Redundancy is a complex part of business life. But as an employer, it’s essential to understand this area of employment law. In this guide, we explain it in detail.
But don’t hesitate to get in touch if you need support. During this time, you may also need assistance with redundancy advice or coronavirus business advice. That’s for any questions relating to furloughs, remote working, or redundancies.
To help you deal with this crisis, our HR helplines are open for employers affected by COVID-19. For quick answers to your questions, please call us on 0800 028 2420.
UK law for redundancy
You must make sure you have a redundancy process. It involves dismissing an individual from a role—the UK law for this is under the Employment Rights Act 1996.
It ensures businesses don’t terminate employment contracts for unfair reasons.
So, you must respect your employee rights in the redundancy process. These include (if they have eligibility) to:
- Redundancy pay.
- The correct amount of notice period.
- A consultation with you before redundancy takes effect.
- Consideration of other roles within the business.
- Time off during working hours to attend interviews.
The redundancy process
To follow a legal redundancy process, you must take into consideration the scale of what you’re planning.
There are five stages of the redundancy process. And these are the steps to follow for a fair redundancy process:
- Create a strong business case for redundancies.
- Consider alternative options—and actively look for them.
- Select employees for redundancy.
- Hold a consultation with the affected members of staff.
- Finalise the process.
1. Create a strong business case for the redundancy
You can view this as a redundancy process for small businesses. But medium-sized, and large organisations, can also follows these steps.
You must establish the reasons for making redundancies. There are common reasons for making employees redundant.
You must always have a solid reason. And that’s regardless of the amount of time an employee has spent with your business. However, if the length of service is over two years, that gives them the right to claim unfair dismissal.
Common examples of a reason include:
- New technology rendering a job unnecessary.
- Business requirements leading to cost-cutting.
- If your business is moving address.
But, remember, it’s illegal to choose members of staff based on protected characteristics. That’s UK law under the Equality Act 2010.
If you focus on fair reasons then you can avoid any claims of discrimination. But ensure you’re thorough in your analysis.
2. Consider alternative options
You must look at other routes your business can take. These include:
- Considering laying off employees—this is often a temporary approach, so you can return them to work at a later date. Employees don’t receive any pay during a lay off period.
- Lowering the number of hou rs the employee has.
- Providing a pay reduction—the individual must agree to this beforehand.
- If possible, transferring employees to available (and suitable) roles.
Again, you must take these steps—investigate where necessary and consider what’s available to your business and the resources you have.
You should keep records of your investigation—and discuss new opportunities with each employee.
3. The redundancy selection process
You should now choose employees. First, provide them with an advanced warning. You should confirm this to them in a letter of writing.
If you have absent employees (due to annual leave, maternity leave, illness etc.) then you should make sure you contact them about this business development.
But you should also remember that sometimes, depending on your business size, you may only have to make one employee redundant. In this case, you don’t need to create a list of potential redundancies.
However, if it’s more than one employee then you should create a selection pool. Use objective criteria to analyse staff performance. For example, think of individual:
- Skill levels.
- The importance of their role.
- Standards of work per employee.
- Disciplinary record.
As an employer, it’s your right to determine which employees you’ll include in the selection pool. But it’s important to consult with staff during the process.
So, it’s good business practice to pay attention to indirect discrimination.
Some businesses use a basic “last-in, first-out” (LIFO) approach based on the length of service of employees. This may appear fair, but it could come across as indirect discrimination against younger employees.
You may want to choose a points-based system. And this will take into consideration each employees’:
- Skillset and how this will help your business.
- Work performance.
- Flexibility in the role.
- Disciplinary record.
- Sickness record.
You can then review each employee based off the above. And then provide a points score.
4. Hold a consultation with the affected employees
You must consult with staff. These should be meaningful. So, you must allow for meetings, which will take into consideration the need to avoid dismissals. This step is the redundancy consultation process.
And it’s the same for 19 employees or under—or as an individual redundancy consultation process (if there is only one employee facing dismissal). This isn’t a legal requirement, but it’s advisable you do this all the same.
You should explain to the member of staff:
- How your system will work.
- The criteria you’re using—and why.
- Explain why some criteria have a priority over others.
You should also allow employees to consider your criteria and then provide feedback. Take into consideration their different responses.
Hold at least two consultation meetings. And you must inform employees why they’re in the selection pool.
The collective redundancy process
In the event you’re making more than 20 employees redundant, that’s a collective redundancy.
So, you should hold the meetings with an “appropriate representative”. This individual is either elected by colleagues. Or, if they’re part of a trade union, representatives of that union.
You should carry out this consultation in “good time”. Specifically:
- If you propose to dismiss between 20 and 99 employees within 90 days or less, the obligation to notify is triggered 30 days before the first dismissal takes effect.
- If 100 or more employees face redundancy, then within any 90-day period or less, notification should occur 45 days before the first dismissal takes effect.
As part of the collective redundancy, you’ll need to provide representatives with details. There’s a set amount you must offer to trade unions. Information includes:
- The reason for your redundancies.
- How many employees are facing selection.
- The number of employees your business has.
- Your method of selection (e.g. a scoring system).
- How you’ll carry out your process.
- How you’ll work out payments and other important information.
Remember, don’t provide your employees with notice during any of the consultation stage.
You must complete the meetings first—then you can confirm your selection and update them in a second meeting.
5. Finalising your redundancies
Once you make your selection, you should then provide each affected staff member with notice.
They have the right to appeal your decision—make sure you inform them of that right. You should include details about:
- Notice pay.
- Statutory redundancy pay.
Then, speak individually to affected employees in a brief meeting. And during that, advise them about your decision. Confirm this in writing.
You’ll need to provide the employees with their contractual notice. If they’ll receive a payment in lieu of notice, provide details of this arrangement.
The redundancy process for coronavirus related lay-offs
To help your business cope with the coronavirus outbreak, you can furlough select members of staff.
This is part of the UK government’s Job Retention Scheme. Once lockdown ends, you can return them to work.
However, you should remember the redundancy process during the coronavirus pandemic remains the same. You must:
- Follow a fair procedure.
- Consider alternative options.
You can read our guide to furloughing employees for support, as it’s a good option for businesses. The Scheme supports your business, and employees, by covering 80% of their wages.
However, be aware the current scheme only runs until the end of June 2020. There’s a new flexible furlough scheme after this.
This situation will develop throughout 2020, so it’s worth keeping track of the latest updates from the UK government.
How long does the redundancy process take?
The most important factor is how many employees are involved. So, we clarify the standard redundancy process timeline below:
- Fewer than 20 employees: As you must consult with staff individually, this’ll only take a reasonable amount of time. Typically, less than a month (30 days or fewer).
- Between 20 and 99 employees: You must complete collective consultation with this process. And it’s good business practice to consult with employees individually. As a result, this can take 30 days before you can dismiss the selected staff members.
- Over 100 employees: Again, this is a collective consultation process—as well as individual consultations. This means the process can take 45 days or more before dismissals come into effect.
The best practices during the redundancy process
For a general guideline for your approach, you can refer to the below:
- Ensure you have a genuine reason for what you’re doing.
- Have a process in place—and follow it thoroughly.
- Establish selection pools for employees—make sure this is fair and objective.
- Provide consultations.
- Offer suitable employment, if it’s available.
- Provide employees with time off if they need it (such as to attend job interviews), which will help them to find a new job. This is a legal requirement.
- Ensure final payments of wages and benefits are correct.
Ultimately, it’s essential to ensure your business is fair. If you take steps to ensure that, you should significantly reduce any chance of legal disputes.
Understanding the voluntary redundancy process
This is where your employees put themselves forward for dismissal.
On our voluntary redundancy guide, we explain it’s up to your business whether you accept this request. It can prove beneficial, as if an employee is near retirement age, they may not mind it.
So, you should:
- Follow the standard procedure and see if there are alternative options available.
- Choose between compulsory or voluntary redundancy.
- Make an announcement to your employees—and that you accept volunteers.
- Ask staff if they would like to put themselves forward.
- Consider requests when they arrive.
- Make a decision.
Grievance during redundancy the process
You must take any claims seriously. You can’t presume the employee is set to leave your business anyway, so it isn’t worth your time.
You should follow your standard grievance procedure. And you can appoint an employee to investigate the matter.
In some instances, it’s wise to stop proceedings to take care of the grievance procedure first. But the outcome will depend on the facts involved in an individual case.
We’re here to help
Dismissing employees is stressful and time-consuming. Especially when dealing with the coronavirus pandemic.
So, do you need quick answers to your questions? We’re here to help: 0800 028 2420.