Have a redundancy plan
Having a redundancy plan allows businesses to share information with their employees and help them to understand what is happening which makes it crucial to managing redundancies.
The plan will help to manage each stage of the redundancy process and should show how:
- Compulsory redundancies will be avoided;
- Employees will be consulted with;
- Employees will be selected for redundancy;
- Employees will be given notice;
- Much redundancy an employee will get;
- Employees will be supported and able to plan for the future.
Avoiding compulsory redundancies
Before making employees redundant, employers should explore any alternative options, such as:
- Offer voluntary redundancy;
- Look at flexible working
- Reduce working hours on a temporary basis;
- Ask employees to stop working for a short period;
- Retrain employees in other areas of the business;
- Release temporary or contract workers;
- Stop overtime;
- Freeze recruitment.
During the current COVID-19 pandemic, employers may need to put some or all of their employees on furlough leave.
Furlough is where an employee agrees to stop work temporarily, but remains employed with the company. Furlough agreements must be done in writing.
Offer voluntary redundancy or early retirement
Voluntary redundancy should always be the employee’s choice; employers should not pressure anyone to volunteer. Voluntary redundancy should be offered to all employees. You do not have to accept an employee for voluntary redundancy just because they applied and therefore it is good practice to inform employees that voluntary redundancy is not automatically given to anyone who applies.
Managing redundancies must be based on a fair way of selecting employees for voluntary redundancy.
Extra redundancy pay can be offered to volunteers to encourage them to volunteer.
Contracts of employment could be updated to allow flexible working; this could include:
- Working fewer hours;
- Job Sharing;
- Working compressed hours.
Temporarily stop working or reduce hours
If it is included in contract of employment, employers can agree with employees for them to:
- Stop working for a while – temporary layoff;
- Work fewer hours – short-time working.
If this option is not included in the contract of employment, then an employer would need to ask an employee to agree to include these options or to have a temporary agreement made.
Move employees into new roles
Employers should look to move employees who otherwise could be made redundant into other job roles within the company.
Available jobs within the company must be identified and discussed with the employee. If a role is suitable to the employee this should be offered to them instead of redundancy.
If more than one employee is interested in the same role, the role must be offered to employees on maternity leave first. For other employees, a fair process must be followed to select a candidate, e.g. interview process.
An employee moving into a new role as an alternative to redundancy has the right to a 4-week trial period. If after the 4-weeks trial they do not feel the role is suitable for them, then they can ask to be made redundant, if they have a good reason why the job is not suitable.
If an employee turns down an alternate job, they must have a good reason for this. This could include:
- The job is lower paid;
- Health issues preventing them from doing the job;
- They have difficulty getting there, for example it’s a longer journey, higher cost;
- It would cause disruption to their family life.
If an employee turns down a role without a good reason an employer can refuse redundancy pay, but you would need to prove their decision was unreasonable.
Managing Redundancy Consultations
Consultation must be meaningful which means employers must get employees feedback and input, and seriously consider their proposals.
If you are planning 20 or more redundancies within 90 days then collective consultation must be followed, which means recognised trade unions or employee representatives must be consulted with.
The consultation period for 20-99 redundancies is at least 30 days before the first dismissals take effect.
The consultation period for 100 or more redundancies is at least 45 days before the first dismissal.
During the pandemic, consultation must still take place, there is no legal requirement for a consultation to be done face to face, so consultation meetings can be done remotely.
There are no set rules for consultations for fewer than 20 employees, however, it is good practice to follow the same process for collective redundancies.
Employers must discuss with each employee affected to explain the changes and get employee ideas and feedback.
Employees and representatives must be informed of the following:
- Why redundancies are needed;
- The number of employees and which jobs are at risk;
- How employees will be selected;
- What the timeframes for the redundancies are;
- How redundancy pay will be calculated.
Consultation meetings should be carried out by a trained person and there should be a clear way of presenting the redundancy plan. It is a good practice to have a frequently asked question and answer sheet available for employees which can be updated throughout the consultation period.
An employee can only be given notice of redundancy once the consultation period has passed and everyone affected has been consulted with.
Employees should normally be told face to face that they are being made redundant
However, during the pandemic, this may not be practical, technology should be used where possible to conduct video meetings, if physical meetings are unsafe inappropriate or impractical. Employers must also inform them of their dismissal in writing.
The letter of confirmation should include:
- Termination date;
- Notice period;
- How much redundancy pay they are entitled too;
- How the redundancy pay was calculated;
- Any other pay they are owed, e.g. holiday pay, expenses etc;
- When they will receive their pay and how they will be paid;
- How they can appeal the decision.
Informing the Government
If an employer is proposing more than 20 redundancies in any 90 day period, by law employers are required to inform the Redundancy Payment Service (RPS) of their plans to make redundancies before any consultation starts. Form HR1 must be completed and sent to the RPS.
Companies can be fined if they do not inform the RPS so it’s important to manage redundancies in a legally compliant manner.
If there are redundancies taking place after TUPE, a consultation can start before the transfer and continue after the transfer, but only if the old employer agrees, no employees should be selected for redundancy until after the transfer takes place.
What to discuss
During the consultation period, employers must discuss the following with employees:
- Ways to avoid redundancies;
- How to reduce the effect of redundancies;
- Plans to restructure for the future;
- How employees are selected for redundancy.
Any ideas or suggestions put forward by the employee should be considered, these can be rejected if they are not reasonable suggestions, but an explanation should be given as to why the suggestion is rejected.
It is vital to document all consultation meetings that take place.
Selection for Redundancy
Redundancy should be managed in a way that employees are selected for redundancy in a fair way and no one is discriminated against.
Selection criteria should be used to help decide which employee will be made redundant.
Selection criteria should be objective and could be based on:
- Standard of work;
- Skills, qualifications or experience;
- Attendance record, which should not include absences relating to disability, pregnancy or maternity;
- Disciplinary record.
The following should not be included in the selection criteria:
- Gender reassignment;
- Marriage or civil partnership;
- Pregnancy or maternity leave;
- Sexual Orientation;
- Family-related Leave;
- Trade Union role;
- Member of a trade union;
- Part-time or fixed-term status;
- Pay and working hours.
Criteria to be used should be agreed upon with the relevant employee representatives or trade union representatives.
Employees should be scored against the agreed criteria, which ensures that not one criteria are relied on lowering the risk of discrimination.
Scoring the criteria allows employers to:
- Be objective when selecting employees;
- Easily share with employees how the selection process works;
- Explain decisions at an employment tribunal.
Employees must be given at least statutory notice; this is based on how long they have worked for an employer. Contracts of employment may include a longer notice period, so it is always best to check these.
Statutory notice is:
- 1 month to 2 years’ service is a minimum of 1 weeks’ notice;
- 2 – 12 years is a minimum of 1 week for each years’ completed service;
- 12 years or more minimum notice is 12 weeks.
Employers should make sure employees understand how long their notice period is and when this notice period starts.
Employment can be terminated before a notice period ends if an employee has agreed to have a payment in lieu of notice.
During the pandemic employees have the same redundancy rights which include redundancy pay.
Redundancy pay must be paid to employees who have worked for 2 full years or more.
Statutory redundancy pay is the minimum that employees should receive.
How much employees get depends on their age and their service, which is capped at 20 years.
Statutory redundancy pay is:
- 1.5 weeks’ pay for each year worked after their 41st birthday
- 1 weeks’ pay for each year worked after their 22nd birthday
- 0.5 weeks pay for each year of work before their 22nd birthday
Weekly pay includes:
- Any regular overtime an employee’s contract says they should get;
- Any bonuses or commission.
Weekly pay is capped at £538, the maximum total of statutory redundancy pay an employee can receive is £16,140.
Employers can choose to pay more than the statutory amount, but this is the minimum employees should receive.
If employees have been on furlough leave, then their redundancy pay must be calculated at their full rate of pay and not the furlough amount.
There is no statutory obligation on the employer to offer the employee the right to appeal the redundancy. The employer should ensure that the employee has the opportunity to challenge the decision to select them for redundancy during the individual consultation process.
The ACAS code of practice (non-statutory) does say employees should be encouraged to offer an appeal in a redundancy situation, however, this has no legal status. By offering an appeal could reduce the likelihood of employees bringing tribunal claims. If an appeal is offered, employees should be told how they can appeal, how long they have to appeal, and what happens during an appeal hearing.
Support for employees
When managing redundancy, employers should consider how to support:
- Employees at risk of redundancy;
- Managers breaking the news of redundancy;
- People conducting consultations;
- Employee representatives;
- Employees who will remain in employment.
Employees can be supported by:
- Face to face meetings to discuss concerns;
- Financial advice and support;
- Being informed of the company’s future plans;
- Help to find other employment.
Employees who are to be made redundant are allowed a reasonable amount of time off to look for another job or undertake training. If you’ve worked continuously for your employer for at least two years they have to pay you up to 40% of a week’s pay to cover your time off.
For example, if you work a five-day week you can take two days off in total to attend interviews and your employer will have to pay you for this time.
If you take any more time off than this, they don’t have to pay you for it.
If redundancy situations are handled correctly it can make a difference to:
- How employees react and cope with being made redundant;
- The morale of employees who are staying with the company;
- The success of any further changes and the future of the company.
If you would like further information on how to manage redundancies, outplacement services or other HR issues, please contact Clover HR on 0121 516 0299 or email us at firstname.lastname@example.org