The correct use of redundancy selection criteria is crucial in ensuring that any redundancy process is fair and lawful.
The following guide focuses on how to choose and apply the most appropriate redundancy criteria and how to mitigate the risks of falling foul of your obligations when making someone redundant.
Identifying your pool for selection
If you have restructured your company or organisation, or have been forced to make significant financial cuts due to a downturn in business, you will need to decide which employees are to be made redundant.
In cases where you have been forced to cut back on your payroll liabilities, this may affect all areas of your business, where you will need to identify the group of employees who will be at risk of redundancy. This is known as the selection pool and against whom you will apply your redundancy selection criteria.
Where your business has undergone a complete restructure, specific job roles may have become automatically obsolete. However, it is important to bear in mind that even where specific jobs may be lost, the selection pool should not be confined to those currently occupying those jobs, but should include all employees capable of doing that work. This can include employees carrying out the same or similar roles in other parts of the business or on different sites.
There is no need to select a pool for redundancy if your entire business is closing down and there are no other sites to take into consideration. Equally, if the redundant post is unique, then it may be entirely reasonable to focus on a single employee without creating any redundancy selection pool.
Identifying redundancy selection criteria
Having identified the pool of employees at risk of redundancy, you must follow a fair procedure when deciding whom to select from that pool.
As an employer, you have a fairly broad measure of flexibility in determining which redundancy selection criteria to use, although where any existing written redundancy procedures specify the criteria to be applied, you should not seek to deviate from this without good reason. Further, if a method for deciding redundancies has been agreed with a trade union, you should follow it.
When selecting employees for redundancy, or deciding on the criteria to include within any written redundancy procedures, you should always try to use objective criteria that are easily measurable and capable of being applied in an independent way, rather than based solely on opinion.
Examples of fair reasons for selecting employees for redundancy can include:
- An employee’s standard of work and/or performance
- An employee’s skills, qualifications and/or experience
- An employee’s attendance record and/or disciplinary record.
This list of redundancy criteria is not exhaustive. You can also apply a number of different redundancy selection criteria, or combination of criteria, with the aim of retaining those staff with the necessary skills and experience that are most valuable to the future of your business moving forward.
Applying the redundancy selection criteria
When applying your chosen selection criteria to your pool of employees at risk of redundancy, you must do so fairly and consistently and, where at all possible, based on an objective assessment with reference to clear evidence.
It is often a good idea to score employees against the agreed selection criteria to help you avoid relying on one particular criteria and to lessen the risk of unfairness. That said, you can decide which redundancy criteria are most important, adjusting the points accordingly, where this weighting system will allow you to be more flexible in how you score employees.
That said, that there is no strict requirement that redundancy criteria can only be valid if they can be scored or assessed by way of a ‘box-ticking’ exercise. There will be an element of judgment involved in many cases, although every care should be taken to use objective measures, for example, performance data should be supported by written performance reviews or appraisals.
You should also provide detailed written evidence to support your score or decision, so that employees have a clear picture of how they have been assessed.
Using a redundancy selection criteria matrix
A redundancy selection criteria matrix is used to define the different criteria that will be applied in deciding which employees to make redundant, such as a combination of aptitude, performance reviews and disciplinary records.
Each employee in the redundancy pool is then scored against each of the criteria within the matrix. Employees that score the lowest would then be selected for redundancy.
By using a redundancy criteria matrix, this can help you to create a transparent decision-making process and to fairly apply each of your criteria to minimise the risk of any complaint. This will make it clear to employees what is being taking into account and how any redundancy decisions have been made.
The risks of getting redundancy criteria wrong
Redundancy is a potentially fair reason for dismissal, as long as there is a genuine redundancy situation and the selection process is fair. By using redundancy selection criteria that is unfair or discriminatory, this could easily expose your business to a costly claim for unfair dismissal.
Typically, complaints of unfair dismissal will arise where the redundancy criteria applied by an employer either directly or indirectly discriminates against a certain employee or group of employees.
Below we look at how automatically unfair dismissal can arise in the context of discrimination, as well as use of the traditional last-in-first-out method that can, in itself, give rise to potential discriminatory effects.
Avoiding discriminatory redundancy criteria
When making redundancies, you must not discriminate against certain individuals or groups. This means that you must not select employees because of any one of the nine protected characteristics under the Equality Act 2010, including age, disability, gender reassignment, marriage and civil partnership, pregnancy and maternity, race, religion and belief, sex or sexual orientation.
By selecting an employee for redundancy on the basis of any one of these nine characteristics, this would be classed as an automatically unfair reason. Some other selection criteria are also automatically unfair, where you must not select an employee for redundancy based on any of the following:
- Family-related leave, for example, parental, paternity or adoption leave, or an employee taking time off to care for a dependant
- An employee acting as an employee or trade union representative
- An employee joining or not joining a trade union
- An employee working on a part-time or fixed term basis
- A reason relating to pay or working hours, such as an employee asking for the national minimum wage, holiday entitlements or rest breaks, or an employee refusing to opt out of the maximum weekly working hours.
To avoid any potential discriminatory effects, it is often a good idea to use criteria that are objective, measurable and do not in themselves discriminate against certain individuals or groups.
That said, even with some objective redundancy criteria, caution must still be exercised, for example, when using an employee’s attendance record this must not include absences relating to either disability, or to pregnancy and maternity.
Adopting the last-in-first-out method
Prior to the enactment of equality and anti-discrimination legislation, many employers would often use the last-in-first-out method, where making redundant those with the shortest length of service was easy to apply. However, this approach is now largely discredited as a sole means of selection for redundancy because of its potential to indirectly discriminate against younger people or women who tend to have shorter periods of employment.
Under the 2010 Act indirect discrimination is defined as where “a person (A) discriminates against another (B) if A applies to B a provision, criterion or practice (PCP) which is discriminatory in relation to a relevant protected characteristic of B’s”. A PCP is discriminatory in relation to a relevant protected characteristic of B’s if:
- A applies, or would apply, it to persons with whom B does not share the characteristic
- It puts, or would put, persons with whom B shares the characteristic at a particular disadvantage when compared with persons with whom B does not share it
- It puts, or would put, B at that disadvantage, and
- A cannot show it to be a proportionate means of achieving a legitimate aim.
These statutory provisions mean that in order for the potential discriminatory effects of applying last-in-first-out to be fair, you must be able to objectively justify this approach as a proportionate means of achieving a legitimate business aim, such as in reward of loyalty or maintaining a stable workforce.
Often additional redundancy criteria will need to be used to lessen the effects of any discrimination, although it is worth remembering that where you are weighting different criteria to reflect the most important factors for the future of your business, last-in-first-out should not be weighted more highly than any other criteria. In most cases, this method should be used in a tiebreaker situation where two employees score equally on, for example, performance and skills.
Practical tips for a fair redundancy selection criteria process
The following practical tips can help employers ensure that their redundancy selection criteria are fair, minimising any exposure to complaints of bias or discrimination that could result in a claim for unfair dismissal:
Where at all possible, choose objective redundancy selection criteria. This will help you to assess the pool of employees at risk of redundancy in a clearly defined and measurable way, rather than based on opinion.
If you choose to apply criteria involving qualitative data, any assessment must be carried out by someone with direct and specific knowledge of the employee’s work and be supported by written evidence.
Before finalising your redundancy selection criteria, consult with any employee or trade union representatives as to the selection criteria proposed to be used. If agreed, you will be in a much stronger position to defend your decisions if challenged by individual employees.
If scoring employees on their performance or disciplinary records, only take these into account where reviews, appraisals and rules have been applied fairly and consistently across all employees in the redundancy pool. You should also apply a fair timeframe to enable you to obtain a more accurate picture, discounting any expired disciplinary warnings.
If necessary, ask employees to reapply for their jobs to help you decide on whom to select. However, you should still use objective criteria when you interview to make sure you are selecting people in a fair way.
Make an appeals process available for employees who believe they have been unfairly selected, thereby reducing the chances of someone making a claim against you to an employment tribunal.
Keep a written record of your redundancy selection criteria and how you applied these criteria to your selection pool. This should include clear evidence used in support of any decisions made.
DavidsonMorris’ employment lawyers can help with all aspects of the redundancy process, including advice on lawful selection criteria for redundancy, and how these impact fairness of the redundancy selection procedure. Working closely with our specialists in HR, we provide comprehensive guidance on managing the legal risks of dismissing employees, including more complex cases involving furloughed workers and negotiating settlement agreements. For help and advice, speak to our experts.
Fair reasons for redundancy FAQs
What are the selection criteria for redundancy?
The selection criteria for redundancy can vary, although it is often best to use criteria that are objective rather than based on any opinion. This could include, for example, an employee’s standard of work and performance; their skills, qualifications or experience; or even their attendance and disciplinary record.
Can length of service be used in redundancy selection?
Length of service can be used in redundancy selection, for example, the last-in-first-out method, where those with the shortest time with an employer are selected first. This, however, is often only used in conjunction with other selection criterion to lessen the effects of discriminating against young people and women who tend to have shorter periods of employment.
What is a redundancy selection matrix?
A redundancy selection criteria matrix sets out the criteria that will be applied in deciding which employees to make redundant. Each employee in the redundancy pool is scored against each of the criteria and the employees with the lowest scores are then selected for redundancy.
On what grounds can you make someone redundant?
You can only make someone redundant where there is a genuine redundancy situation. This might arise because your business is changing what it does or doing things in a different way, for example, through the introduction of labour saving technology or a complete restructure to save on costs.
Last updated: 17 December 2022