The Redundancy Process

What is Redundancy?

Redundancy is a special form of dismissal which happens when an employer needs to reduce the size of its workforce. In the UK, an employee is dismissed for redundancy if:

  • The employer has ceased (or intends to cease) continuing the business, or;
  • The requirements for employees to perform work of a specific type, or to conduct it at the location in which they are employed, has ceased or diminished or is expected to do so.

If there is a genuine redundancy an employer must follow the correct procedure in line with UK employment law. Employers who don’t may be liable for unfair dismissal claims or protective awards.

What are the stages of the redundancy process?

Every employer should consider having a formal redundancy procedure, if not already in place. The exact procedures will vary according to the timescale and size of a redundancy programme, but the below stages are recommended as a minimum:

Planning

Throughout the planning phase, businesses should always attempt to avoid redundancies wherever possible. Some suggested alternative approaches to consider include:

  • Natural wastage;
  • Recruitment freezes;
  • Stopping or reducing overtime;
  • Offering early retirement to volunteers (here you need to ensure compliance with age discrimination law);
  • Retraining or redeployment of employees;
  • Offering existing employees sabbaticals and secondments;
  • Pay freezes;
  • Short-time working; and
  • Any other ‘alternatives to redundancy’ schemes where by employees do not work for their employer for a specified period and are free to seek new work whilst receiving an allowance.

Before being able to implement any of the above changes, employers will need to check employees’ contracts to enable such variations to happen.

Also, employers need to be mindful, that where redundancy will involve 20 or more employees, the Redundancy Payments Service must be informed (via HR1 form) before the start of the consultation process.

Identifying the Selection Pool

Employers must carefully identify the group or groups from which employees will be selected for redundancy. This will usually consist of at least one of the following:

  • Those who undertake a similar type of work;
  • Those who work in a particular department;
  • Those who work at a relevant location;
  • Those whose work has ceased or been reduced, or is expected to do so.

It may be necessary to identify a range of selection pools. And it’s important to note, if an employer fails to consult and consider a selection pool correctly, the dismissal may be deemed as unfair.

Seeking Volunteers

As an option, employers can consider offering voluntary redundancy as an alternative to compulsory redundancy. This gives the affected employees an option to volunteer to take redundancy when the business is faced with a redundancy situation. An incentive is normally offered in exchange for the employee volunteering.

Consultation Process

As well as individual consultation, if 20 or more employees at one establishment within a 90-day period are to be made redundant, collective consultations with recognised trade unions or elected representatives must start within minimum time scales:

  • If its dismissal of 100 employees or more, it’s at least 45 days before the notification of redundancies; and
  • if it’s dismissals of 20-99 employees, it’s at least 30 days before the notification of redundancies.

Collective consultation must be completed before notices of dismissal are issued. If there are no recognised trade unions or employee representatives, the employer must facilitate an election, by the employees, of representatives for the consultation.

If you are looking at making less than 20 employees redundant, then there is no minimum statutory timescale. However, the individual consultation process must be meaningful and may also be covered by contractual terms or policies.

It is also important to note, employees are entitled to be accompanied at all individual consultation meetings by a trade union representative or colleague.

During the consultation the most important factor is communication, employees should be fully informed of what is happening and timescales involved.

There is no maximum number of consultation meetings that should be held with employees, but it is crucial that all employees’ queries, concerns and any recommendations are considered and the employee feedback to on these.

Redundancy Process Flowchart

Stage 1

Preparation for Redundancies including timeframe, numbers and criteria to be used. Communications written ready to be distributed. Trade Unions and Employee representatives informed of the potential redundancies.

Stage 2

Consultation with employees and recognised trade unions or employee representatives begins, timeframes discussed and numbers involved. Individual consultation meetings begin.

Stage 3

The selection Process takes place identifying employees who are at risk of redundancy and then those who will be selected for redundancy.

Stage 4

Confirmation of redundancy issued as a formal dismissal letter, including dates, notice periods and redundancy payments to be made. Appeals process begins

 

Meaningful Consultation

The law requires a meaningful consultation, it’s not enough to inform employees of a decision that has already been made.

ACAS states that you should listen to the employee and genuinely consider any of their suggestions. This will give you a better chance of finding alternative jobs for affected employees and provides an opportunity for ideas and options to surface that you hadn’t considered or previously identified.

At the start of the consultation process the employer is legally obliged to give the following information:

  • The reason for the redundancy dismissals;
  • The number of proposed redundancies and their job types;
  • The total number of employees affected;
  • The proposed methods of selection;
  • The procedure to be followed in dealing with the redundancies;
  • And the method of calculating redundancy payment.

Selecting employees for redundancy

When selecting employees for redundancy, choices must be based on objective criteria (which can be weighted) such as:

  • length of service (this should not be solely relied upon as could be deemed as age discrimination);
  • attendance records;
  • disciplinary records;
  • skills, competencies and qualifications;
  • work experience;
  • performance records.

Employment tribunals look favourably on selection procedures based on a points system that scores each employee against relevant criteria. It’s important here that you take care in the choice and application of selection criteria to avoid discrimination.

Dismissals and appeals

The employer should give written notice to those selected for redundancy that they are ‘at risk’ of redundancy and invite them to individual meetings.

It is good practice to hold at least one further consultation. However, the actual number of meetings will depend on what the employee has to say and the employer’s specific process. The employer must consider any points that the employee puts forward.

Once the individual consultation is complete, the employer must decide whether the employee is to be made redundant and give a written redundancy notice. This will be either the statutory minimum notice or the contractual notice, whichever is the greater. The employer must also explain the redundancy payment calculation to the employee.

All employees should be allowed to appeal against the redundancy decision.

Suitable alternatives

Employers must consider offering suitable alternative work to employees being made redundant. If employees unreasonably refuse suitable alternative work they may lose their entitlement to a statutory redundancy payment.

Employees can have a four-week trial period in a new role. If the employer and employee then agree that the role is not a suitable alternative, the employee reverts to being redundant.

What are the Redundancy Costs?

There are various direct and indirect costs to employers associated with redundancy.

Direct costs include:

  • Any contractual or statutory redundancy payments:
    • Employees with two or more years’ service are entitled to a minimum statutory redundancy payment. Which currently is
      • half a week’s pay for each full year you were under 22
      • one week’s pay for each full year you were 22 or older, but under 41
      • And one and half week’s pay for each full year you were 41 or older
      • Weekly pay is capped at £538, and the maximum statutory redundancy payment is £16,140.

Indirect costs can include:

  • management time;
  • higher labour turnover;
  • lost output resulting from the reduced morale and engagement of surviving employees.

Survivor support

In any redundancy situation, the employer’s immediate priority should be the fair and sensitive treatment of those employees who are losing their jobs. Once this has been achieved, the business’s ongoing effectiveness is largely dependent on the morale of the survivors.

So, to help support those who continue to be employed through the process, it is good practice for businesses to:

  • Give a full explanation of the situation to all employees, including the redundancy procedure being used;
  • Explain the need for the changes;
  • Give an overview of any further reorganisation and/or changes in working arrangements;
  • Provide a forward-looking, positive attitude for the future and show survivors the value of their role;
  • Carry out individual discussions with remaining key workers, where necessary, to reassure them of their importance and employment prospects.

FAQ’s

Do small businesses have to pay redundancy?

Yes, all companies have to pay statutory redundancy payments to employees who qualify for these. It depends on a Company’s redundancy policy as to whether they pay any enhanced redundancy pay or not.

What are the legal requirements of redundancy?

  1. Statutory Redundancy Pay (SRP) – any employee who has two or more years’ service is entitled to receive SRP.

SRP is:

  • Half a week’s pay for each full year worked under the age of 22
  • One weeks pay for each full year worked over the age of 22 but under 41
  • One and a half weeks pay for each full year worked over the age of 41
  1. Consultation Periods
  2. Ensuring a fair and objective way is used to selecting employees for redundancy

If you would like further guidance or support on this matter or require advice on other people management matters please contact Clover HR on 0330 175 6601 or email us at info@cloverhr.co.uk  ©️ Copyright Clover HR

 

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