Redundancy can be one of the most stressful workplace experiences for both the employee and employer alike. While the employee grapples with the uncertainty of their future, the employer is under a legal obligation to follow a lawful redundancy process and should take all steps to be transparent and supportive towards affected workers. Employers also have to be mindful of the impact of job losses on wider workforce morale.
Redundancy is a potentially fair reason for dismissal, but should only be used in certain circumstances where the employee’s role n o anger exist and or is no longer required. Since the effect of the redundancy is to terminate an employee’s employment, it should only be used as a measure of last resort after all other options have been exhausted.
Consequences of getting the redundancy process wrong
The law on redundancy is complex and demanding on the employer. When making staff redundant, employers have to follow a fair legal process that meets employees’ rights while protecting the organisation from risks such as tribunal claims. Throughout the redundancy process, the employer has to show compliance with the law and that they have exhausted all other options before terminating an employee’s contract through redundancy.
If an employer fails to follow the law when making someone redundant, the employee may be able to bring a claim for unfair dismissal. If the tribunal finds in favour of the employee, they may be awarded compensation or in some cases, may even be reinstated into their role.
Importantly, employers have to ensure that each stage of the redundancy process is lawful and fair. If you do have fair reasons to make someone redundant and you give redundancy notice as required, you could still risk tribunal claims if the selection criteria were unfair or if you failed to follow the consultation rules.
In addition to legal risks, employers should also be proactive in managing:
- Low workforce morale – both among ‘surviving’ workers and those not directly affected by the process who may be concerned about future redundancy rounds.
- Reputational damage – redundancies are generally perceived negatively in the marketplace, and employers will have to work hard to ensure they handle the process correctly and avoid legal claims, and look to focus on more positive activities.
- Complaints relating to the redundancy process – if affected employees bring a grievance or tribunal claim, the employer will have to dedicate time and resource to resolve and manage the issues.
In this guide, we detail each of the stages of the redundancy process, and how to manage the legal risks of making someone redundant.
What is the redundancy process?
In outline terms, there must be adequate consultation with those affected and where relevant their appointed representatives, the selection process has to be fair and non-discriminatory, alternative, suitable employment within the organisation should be offered where possible and sufficient notice of redundancy has to be given to those who have been selected, and relevant redundancy pay entitlement made.
1. Establish fair reasons for redundancy
When a company wants to reduce the size of its workforce or a role becomes obsolete, the redundancy process may be used to dismiss workers.
This means an employee may be made redundant where their role is no longer needed. This could be because of changes in the industry the business operates in, changes in the process the business follows, or the closure of sites.
Fair reasons for redundancy include:
- the organisation is closing or intends to close down; or
- the organisation is relocating; or
- the work done by affected workers’ is being undertaken by others; or
- the work done by affected workers’ is no longer required either due to a change in need or due to the introduction of new processes; or
- ownership of the organisation is being transferred to a different organisation
Importantly, redundancy cannot be used as a process or excuse to ‘get rid’ of employees, such as for underperformance, absence or misconduct reasons. In these instances, you should follow the relevant organisational policy, such as the disciplinary or performance management procedure.
It is also unlawful to make someone redundant by reason of a protected characteristic, as defined under the Equality Act 2010. These include age, sex, sexual orientation, marital status, disability, race or religion.
Unlawful discrimination applies where the worker has, or is perceived to have, or is associated with someone who has, a protected characteristic.
Automatically unfair dismissal
In addition, if an employer makes someone redundant because of certain reasons, the redundancy would be deemed automatically unfair. These include:
- Being pregnant or on maternity leave
- Taking, or wanting to take, any other form of leave associated to family such as paternity leave
- Requesting flexible working
- Acting as a trade union member or representative
- Taking part in industrial action
- Exercising or asking for legal entitlement, such as being paid National Minimum Wage
- Taking action, or intending to take action, on a health and safety issue
- Taking time off work to do jury service
- Being forced to take compulsory retirement
- Relating to arrangements of working hours, i.e. part-time, full-time, shift, flexi-time
- Relating to level of pay
It is not unlawful in itself to make a worker redundant if they are pregnant or on maternity leave. It would be unlawful if the redundancy was because of the maternity or pregnancy, so the employer must be able to show that the reason is legitimate and the correct redundancy procedure followed.
Employers should also remember that women made redundant while on maternity leave have the right to be offered a suitable alternative role before any other colleagues.
2. Consider alternatives to redundancy
While the employer may have established a fair reason for redundancy, they are also required to consider alternatives to dismissing workers by redundancy. This means the employer should look at steps to mitigate the threat of making people redundant.
In practice, if an employee believes their dismissal by redundancy was unfair as their employer failed to explore alternatives, they can make a tribunal claim.
Alternatives could include:
- lay offs (temporary)
- reducing working hours
- reducing pay
- redeploying staff
- retraining or reskilling workers
- reducing the working week
- introducing job shares or other flexible working shifts
- suspending or withdrawing overtime or putting a moratorium on recruitment in place if there is a reduced requirement for employees for a particular type of work
- voluntary redundancy
- career breaks
- early retirement
It’s advisable to investigate alternatives and the viability of these in relation to your organisation’s circumstances and resources. Document this exercise and the decision that is ultimately made.
Importantly, any alternative measure must be agreed with affected employees as a change to their contract terms, or you risk legal complaints. In practice, this would usually form part of the consultation phase to allow workers to feedback their opinions.
3. Offering voluntary redundancy
In some circumstances, it may be appropriate or in the interests of the organisation to offer voluntary redundancy.
Voluntary redundancy is when you offer employees fair financial compensation, or incentive, to leave the organisation.
There will be a number of factors to consider. Voluntary redundancies are typically more costly in settlement terms as the redundancy package is negotiated and agreed with the worker.
When voluntary redundancy is offered, employees should be made aware that the employer is not required to accept requests for voluntary redundancy made by employees. The employer has to approve the resignation and settlement package.
If more employees volunteer for redundancy than required, you will need to make a fair selection from this ‘pool’. To avoid legal issues, every selection from the volunteer pool will have to adhere to a fair procedure. Applications should be evaluated based on criteria such as skills, attendance and disciplinary record. Additionally, this should prevent instances where valuable workers who the business would like to keep on board volunteer.
If not enough people come forward, you may still have to go through with the compulsory redundancy scheme, which will protract the process as a whole. An assessment of the specific circumstances will help to inform whether voluntary redundancies should be offered.
4. Redundancy selection
For individual redundancies, employees must be selected fairly by applying pre-determined redundancy criteria.
Where more than one individual is affected, it is likely you will need to identify a pool of employees to assess against set criteria in order to select those who will be made redundant. The pool should comprise staff carrying out the same or similar work as each other, including those providing cover.
Where the redundancies are a result of a total workplace shutdown affecting all staff, selection will not apply.
Define the selection criteria
Employers should make every effort to apply objective criteria that are clearly defined and do not discriminate against people unlawfully.
The scoring criteria could be based on objective measures such as standard of work, the level of relevant skills and experience, qualifications, disciplinary record and attendance.
All employees have the right to be treated without discrimination. An employee therefore can’t be made redundant for any of the following reasons:
- disability or on long-term sick leave
- gender reassignment
- sexual orientation
- race, religion or belief
- married or in a civil partnership
The scoring criteria should be explained to each employee as part of their first consultation meeting so that they have an opportunity to respond. They may have suggestions to improve the scoring criteria or alternatively, they may flag up problems with the system. The employer should consider all such comments when developing the scoring criteria.
While the last-in first-out criterion remains open to employers, it is not advisable to rely on this as the sole basis for redundancy selection or to weight it more highly than other criteria. This is to avoid issues of discrimination since, for example, younger workers are more likely to have shorter periods of employment.
Importantly, employers should have a written record and evidence of the redundancy selection criteria and how these have been applied to the selection pool to support decisions that are made. In the event of allegations of unfair selection criteria, employers should be able to rely on contemporaneous
5. Redundancy consultation
An employee has the right to be informed if their position is being considered for redundancy through a “meaningful” consultation process.
Affected employees should be given the chance to attend consultation meetings to discuss the possibility of redundancy and explore alternative solutions to avoid dismissals. During the consultation, you should explain the redundancy process being followed and the selection criteria that each affected employee will be assessed against. You should also explain which criteria have greater weighting than others, and why.
In addition, the consultation process should allow for employees to provide feedback. Any feedback received should be given genuine consideration
For redundancy to be deemed fair, employers need to consult with employee representatives and unions if the redundancy is a collective redundancy, which applies to redundancy processes affecting 20 or more employees.
You have to hold at least two consultation meetings with affected employees and you have to explain why the employees are in the redundancy selection pool.
If you fail to do so as an employer, you are risking a claim for unfair dismissal and could leave yourself open to a claim via an industrial tribunal.
A collective consultation requires that the employer not only discusses the redundancy situation with the affected employees but also with trade union and other types of employee representatives.
The Redundancy Payment Service (RPS) must also be notified before the consultation period begins. An employer who doesn’t inform the RPS of a collective redundancy could face an unlimited fine.
Once it becomes clear that there is a need to make twenty or more redundancies in one work location or establishment, the procedure for a collective redundancy consultation should include:
- Notification to the RPS.
- Notification of relevant trade union and other employee representatives, providing them with all required information related to the redundancy situation.
- Notification of the affected workforce.
- Consultation with trade union and other employee representatives.
- Scoring of the affected employees.
Different procedures apply when dealing with small-scale or individual redundancies as opposed to collective redundancies (defined as 20 redundancies during a 90-day period).
For example, for individual or small-scale redundancy, there isn’t a specified consultation time limit, however, it must allow for ‘meaningful consultation’ to occur.
As such, it is geenrally advisable to follow the standard consultation process to ensure fairness and reduce the risk of unfair dismissal claims.
Employee consultation rights
The employee has the following rights during the period of consultation:
- to be treated fairly and without discrimination when being considered for redundancy
- to be notified if they and their job are being considered for redundancy, and the reasons why
- to be invited to consultation meetings to discuss their possible redundancy
- to be made aware of what redundancy pay and notice they are eligible for
- to be given the chance to respond and suggest alternatives to redundancy
- to be accompanied to redundancy consultation meetings by a fellow employee or trade union or other employee representative
- to receive a written record of what happened in each meeting (the outcome letters)
- to receive the decision in writing
- to appeal against the decision
6. Suitable alternative employment
As part of the obligation to try to avoid redundancy, employers should offer any suitable alternative positions to employees who are at risk of being made redundant and who would be eligible for statutory redundancy pay. As such, any employee who has worked for the employer for at least two years at the time that their job ends should be offered an alternative role if one is available.
The alternative role has to be offered before the employee’s contract comes to an end and the employee should start in their new job no later than four weeks after their previous role ends.
Any employee who accepts alternative employment is entitled to a four-week trial period in the new role. The four-week period cannot be extended to account for absences due to holiday or illness, and any such trial period must begin after the employee’s current employment has come to an end.
If the employee accepts the new role, they will not be considered to have been dismissed at the end of their previous role, and as a result, will not be entitled to any statutory redundancy pay. Instead, they will start their new position in accordance with the provisions of their new employment contract.
The employee has the right to refuse the offer of an alternative role if the new position is not “appropriate” and their decision can be shown to be reasonable. The definition of “reasonableness” will depend on a variety of factors, including how the new job will affect the employee’s home life, any health problems the employee may have, the amount of time given to the employee to decide, whether the position is temporary or part-time, whether the pay is significantly lower, and so on.
If the alternative role is refused, the employee will be deemed to have been dismissed by redundancy and be entitled to receive statutory redundancy pay.
Protections relating to maternity
Special rules apply if any of the at-risk employees are pregnant or on maternity leave.
Under Regulation 10 of the Maternity and Parental Leave etc. Regulations 1999, an employee on maternity leave must be offered any available, suitable alternative positions first, ahead of any other at-risk employees. The new role must entail work that is appropriate for the employee. The burden is on the employer to prove that the new role would be ‘suitable’. For instance, does the new role require similar skills and experience to the employee’s previous role.
In addition, the proposed new contract terms cannot be substantially less favourable than those under the previous contract.
Failure to comply with these obligations can constitute grounds for automatically unfair dismissal.
7. Dismissal by redundancy & notice periods
If, at the end of the redundancy process, the decision is made to make employees redundant, you have to give formal notice to the selected employee(s).
You will need to meet with each employee to explain the decision, and inform them of the date of their contract will end and details of the redundancy package they will receive and how this has been calculated. You should also confirm these details in writing.
Certain notice periods apply when making workers redundant. This will be either the statutory minimum notice or the contractual notice, whichever is the greater.
Employees that have been employed for between 1 month and less than two years are entitled to one week’s notice.
For employees who have been employed for between 2 and 12 years, they are entitled to one week’s notice for every year of employment.
For those employees who have worked for 12 years and over, they will be entitled to 12 weeks’ notice.
If you do not require the employee to work their notice period, you can make a payment in lieu of notice (PILON) at the relevant rate if the contract of employment allows this.
You also have to offer the employee the right of appeal, which you should include within the dismissal letter.
Time off to look for new employment
When a redundancy situation has been announced employees are also entitled to reasonable time off to look for a new job.
8. Redundancy pay
Any employee who has worked for your organisation for over 2 years is entitled to, as a minimum, statutory redundancy pay, determined by their length of service, and any other payments due for example in relation to accrued holiday and payment in lieu of notice.
Some employers are also contractually obliged to provide enhanced redundancy pay to employees, and others may negotiate an additional settlement amount.
There are two types of redundancy pay: statutory redundancy pay (a redundant employee’s legal entitlement) and contractual redundancy pay (the extra amount stated in your employment contract). Not all employers will offer contractual redundancy pay.
An employee may be entitled to statutory redundancy pay if they have worked continuously for their employer for a minimum of 2 years (continuous service).
If an employee is eligible to receive statutory redundancy pay, the amount (based on how much they earn before tax is deducted) will be calculated on the length of their continuous service and their age. Remember, to be eligible for statutory redundancy pay, the employer must have at least 2 years’ continuous service.
For each full year worked of continuous service:
- an employee aged 18 to 22 is eligible to half a week’s pay
- aged 23 to 40, 1 week’s pay
- aged 41 and older, one and half week’s pay
The redundancy payment rate is based on the employee’s age for each year of continuous service so where an employee begins work aged 39 and is made redundant when they are 43, their redundancy pay will be calculated as 2 years at 1 week’s pay per year and 3 years at 1.5 week’s pay per year.
Statutory redundancy pay is not subject to tax up to a threshold of £30,000.
The maximum number of years you can receive redundancy pay for is twenty years.
Should the redundancy go ahead, the employee generally has the right for a redundancy payment under £30,000 to be paid without a deduction for tax or national insurance.
How long does the redundancy process take?
The time it takes to complete a redundancy process will be determined by how many employees are involved.
- 19 or fewer redundancies: with consultations held on an individual basis, there are no time limits but the process typically takes around a month.
- 20 – 99 redundancies: collective consultation has to start at least 30 days before employees can be dismissed.
- 100 or more redundancies – consultations must start at least 45 days before dismissals come into effect.
Managing redundancies: best practice
As part of a proactive approach to workforce management and avoiding redundancies, employers should:
- Adopt workforce strategies encompassing planning, recruitment and resourcing to meet and adapt to changes in organisational needs without recourse to redundancies.
- Create a business case evidencing why redundancies are necessary and why alternatives are not suitable or appropriate.
- Train H&R and managers to manage a legally-compliance redundancy process.
- Ensure internal communications are managed effectively through any redundancy process, taking account of all stakeholders; while those affected must be kept informed of the redundancy process, those not directly affected should be communicated with to maintain workforce morale and avoid misinformation circulating.
Complaints about the redundancy process
If an employee raises a complaint about the redundancy process, you have to take the matter seriously. Follow the organisation’s grievance procedure and conduct an objective investigation. This would usually require someone not involved in the redundnacy process leading the investigation and grievance hearing. You may also need to pause the redundancy process while the grievance is completed and decided.
Managing workforce morale during the redundancy process
It’s crucial to treat everyone with respect, dignity, and kindness during a redundancy process. People’s ability to cope can be significantly impacted by how redundancy is handled.
Spend some time outlining the factors that led to the redundancy, why it was a difficult business decision, and the steps that were done to prevent redundancy and promote redeployment. Make sure everyone understands that their contributions to the company were valued and that being chosen for redundancy has nothing to do with them personally. Giving notice is a challenging undertaking, and managers should receive training on how to approach redundancy with compassion and clarity.
Workforce engagement & support
Regardless of a person’s prior health history or level of resilience, being chosen for redundancy can have a serious negative impact on their mental health.
being made redundant is often something people need to come to terms woth, both in relation to feelongs of rejection and any self-worth and confidence, but also having to make a decision about their next steps and taking action to put this in place – such as finding a new job.
To protect their wellbeing, the individual should be given access to immediate and ongoing support. When requested or necessary, this should include access to occupational health assessments, as well as counselling and other services which employers usually provide through an employee assistance programme (EAP). Employers should signpost employees to any such support services.
Depending on the EAP the employer has opted for, some provide continuing help for employees who have been made redundant for up to three months after employment has ended. Other areas of support can include guidance on finding a new job, navigating the job market, improving interview techniques and CV advice. These can be particulalry valuable to exiting employees given the time pressure of an imminent dismissal.
Employees should also take a proactive approach to engaging with workers who have not directly been affected by the redundancy process.
While those workers may not have faced dismissal, they may be affected by witnessing the experience of colleagues, and they may also be fearful of their jobs being at risk in the event of future redundancies.
Morale among surviving may also be affected, which, if not managed well, can be detrimental on performance and operations. Employees may also decide they want to leave the organisation if they do not feel informed about the .
Best practice engagement advice for managers
- Provide a thorough explanation of the issue to all staff members, including the redundancy process being used.
- Describe why the changes are necessary.
- Be reasonable, fair and efficient throughout the process
- Give a summary of any additional restructuring and/or modifications to working conditions.
- Possess a hopeful outlook on the future and convey to survivors the importance of their contribution to it.
- If required, have private conversations with the remaining critical employees to reaffirm their value and future employment opportunities.
- Make sure managers possess or acquire the character traits needed to function successfully during times of traumatic transition.
If you are an employer, and you fail to carry out a redundancy procedure fairly, or use the process to dismiss employees unfairly, this can leave you open to claims for unfair dismissal.
As specialists in employment law, we can help if you need guidance on the redundancy process, from initial planning through to the implementation stages. If you are concerned and would like advice to manage the risk for your business of making staff redundant, we’re on hand to answer your questions.
Redundancy process FAQs
What is the redundancy process?
A fair and lawful redundancy process involves identifying posts which are at risk and drawing up a selection pool, inviting volunteers, carrying out consultations, applying the selection criteria and notifying those who will be made redundant.
What is the consultation period for redundancy?
If there are 20 to 99 employees affected, the consultation period should be a minimum of 30 days. For more than 100 redundancies, this should be at least 45 days before dismissal.
How much redundancy notice are businesses required to give?
If the employee has worked for the employer for at least one month and up to 2 years, then they must be given a minimum of 1 week’s notice. For an employee who was worked for the business between 2 and 12 years, the required notice is 1 week per year worked. For employees who have worked for over 12 years, the minimum notice period is 12 weeks.
Last updated: 28 July 2022