, if done so over a period of time, however employers must ensure they do not include any absences relating to any of the protective characteristics.
• Disciplinary records: These can be used if they are for any live warnings an employee may have. Using disciplinary records ensures that employees with no blemish on their record receive top marks in the scoring process.
• Cost: You can take an employee’s cost into account, as ultimately a redundancy process is a cost-cutting exercise. However, employers cannot use cost as an individual or deciding factor, as ultimately your higher cost employees may be longer serving employees, so age discrimination could be an issue.

WHAT ARE FAIR REDUNDANCY CRITERIA?

Fair redundancy criteria will consider objective, measurable factors such as performance, skills, attendance and conduct. It must be applied consistently, free from bias or discrimination and supported by accurate evidence to ensure compliance with employment law.

FAIR REDUNDANCY EXAMPLES

An example of a fair and straightforward redundancy can be as simple as a company closing down a single store. Since the store in that location is closing, there’s no ongoing need for those roles. The employees working at that location are automatically affected without the need for complex selection criteria.

Another fair redundancy example involves relocation. If a company decides to close its office in one city and move operations to another location, employees who are unable or unwilling to relocate may be fairly made redundant, as their roles will no longer exist in the original area.

EXAMPLES OF REDUNDANCY CRITERIA THAT SHOULDN’T BE USED

Redundancy selection criteria that should not be used include factors such as age, gender, sickness absence that is connected to a disability and any personal bias. Any discriminatory factors that are used as part of redundancy criteria can lead to a claim of unfair dismissal and result in an employment tribunal. Penalising part-time workers could also lead to indirect discrimination, as it demonstrates favouritism.

CAN LAST IN, FIRST OUT APPLY?

Last in, first out can be part of redundancy selection criteria but it should not be the sole factor in deciding whether an employee should be made redundant. While this may seem like a straightforward approach that rewards employees with longer service, it can leave businesses vulnerable to unfair dismissal claims. This is because it overlooks important considerations such as skills, performance, adaptability and the organisation’s future needs. To remain fair and compliant, employers should use LIFO only as part of a broader, evidence-based selection process.

REDUNDANCY PROCESS IN BUSINESSES

A business redundancy process involves careful planning and structuring to ensure it meets the company’s operational needs while remaining fully compliant with employment law. A step-by-step process should involve:

1. Identify the reason for redundancy, for example, closure, restructuring or reduced demand.
2. Plan the process by defining measurable criteria, a timeline and what documents will be needed.
3. Inform employees early with an at-risk letter.
4. Hold consultations to discuss solutions and ways to reduce the impact of redundancies.
5. Apply redundancy selection criteria evenly. Make sure the criteria are applied consistently to all employees in the selection pool.
6. Issue dismissal letters with clear reasoning, effective data and any enhanced redundancy pay.
7. Review appeals and evidence and confirm the final decision in writing.
8. Provide support and references to assist former employees with the transition.

PRACTICAL TIPS FOR EMPLOYERS IMPLEMENTING REDUNDANCY CRITERIA

Tips for choosing redundancy selection criteria include:

• Choose the skills you need for the future of the business, as in a redundancy programme an employer’s goals should be to retain the ‘best’ employees.
• Combine objective and subjective criteria, but keep the criteria simple – do not use too many, a total of six is recommended for simplicity.
• Always consult with Trade Unions or employee representatives on the selection criteria you are going to use, so there is clear communication.
• Have more than one manager score the employees to avoid any personal views or bias.
• Keep all data factual. This avoids demonstrating any potential signs of favouritism.
• Consult with employees on their scores and discuss concerns or queries they may have with their scores.
• Ensure the time period the scoring is done over is sufficient – a period of 2 years is best practice.
• Be aware of discrimination – ensure no employee has an advantage over another employee due to a specific circumstance.

CHALLENGES FOR BUSINESSES WHEN REDUNDANCY SELECTION GOES WRONG

Redundancy selection isn’t a science. This is why we emphasise the importance of using as much factual and objective data as possible when forming your criteria. Sometimes, redundancy selection might not be a smooth process for all parties involved. In these instances, it’s important to have support and documentation, such as clear records of how decisions were made. These documents not only provide transparency but also help protect the business in case of any disputes or tribunal claims.

HOW TO COMMUNICATE REDUNDANCY OUTCOMES

The best way to communicate redundancy outcomes is with complete clarity and professionalism. Deliver the news in a private meeting and explain the reasons and the criteria that were involved in making this decision. It’s also important to provide written confirmation outlining notice periods, redundancy pay and support. Allow employees to ask questions and ensure the conversation remains respectful, transparent and supportive.

WHEN TO OUTSOURCE HR ADVICE FOR REDUNDANCY

We understand that redundancy can be difficult to navigate, which is why many businesses choose the experts at Clover HR to handle the complicated process of managing redundancies. By outsourcing HR support, you have a devoted expert who’s experienced in dealing with legally complex cases and creating fair redundancy selection criteria. Fill out our contact form, give us a call on 0330 175 6601 or email us at info@cloverhr.co.uk.