Fair Reasons for Redundancy

26 November 2020

In employment law, redundancy is a potentially fair reason for dismissal. However, getting a redundancy procedure right can be tricky. It is essential that you establish valid reasons for redundancy when considering grounds for redundancy.

This extends not only to the initial reason you are pursuing redundancies in your company but also when selecting employees for redundancy.

If the redundancy is not fair, genuine or didn't follow the correct process, the dismissed employee may bring a claim alleging that the dismissal was unfair and/or discriminatory. This leads to costly employment tribunals.

Let’s look at some fair reasons to make employees redundant, to make sure you follow the correct redundancy process.

Business reasons for redundancy

This is not the same as dismissing someone. You can only have a genuine reason for redundancy in the following circumstances:

  • When a business, or part of it, shuts down completely.
  • When a business shuts down at a specific location (even if moving to a new location.)
  • Relocation of the business
  • The requirement for employees to do work of a particular kind has reduced or ended.
  • The work of an employee is being completed by others.

These are the genuine and legal reasons for redundancy.

It is crucial that your statutory redundancy reasons fall into this definition. For example, attempting to use a redundancy situation to get rid of a problem employee could cause a costly employment tribunal claim for unfair dismissal.

Alternative options to redundancy

For the redundancy to be fair and genuine, you have to have explored all other available options. Many businesses may believe that the impact of the coronavirus crisis on their business represents one of the valid reasons for redundancy.

This may be the case, however, you will still need to make sure that a situation has arisen in line with the previous definition.

You will also need to consider if any of the government schemes in place to help businesses through the coronavirus crisis, such as the new Job Support Scheme, could help them avoid the redundancy taking place.

Other alternatives could consist of the following:

  • Reduction in working hours
  • A period of unpaid leave
  • Layoffs or short-time working
  • Early retirement
  • Retraining or redeploying staff
  • Restricting or banning overtime

Reasons for redundancy selection

Once you establish a genuine business case and considered alternative options, you will need to implement a fair selection process. This decides which members of staff will be placed at risk of redundancy.

While an employment tribunal may be unlikely to challenge a genuinely held belief that redundancies are necessary, they will scrutinise how you go about choosing those who are made redundant.

It is down to you to determine the most sensible way to achieve a fair outcome. Some organisations decide to allow staff to apply for the remaining jobs, treating selection for those jobs as akin to a recruitment exercise. Others choose the more traditional method of assessment against a matrix of skills or 'selection criterion.'

Another option is to offer voluntary redundancy.

Voluntary redundancy

When looking at reasons for redundancy, ACAS advises that you should consider ways you can avoid compulsory redundancies. Accepting volunteers has the advantage of allowing those who want to leave to do so. For example, staff may have personal reasons for voluntary redundancy, such as seeking to retire, and may want to ‘bite the bullet’ for their colleagues.

It is still important to establish good reasons for voluntary redundancy. This means you should:

  • Avoid committing to accepting them as you risk losing those with skills you want to keep
  • Define how you will choose between them if you have more people come forward than required. This may need to be considered carefully, as merely selecting the cheapest redundancies to make could be discriminatory in its effect.
  • Avoid having a policy of not re-hiring anyone who takes voluntary redundancy (as this can also be indirectly discriminatory).

Grounds for unfair redundancy

When considering reasons for redundancy UK, it is crucial that you get the procedure right. As discussed already, failure can leave you open to several tribunal claims which include unfair dismissal but can also relate to the procedure followed.

It is crucial to remember consultation requirements that are placed on you depending on how many members of staff you choose to make redundant.

Legislation requires you to inform and consult with 'appropriate representatives' of any employees who may be affected, where it is proposed to dismiss at least 20 employees at any 'one establishment' within 90 days or fewer.

Need our help?

Get in touch to navigate redundancy with confidence. Our services will save you time and money on costly mistakes. We can advise on redundancy payments and selection. We’re here to help: 0800 028 2420.

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