Making someone redundant can be one of the trickiest tasks you’ll face as an employer. It’s important to consider whether it is the right call and how it will affect your employee. Proper planning and execution can make the process smoother and less stressful for everyone involved.
In this guide, we’ll explain how to carry out the redundancy process lawfully and in the least stressful way possible.
What is Redundancy?
Redundancy is the process of dismissing an employee from the company when their job is no longer needed. This could happen for several reasons, such as:
- Changing what your business does
- Altering operations (e.g., using new machinery)
- Moving location
- Closing down
For redundancy to be genuine, you must demonstrate that the employee’s job will no longer exist once they have left the company. This is the key distinction between redundancy and termination.
Termination occurs when you fire someone for performance or misconduct reasons, and someone else can then be hired to resume the role.
Confusing the two, such as making someone redundant for misconduct, can expose your company to legal action and potential compensation claims. This is why it’s crucial to meet all the required criteria to be compliant before making any redundancies.
How to Avoid Redundancy
You should do your best to avoid compulsory redundancies by considering the following steps:
- Seek applicants for voluntary redundancy or early retirement (more about this below)
- Seek applications from existing staff to work flexibly
- Lay off self-employed contractors, freelancers, etc.
- Don’t use casual labour
- Restrict recruitment
- Reduce or eliminate overtime
- Fill vacancies elsewhere in the business with existing staff
Implementing these strategies can help you manage your workforce more effectively and may reduce the need for compulsory redundancies, ensuring a smoother and more positive outcome for everyone involved.
Non-Compulsory Redundancy (or Voluntary Redundancy)
Non-compulsory redundancy, also known as voluntary redundancy, involves asking employees if they would like to volunteer for redundancy.
While this might seem counterintuitive, for some individuals, voluntary redundancy can be an attractive option. For example, employees considering a career change or approaching a different stage in their life may find voluntary redundancy appealing.
This approach also offers added protection to team members who rely heavily on their jobs, giving those more open to redundancy the opportunity to take it.
Early Retirement
You can offer employees incentives for early retirement as an alternative to voluntary redundancy. You must make this offer across the workforce to avoid age discrimination and cannot target specific individuals.
The decision to retire early must be voluntary; you cannot force an employee into early retirement.
Offers of Alternative Work
If you have selected someone for redundancy, you can still offer them an alternative role within your company.
For this offer to be valid, it must be unconditional and in writing, made before the employee’s current contract ends. The offer should explain how the new job differs from their existing one and must begin within four weeks of the old job ending.
Employees who accept this offer are entitled to a four-week trial period to ensure the work is suitable. If both parties agree it isn’t, the employee can still claim redundancy pay.
Compulsory Redundancy (or Involuntary Redundancy)
If your business still needs to let some employees go after taking steps to prevent redundancy and offering voluntary redundancy, you will move on to compulsory redundancy.
When making compulsory redundancies, you must identify which employees will be made redundant in a fair and reasonable manner, ensuring there is no discrimination.
How to Fairly Select Employees to Make Redundant
Selecting employees for redundancy is a delicate process that must be handled fairly and transparently. It’s crucial to ensure that the selection criteria are objective, justifiable, and non-discriminatory. Here are some fair reasons for selecting employees for redundancy:
Fair Selection Criteria
Skills, Qualifications, and Aptitude
Assess the specific skills, qualifications, and aptitude of each employee. Consider which skills are essential for the future of your business and how employees’ abilities align with these needs.
Standard of Work and Performance
Evaluate the quality of work and overall performance of employees. This can include productivity levels, quality of work produced, and ability to meet targets and deadlines.
Attendance
Consider the attendance records of employees. This includes overall attendance, punctuality, and any patterns of absenteeism.
Disciplinary Record
Review the disciplinary records of employees. This can include any formal warnings or actions taken due to misconduct or performance issues.
Length of Service
Length of service can also be a criterion, with those hired more recently potentially being the first to be made redundant. However, it’s important to justify this with other criteria to avoid claims of indirect discrimination (e.g., age discrimination).
Using these criteria helps ensure that the redundancy process is fair and legally compliant. Documenting the selection process and the reasons behind each decision is also essential for transparency and to defend against any potential claims.
What is Considered Unfair Selection Criteria for Making Someone Redundant?
There are specific criteria that are automatically considered unfair and must not be used when making redundancy decisions. Selecting an employee for redundancy based on any of the following reasons can lead to legal action and claims of unfair dismissal:
Pregnancy and Maternity
This includes all reasons related to pregnancy, maternity leave, and any absences due to pregnancy-related illness.
Family Responsibilities
This covers parental leave, paternity leave (for both birth and adoption), adoption leave, and time off for dependants.
Employee Representation
Acting as an employee representative or a trade union representative cannot be used as a reason for redundancy.
Trade Union Activities
Joining or not joining a trade union is not a valid reason for redundancy.
Part-Time or Fixed-Term Employment
Being a part-time or fixed-term employee cannot be a criterion for redundancy.
Protected Characteristics
Age, disability, gender reassignment, marriage and civil partnership, race, religion or belief, sex, and sexual orientation are all protected characteristics under discrimination laws and cannot be used as reasons for redundancy.
Pay and Working Hours
This includes aspects such as compliance with the Working Time Regulations, annual leave entitlements, and adherence to the National Minimum Wage.
Additional Considerations for Fair Redundancy
Transparency and Communication
Ensure open communication with employees throughout the redundancy process. Transparency about the reasons and criteria for redundancy can help manage expectations and reduce uncertainty.
Consultation
Engage in consultations with employees and their representatives. This not only helps in exploring alternatives to redundancy but also demonstrates a fair and inclusive process.
Support and Guidance
Offer support to affected employees, such as career counselling, job placement services, or additional training. Providing resources to help them transition to new employment can mitigate the negative impact of redundancy.
Document Everything
Keep detailed records of all decisions and communications related to the redundancy process. This documentation can be crucial if any legal issues arise.
By following these guidelines, you can ensure that your redundancy process is fair, transparent, and compliant with legal requirements. This approach not only protects your business from potential legal challenges but also maintains the trust and morale of your remaining employees.
Redundancy Consultations
Proper consultation with employees is a critical part of the redundancy process. Failing to consult can result in any redundancies being deemed unfair, potentially leading to legal action and employment tribunals. Effective consultation not only fulfils legal obligations but also demonstrates respect and transparency towards your employees.
If you’re making 20 or more redundancies within a 90-day period, you must follow collective consultation rules. These rules mean you handle redundancies transparently and fairly.
Steps for Effective Collective Consultation
Notify the Redundancy Payments Service (RPS):
Inform the RPS before the consultation begins. This notification is a legal requirement and helps ensure transparency in the redundancy process.
Tip: Use online tools provided by RPS to streamline the notification process and ensure all details are accurately recorded.
Consult with Representatives:
Engage with trade union representatives or elected employee representatives. If there are no representatives, consult directly with the staff.
Provide detailed information about the planned redundancies, including the reasons for them and the number of employees affected.
Tip: Schedule regular meetings with representatives to address concerns and provide updates. This helps build trust and reduces uncertainty.
Provide Information:
Give representatives or staff plenty of time to consider the information provided. This includes details on how employees will be selected for redundancy and how the process will be carried out.
Tip: Create a comprehensive information pack that includes FAQs, timelines, and support resources for employees.
Respond to Requests:
Respond to any requests for further information promptly and thoroughly. Open communication is vital for a fair process.
Tip: Designate a point of contact within your HR team to handle all queries efficiently.
Issue Redundancy Notices:
Once the consultation is complete, formally issue redundancy notices to finalise the process.
Tip: Ensure redundancy notices are clear and concise, outlining all necessary details such as redundancy pay, notice period, and support available.
Redundancy Notice
After completing the consultation stage, you must give employees notice and agree on a leaving date, adhering to at least the statutory notice period based on their length of service:
- 1 month to 2 years: 1 week minimum notice
- 2 years to 12 years: 1 week’s notice for every year employed
- 12 or more years: 12 weeks’ notice
Notice Pay
Employees are entitled to notice pay based on their pay rate and notice period. Alternatively, you can make a payment in lieu of notice, which allows you to terminate employment without any notice period by compensating the employee for the notice period they would have worked.
Notice pay is calculated based on the average weekly earnings over the 12 weeks before the notice period starts.
Redundancy Pay
Employees made redundant may be entitled to statutory redundancy pay, provided they meet the following criteria:
- Contract of Employment: The employee must be working under a contract of employment.
- Continuous Service: The employee must have at least 2 years of continuous service.
- Dismissal, Lay-Off, or Short-Time Working: The redundancy must result from dismissal, lay-off, or short-time working.
Employees who take early retirement are not eligible for redundancy pay.
Redundancy Pay Rates
Redundancy pay rates are based on the employee’s age and length of service, calculated back from the date of dismissal. The rates are as follows:
- Half a week’s pay: For each full year of employment up to the age of 22.
- One week’s pay: For each full year of employment between the ages of 22 and 41.
- One and a half weeks’ pay: For each full year of employment after the age of 41.
Length of service is capped at 20 years, and the weekly pay is capped at £571, with the maximum statutory redundancy pay being £17,130.
By following these guidelines and incorporating empathy and transparency, you can ensure that the redundancy process is fair, transparent, and legally compliant. This approach not only protects your business from potential legal challenges but also maintains the trust and morale of your remaining employees.
Professional Guidance on Redundancy
If you think you are going to have to make redundancies in your company, the best thing you can do is seek professional advice. With expert guidance from a team such as Ryans, you can ensure you’re making the right decision and doing so legally.
Get in touch with our team of experts today to find out the best redundancy process for your business. For more information and advice, check out the rest of our handy guides here.