When making staff redundant, employers should follow a fair legal process that upholds employees’ rights while protecting the organisation from risks such as unfair dismissal claims.
Throughout the 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.
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 and sufficient notice of redundancy has to be given to those who have been selected.
We look in detail at each of the key stages to help employers manage the risk of making staff redundant.
When can you make someone redundant?
Redundancy applies where a job role has become obsolete. 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.
Redundancy should be used as a measure of last resort only after all other options have been exhausted. Before considering redundancy, organisations should look at steps to mitigate the threat of making people redundant. This could include redeploying staff, reducing the working week, withdrawing overtime or putting a moratorium on recruitment in place if there is a reduced requirement for employees for a particular type of work.
Importantly, redundancy cannot be used as an excuse to ‘get rid’ of employees, whether for underperformance, absence or conduct.
Identify at-risk employees
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 providing cover.
Where the redundancies are a result of a total workplace shutdown affecting all staff, selection will not apply.
Define the selection criteria
The scoring criteria should be based on objective measures such as standard of work, the level of relevant skills and experience, qualifications, disciplinary record and attendance.
The scoring criteria must not be used to discriminate against any employee.
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
- pregnant or on maternity leave
- on any other form of leave associated to family
- acting as a trade union or other form of employee representative
- a trade union member
- arrangement of working hours, i.e. part-time, full-time, shift, flexi-time
- level of pay
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.
Compulsory or voluntary redundancy?
In some circumstances, it may be appropriate or in the interests of the organisation to offer voluntary redundancy.
There will be a number of factors to consider. Voluntary redundancies are typically more costly in settlement terms as it tends to be taken up by employees entitled to a larger settlement for example through long service.
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.
Collective versus individual redundancy
An employee has the right to be informed if their position is being considered for redundancy, given the chance to attend consultation meetings to discuss the possible redundancy, and given notice of their redundancy.
For redundancy to be deemed fair, employers need to consult with employee representatives and unions if the redundancy is a collective redundancy (ie 20 or more employees). 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.
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.
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.
- Individual consultation meetings with the employees.
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
Dismissal & notice periods
If proceeding with the redundancy, you will need to meet with the employees to explain the decision, the date of their contract termination and details of the redundancy package they will receive.
You confirm these details in writing dismissal.
When a redundancy situation has been announced employees are also entitled to reasonable time off to look for another job.
Certain notice periods apply when making someone redundant.
Employees have been employed for between 1 month and less than two years, they 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.
You also have to offer the employee the right of appeal.
They also have the right to take time off work to seek alternative employment.
How much is 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.
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: 23 March 2020