Managing redundancies effectively is essentially the form of dismissal which occurs when an employer needs to reduce the size of its workforce. Redundancies can occur because:
- The Employer has ceased or intends to cease, the operation of the business
- The requirements for employees to perform work of a specific type has ceased or reduced or is expected to
- The requirement for employees to perform work of a specific type in a specific location has ceased or is expected to
- The employer needs to reduce costs
In order to make employees redundant, employers must follow a redundancy process and make the necessary redundancy and notice payments to affected individuals. Where employers do not follow the correct process, they may be liable for unfair dismissal or discrimination claims, or both.
The redundancy process
Before employers can even talk to employees about potential redundancies, there are a number of steps that they need to complete to prepare for these discussions (the consultation process). The specific steps will depend on the exact nature of and reason for the changes, however, they usually include:
- Defining the business case for the proposed changes
- Outlining the structure of the business going forward
- Calculating the costs of redundancy
- Identifying the pool for selection if relevant
- Preparing the consultation documents and letters to be issued to employees
- Determine other possible options for alternative employment
Once the planning steps outlined above have been completed, the following steps will be required to complete the redundancy process:
- Inform and consult affected employees
- Inform other employees
- Seek volunteers for redundancy, if appropriate
- Selection for redundancy, if relevant
- End of the consultation process
- Redeployment into other suitable employment
- Dismissals and appeals
- Make all payments due to anyone made redundant
- Ongoing support to remaining employees
Redundancies should always be a last resort. They are disruptive to the business and can have a lasting impact on motivation and morale, and so should only be considered when there is no alternative. Alternatives to redundancy can include:
- Natural waste
- Recruitment freeze
- Terminating agency workers
- Not renewing fixed term contracts
- Reduce the use of casual workers
- Stop overtime
- Short time working and/or lay off
Alternatives will need to be carefully considered to ensure that employees meet their obligations to other workers and do not breach their contracts of employment.
Defining the business case
The business case should set out an explanation of the business, and the area within the business that the employer is proposing to restructure.
It should also set out the reasons for the proposed restructure, and the goal of the proposed changes.
It should detail the consideration given to other measures which have been taken or considered to avoid redundancies.
Finally, the business case should include organisation charts which outline the current and proposed structures.
Calculating the costs of redundancies
The statutory redundancy payment due to each employee will depend on their age and length of service. In addition to calculating their redundancy payment, each employee will also be entitled to notice pay.
Employees may be entitled to additional payments depending on the employment contract terms in place.
For help calculating redundancy and notice payments, please contact us at email@example.com.
Preparing the paperwork
In order to start the process, you will need to have prepared confirmation of at risk letters for affected employees, and consultation forms for each individual employee.
At the end of the process, employers will also need to issue written confirmation of the outcome of the process to each affected employee – this will confirm that they have been made redundant, have been redeployed or remain in their current role.
We can help assist you with your policies should you need advice or this completed on behalf of your business.
Identifying the pool for selection
The group from which employees will be selected for redundancy must be carefully identified. It usually consists of a group of employees:
- Employees who undertake a similar type of work
- Those who work in a particular department
- Those who work at a particular location
- Those whose work has ceased or reduced or is expected to
There may be more than one pool in a redundancy situation depending on the exact nature of the changes proposed.
It is critical to identify the pool for selection carefully as a flaw in this stage of the process could lead to the dismissal by reason of redundancy being automatically unfair.
Where a business intends to make more than 20 employees redundant, they must inform the Redundancy Payments Service, which acts on behalf of the Department for Business, Energy and Industrial Strategy (BEIS).
In all redundancy situations, employers must consult with the affected employees individually. Where more than 20 employees are to be made redundant, the employer is also required to undertake collective consultation with recognised trade unions or elected representatives.
There are legally defined timescales for this.
Where an employer plans to make 100 or more employees redundant, they must consult for at lease 45 days before the notification of redundancies.
For dismissals of 20-99 employees, employers must consult for at least 30 days before the notification of redundancies.
Where it is required, collective consultation must be completed before redundancy notices are issued.
If there are no recognised trade unions or elected employee representatives already in place, employers are required to facilitate an election process to appoint employee representatives for the purposes of collective consultation.
Consultation must be meaningful. It is not enough for employers to simply inform employees of a decision that has already been made.
Where consultation does not comply with the legal requirements, employees can receive compensation, known as protective awards.
Just remember: there is a lot of HR support out there. Don’t struggle alone or get this process wrong.
It’s essential that the entire process is completed correctly or this could return to haunt you at a later date.
Always seek professional advice first. A good source of information from the government can be found on this link here: https://www.gov.uk/staff-redundant
What must I consult about?
Employers must consult on the following:
- The reason for the redundancies
- The number of proposed redundancies and the roles affected
- The total number of employees affected
- The proposed methods of selection, if relevant
- The redundancy process
- Redundancy payment calculations
Employers are required to consult individual employees in all redundancy situations.
Employees are entitled to be accompanied at all individual consultation meetings by a trade union representative or a colleague.
Seeking volunteers for redundancy may avoid the need for redundancy may avoid the need for compulsory redundancies. Voluntary redundancy can be managed by an application process, so the employer can retain key skills within the business.
Selection for redundancy
Employers may need to select individuals from the redundancy pool if not enough people opt to be made redundant during the consultation process. Selections must be based on objective criteria such as:
- Disciplinary record
- Performance/appraisal records
- Skills, qualifications and competences
Selection criteria must be applied carefully to ensure that no group is discriminated against.
Scoring against selection criteria should be carried out by at least two managers who know all the employees in the selection pool.
Suitable alternative employment
Employers must consider offering suitable alternative work to employees at risk of redundancy. This means that if employers have vacancies in any other areas or teams within the business, they must consider employees who are at risk for these roles, and if they are suitable alternative roles, must redeploy affected employees into these positions.
There is a 4-week trial period for any new role that an employee is redeployed into as part of a redundancy process. If the trial period is not successful, the employee reverts to being redundant.
Time off to look for alternative work
Employees at risk of redundancy should be given reasonable time off to look for alternative work during any redundancy consultation and notice period.
Redundancy whilst lockdown measures are still in place
Redundancy processes can be carried out remotely if necessary, however, lockdown measures will not be a satisfactory reason for not carrying out a redundancy process.
Appeals and dismissals
Employees should be allowed to appeal against the decision to make them redundant. Where an employee appeals against the decision to make them redundant, a more senior manager should hear the appeal. The outcome of the appeal must be confirmed to the employee in writing.
We strongly recommend that employers:
- Ensure they plan any redundancy programme thoroughly, in particular, documenting a robust business case for the changes
- Ensure they have good management practices in place to manage employees remotely: team meetings, one to ones and appraisals.
- Communicate with employees regularly.
- Focus on the key deliverables.
- Be inclusive and supportive.
- Meet face to face periodically.
For further information, advice or support to make redundancies, please contact us at firstname.lastname@example.org.