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Redundancy
Peninsula Group, HR and Health & Safety Experts
(Last updated )
Peninsula Group, HR and Health & Safety Experts
(Last updated )
Businesses will often go through ups and down. When times are hard you may need to make some employees redundant. So, it’s important you follow the correct process.
Not doing so could lead to the dismissals being unfair, leaving you liable to future claims. Following the process is the only way to avoid unfairly dismissing your employees.
In this guide, we'll discuss what the redundancy process is, how to follow a fair procedure, and how long the process takes.
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The redundancy process is a list of steps you must follow to ensure you're acting legally when making redundancies.
Let's discuss each step in more detail to help you stay on the right side of the law:
The first stage of the process is to create a business case for redundancy. This is a document that explains the reasons for needing to trim your workforce. In essence, it's a redundancy proposal.
You must have genuine and legal reasons for making employees redundant from your company.
As a business owner, it’s accepted practice to create a business case for redundancy. So, you must know how to write one to avoid claims and potential compensation payouts in the future.
When writing the business case for your company, there's plenty to bear in mind. Try and include the following in yours:
You must also explain how the redundancies will affect the remaining employees in your company.
The case has to be as clear as possible as you may be required to defend its at a tribunal.
As an employer, you should explore alternatives to avoid redundancy. There are different avenues to explore when it comes to this, so you must become familiar with them.
Choosing one of the alternatives can lead to the number of redundancies decreasing.
Let's discuss each of them in more detail:
Make sure you discuss all the options with your employees and be willing to listen to any new ideas.
Stage three of the redundancy process is to offer voluntary redundancy. However, this isn't always an option for all companies so you must understand what it is.
Voluntary redundancy is when employees are offered fair financial compensation or incentive to leave the company.
It's typically a fast and less painful process than compulsory redundancy. But if not enough employees volunteer themselves, you must go down the compulsory route.
There are some benefits to offering voluntary redundancy that you should consider. Such as:
As well as the benefits, there are some risks you need to be aware of. You should be familiar with them before you decide to take this route, such as:
There are two major differences between voluntary and compulsory redundancies that you need to be aware of.
Voluntary redundancy typically offers a larger financial incentive than compulsory, and people want to leave. This makes it a desirable option for companies.
But the main difference is that with voluntary redundancy people want to go, with compulsory they don’t.
Yes, employers don't have a legal requirement to accept voluntary redundancy requests.
You may not want to lose the particular member of staff who has offered their redundancy. Especially if they're crucial to the day-to-day running of your business.
If this situation arises and the employee still wants to leave, it should be processed as a resignation.
The fourth stage of the process is to select the employees you wish to make redundant. No matter how many people are losing their job, they must be fairly selected by predetermined selection criteria.
However, if more than one employee is at risk you must create a selection pool to assess each one. Your pool must follow fair selection criteria, for example employees who carry out similar work.
Following unfair selection criteria can lead to the dismissals being automatically unfair.
You must use objective criteria within your pool. Examples of these are:
Redundancy selection becomes unfair if you choose employees who hold a protected characteristic. All your employees have the right to be treated equally and without discrimination.
You cannot choose someone to be made redundant because of the following:
As an employer, you may choose to use a scoring system to fairly choose employees for redundancy.
When making multiple redundancies, you may be unsure of which employees to select. One way you can make the final decision is by using a scoring system.
You can use this to score employees against a predetermined set of criteria, for example:
Work performance:
Remember, you must never act in a discriminatory way when selecting employees via the points system.
The fifth stage of the redundancy process is redundancy consolidation. All employees should be made aware of the proposed redundancies in your company.
It's important you understand the process to be followed.
You must understand the process for redundancy consultations. Failure to do so could mean you act unfairly and have claims raised against you. So, let's discuss it in more detail:
All employees are eligible to discuss alternatives and suggest new ideas. You may also need to hold a collective consultation.
If 20 or more, or even 100 employees are potentially being made redundant it is known as collective redundancy. The consultation for 20 or more employees it must be held at least 30 days before any redundancies take place. For 100,it’s 45 days.
It must involve a trade union or employee representatives to keep them fair.
You must as many consultation meetings as needed with the affected employees, explaining why they're part of the selection pool.
The Redundancy Payments Service (RPS) must be notified before starting the consultation process. The process is as follows:
Following completion of the collective consultation, employees must be provided with redundancy notice.
There are different procedures that apply to small-scale or individual redundancies. For example, there's no time limit to hold a consultation. However, it must be held in a reasonable time.
To ensure you're acting fairly, you should follow the standard consultation process to avoid claims being made against you.
Once the individual consultation is completed, you must provide the employee with a notice period. This will either be contractual notice or a statutory minimum notice period.
Remember, you shouldn't provide your employees with a redundancy notice period during any of the consultation stages.
Yes, employees are expected to work whilst the consultation process is taking place (unless they have time booked off as annual leave or on maternity leave).
It's advisable to explain this to your employees at the start of the process.
During the redundancy consultation process, your employees have certain rights that you must provide.
If an employer fails to do so, it can lead to claims being raised against you at an employment tribunal.
These rights are:
The next stage of the process makes up your obligation to avoid redundancies in your company.
Any at-risk employees should be offered this where available. However, employees who have more than two years’ service and not been offered can claim for unfair dismissal.
Consider eligible employees for roles based on:
The role must be offered before their contract finishes, with employees given a four-week trial period in their new job. However, this period can be extended with an agreement.
Failure to source alternative employment may make the dismissal unfair in the eyes of a tribunal.
The last stage of the process is to select employees for redundancy.
You should hold a meeting with each employee to inform them of your decision to make them redundant.
This must be confirmed in writing, including when the job ends along with details of their redundancy package (statutory redundancy pay).
Employees have the right to know how their statutory redundancy payment has been calculated.
Following this, they start their notice period. You must provide the following:
Also confirmed in writing should be they can appeal your decision. At this point, employees are entitled to time off to look for a new job.
How long the redundancy process takes depends entirely on how many employees are being made redundant. So, let's discuss the redundancy process timeline below:
These timeframes are a legal requirement, which you must adhere to.
You should do everything you can to avoid claims being raised against you for unfair dismissal.
So, if you're making any employees redundant in your company, it's good practice to follow these tips:
Arguably the most important is communication. You must communicate with your employees every step of the way. Don't forget how stressful this period of time is for them.
Yes, employees are well within their right to make a complaint if they feel they aren't being treated fairly. If a complaint is made, you must take it seriously.
When dealing with a complaint, your grievance and investigation procedure must be followed. It's advisable that someone not involved in the redundancy process leads the investigation.
Be aware you may be required to pause the redundancy process whilst the issue is investigated.
If you want to avoid unfair dismissal claims being raised against you, then managing redundancy correctly is vital. This includes following a fair redundancy process.
Employers who don't follow the correct procedures during the redundancy process may leave themselves liable to unfair dismissal claims.
It's automatically unfair to make an employee redundant for several reasons, such as being a part-time worker. However there are more, for example:
During the redundancy process, you must avoid choosing someone for redundancy due to the fact they hold a protected characteristic. For example an employee's age under the Equality Act 2010.
Be extra careful when offering older employees with early retirement. Although they may take this option, be aware of age discrimination.
As an employer, making redundancies will be one of the challenging and complex processes you'll have to go through. So, it's vital you understand and follow the correct process.
Failure to do so may make the dismissals unfair, leading to claims being raised against you in the future. You shouldn't underestimate the importance of getting it right.
Peninsula offers 24/7 HR advice which is available 365 days a year. Want to find out more? Contact us on 0800 028 2420 and book a free consultation with an HR consultant today.
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