Redundancies can be one of the most complicated procedures to deal with at work. It's a form of dismissal which isn't always desired in the first place.
With redundancy, you need to ensure all employees involved are given their legal rights and entitlements–from start to end.
If not, you could unintentionally action unfair dismissals which can lead to tribunal hearings and compensation penalties.
In this guide, we'll look at what redundancy is, UK laws on redundancies, and how to manage them in your workplace.
What is redundancy?
Redundancy is a form of dismissal used when a business needs to resize its workforce.
There are several reasons why you might need to action one or several redundancies. And these factors aren’t always related to conduct or behaviour.
Some of the most common reasons for a redundancy include the following:
- The business cannot run sufficiently anymore.
- The job has a particular kind of requirement.
- The location for a job no longer exists.
If there is a genuine redundancy, you need to ensure you follow the appropriate procedures. These include offering alternative roles, adhering to legal entitlements, and most importantly, only referring to redundancy as a last resort.
When redundancies are unavoidable or inevitable, it affects everyone in the business. So, it's your responsibility to ensure the , morale, and motivation isn't permanently damaged.
What is a voluntary redundancy?
As an employer, you can ask your staff whether they'd volunteer for redundancy.
This might seem like a futile request, but it can be beneficial to some people facing certain issues.
But remember, you cannot choose employees for voluntary redundancy. This may be considered as unlawful discrimination. However, you can offer it as part of your voluntary redundancy procedure.
What is a collective redundancy?
In some situations, you may need to make around 20 or more employees redundant. These sorts of situations come under collective redundancies.
Employees in these situations must legally consult their representative. For example, their trade union or an elected employee representative.
When it comes to collective redundancies, employees need to provide certain information. For example:
- All reasons for the redundancy.
- Procedures taken to avoid them.
- Ways of keeping selection numbers low or reasonable.
- Methods behind limiting impacts onto other employees or production.
What is redundancy pay?
Redundancy pay is a financial amount given to eligible employees going through redundancies.
Payment can include both direct and indirect costs provided to anyone up for selection.
Direct costs include:
- Contractual redundancy pays: This is the payment amount outlined in a person's contract.
- Statutory redundancy pays: This is what employment law states redundant employees are entitled to.
How much statutory redundancy pay do employees receive?
There are certain requirements needed when dealing with statutory redundancy pay.
Employees who were made redundant on or after the 6th of April 2022 will receive £571. (This is a capped amount).
The maximum statutory redundancy payment employees can receive is £17,130. If employees are made redundant before the date above, redundancy payments will be lower.
What is termination payment?
When an employee has been made redundant, they could receive 'termination payment'. These payments include:
Statutory redundancy pay that's under £30,000 is not subject to tax reductions. Tax and national insurance contributions depend on what is included in a termination payment.
UK laws on workplace redundancies
There are no specific laws which outline redundancies in the UK. However, there are relevant ones which need to be adhered to.
Without legal compliance, you risk potential negligence, discrimination, and unfair dismissal claims being raised against you. These claims often go through an employment tribunal. If they find you guilty, you could be forced to pay compensation penalties or even reinstate people for the same job.
Remember, these are difficult and upsetting times for all. Your company could already be suffering on a whole–so it's best not to add legal insolvency into the chaos.
Under UK employment law, you cannot select someone for redundancy based on a protected characteristic. If you do, this could class as unlawful discrimination which is illegal under the Equality Act 2010.
The nine protected characteristics which you cannot discriminate against include:
- Gender reassignment.
- Marriage or civil partnership.
- Pregnancy and maternity.
- Sexual orientation.
For example, you cannot pick someone because they're close to retirement age or are on maternity leave.
There are other cases where redundancy selection may be considered unlawful. These include factors like whistleblowing, exercising statutory rights, or taking action based on health & safety grounds.
Other redundancy rights
When employees are being made redundant, they could be eligible for certain legal benefits. For example, they could receive:
- Redundancy pays.
- Individual or collective consultation.
- Option to move into a different role.
- Time off to find a new job placement.
Do you need to provide notice periods during redundancies?
Employees must be given a notice period before their employment period ends.
A genuine redundancy notice period must follow these guidelines:
- At least one week's notice: For employees with 1 month to 2 years' service.
- One week's notice: For employees with 2 to 12 years' service.
- 12 weeks’ notice: For employees with 12 years' service or more.
However, employees should check their employment contract to check their specific terms. In some cases, you can provide more than the statutory minimum amount–but you cannot offer less.
You should also provide notice pay during this period. It's based on how much an employee’s normal earnings.
How to manage redundancies in the workplace
When a person goes from being employed to facing dismissal, their world can be turned upside-down. But in some cases, employers will have no choice but to let part of their workforce go.
At the end of the day, you need to follow the most appropriate steps when managing a workplace redundancy. That way, all parties can depart on professional, mutual, and respectful terms.
In summary, your redundancy procedure needs these following steps:
- Suitable alternative employment.
- Appeals and dismissals.
- Redundancy pays.
- Wellbeing support.
Planning to prevent redundancy
As employers, you'll know first-hand when your business faces choppy times. So, whether you need to let one employee go or a whole department, you need to plan it from start to end.
Before planning, see if there are alternative approaches you can take before redundancy. This might include things like:
- Offering short-time work.
- Stopping or reducing overtime.
- Presenting retraining or redeployment.
- Offering early retirement (so long as this is done without discrimination).
You need to ensure employees are selected for redundancy in a fair and objective manner.
Some of the most common methods for redundancy selection include:
- 'Last in, first out': This is when employees with the shortest service are selected first. (But you decision cannot be discriminatory).
- Self-selection: This is when you ask employees whether they'd volunteer to face redundancy.
- Disciplinary records: This is when you refer to individual records for selection.
- Employee ability: This is when you base selection on factors like appraisals, qualifications, and experience.
It might be reasonable to offer a voluntary redundancy process. Here, some employees might decide to leave on their own accord, for personal reasons.
Remember, the selection is not necessary if everyone on the workforce is being made redundant.
Consultation for redundancy
Anyone selected for redundancy is entitled to consultation meetings. The aim of the consultation is to discuss how staff will be selected, what procedures will take place, and whether alternative methods can be provided instead. These can be done through an individual or collective consultation.
These meetings also allow both sides to express any concerns or queries. And if final decisions can be amended or whether they will be actioned.
There is no time limit for consultation periods. However, a reasonable timeframe can include:
- Less than 20 redundancies: Consultations have no legal time limit outlined.
- 20 to 99 redundancies: Consultations should start at least 30 days before any dismissals take place.
- Over 99 redundancies: Consultation should start at least 45 days before any dismissals take place.
Fixed-term workers aren't eligible for collective consultation if their employment contract has an end-date.
Suitable alternative employment
Employers must consider offering suitable alternative employment before making someone redundant.
If an employee refuses to accept this alternative role, they may lose their entitlement for the statutory pay-rate during redundancy. They must be given a minimum of four-weeks, as a trial period, in their new role.
If both the parties agree the role isn't suitable, the employee reverts to being made redundant.
Those who have acquired two years of continuous service are legally entitled to paid time-off. This period is used to look for other work or perform interviews during notice periods.
Dismissals and appeals
All employers need to provide written notice for anyone at risk of redundancy. You need to invite them to a consultation meeting.
It's in this meeting where you will declare if they will be dismissed through redundancy. You need to:
- Provide notice of redundancy dismissal at end of process.
- Provide written confirmation that employee’s role is at risk of redundancy at the start of process.
Take time to listen to any concerns or points they may raise during this time.
Employees can appeal a redundancy decision made against them. But you should consider their appeal request and make a reasonable final decision.
They will need to explain their reasons for appealing and why they feel you should reconsider. In the end, your final decision must be fair and just. If not, employees could decide to raise a claim to the employment tribunal.
To receive statutory redundancy, pay, employees require two years of continuous service.
The requirements to receive statutory redundancy pay is calculated like this:
- Employees under 22 years old: Half a week's pay for each year fulfilled.
- Employees between 22 to 41 years old: One week's pay for each year fulfilled.
- Employees over 41 years old: One and a half week's pay for each year fulfilled.
The length of service that is required for statutory redundancy pay is capped at 20 years.
Employees won't be paid if their employer offers to keep them in their role. They also won't be paid if they receive suitable alternative employment which has been refused without good reason.
Remember, this only involves statutory redundancy pay, as contractual redundancy pay is up to your own discretion.
Understandably, it's difficult when a business goes through a reshuffle or redundancy. During this time, you could be losing talented and hard-working employees. Some might be going through stressful times, wondering how they will function without their job or fuel their personal obligations.
That's why it's so important to make sure you provide wellbeing support during the entire redundancy system .
Present services like financial advice or mental health support to those affected. One of the most effective support systems to offer are employee assistance programmes (EAPs). These programmes allow people to seek advice on employment matters. And most still run for up to three months after an employment position has ceased.
Throughout this time, you must be compassionate, respectful, and empathetic. Take reasonable steps with each person involved and treat individual cases appropriately.
How do you support employees who survived redundancy?
During a redundancy those who survived selection may have gone through tough ordeals. They will have seen complete reshuffles to their workplace and fear what the outcome of the business might look like.
It falls to employers to re-establish calmness and morale from here on out. Hold a meeting to explain your new systems, how valuable your employees are, and ways to keep productivity and motivation going .
What about employees on short time work and temporary layoffs?
Employees on short time work or temporary lay-offs can claim statutory redundancy pay under certain situations. To be eligible, they need to be temporarily laid off for:
- No more than four weeks in a row.
- No more than six non-consecutive weeks in a 13-week period.
Here, employees need to inform their employer they intend to apply for statutory redundancy payment. This must be done within four weeks of their last working day in the four- or six-week period.
Get expert guidance on redundancies with Peninsula
When an employer makes a redundancy decision, it needs to be fully thought about.
Whether or not they are planned, you need to ensure you follow the right processes throughout. If not, you could face negligence claims and tribunal hearings.
Peninsula offer expert guidance on making redundancies in the workplace. Our 24/7 HR advice is available 365 days a year; with multi-lingual support and fully trained counsellors ready to help.
Want to find out more? Book a free chat with one of our HR consultants. For further information, call 0800 028 2420.