Top tips on redundancy for small businesses

09 July 2019

How do you deal with redundancies? Here’s our guide...

The starting point for a redundancy procedure should always be a written business case. We know that there are lots of pressures on your time, so you don’t need to make it overly complicated. But you should start by looking into the cause of redundancies. Which leads to point one:

1. What made redundancies necessary?

Look into any recent changes in your business's environment, for example:
  • Have your customer numbers dropped?
  • Has a competitor opened on the same street?
  • Has a shopping centre near you closed, leading to decreased footfall?
State both the reason and the result it’s had regarding appointments made and cash flow.

2. Are there other options available?

Before you take action, look to see if there are alternative measures you could take to avoid redundancies, such as:
  • Identifying suppliers who can offer products at a cheaper rate
  • Increasing prices for services
  • Offering re-training in other more successful services in the business

3. What if redundancies are unavoidable?

If this is the case, it’s vital that you keep your staff informed of the current situation, and allow them to put forward their suggestions on how this action may be avoided. Start with formal group meetings, then follow up with individual meetings later on. It’s important to give staff a platform, listen to them and take their suggestions seriously.

4. Who should go?

We understand that choosing which employees to make redundant can be tricky – especially in a small business. You’ll need to come up with some objective criteria to mark your employees against and agree on these with your staff. Scoring should be recorded in writing so that you can show it to your employees: those that score lowest will be the ones chosen for redundancy.

5. What about redundancy pay?

Did you know that employees with at least two years’ service are entitled to receive statutory redundancy pay? This is calculated according to a set formula, involving the length of service and pay up to a certain limit – and will include commission earned by your employees. Once you’ve decided which employees are to be made redundant, you must give them a statement which sets out how their redundancy pay is calculated. Both pay and this statement are legal requirements, so make sure you’ve got this covered. Even in small businesses, redundancy procedures can become complicated. Making someone redundant means dismissing them and therefore, fair procedures are expected. We know these decisions aren’t easy, but get it right and you can come through this difficult time leaner and more efficient. To get immediate redundancy advice, call one of our expert advisors or request a free consultation.

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