Redundancy is a particular type of dismissal which an employer impresses upon one or more of their employees if it’s absolutely necessary that they have to reduce the size of their business’s workforce. Redundancy may be required if:
- The employer has ceased, or intends to cease, continuing the business, or.
- The requirements for employees to perform work of a specific type, or to conduct it at the location in which they are employed, has ceased or diminished, or are expected to do so.
Although redundancy is a potentially genuine fair reason for dismissal, it typically represents an employer’s last resort. As such, corresponding circumstances must always align, and the following procedure must be carried out judiciously.
However well you might manage your business, the potentiality of having to make redundancies is an ever-present concern. Take, for instance, how the Covid-19 outbreak situated the majority of businesses in a complex position, one where decreasing their operational costs was the only remaining option for survival. During this specific climate of socio-economic crisis, redundancy appeared to be more widespread than ever, despite how evidently inappropriate it would have seemed to employees at the time. Even today, redundancy has maintained its prevalence, as typified by large-scale companies like Twitter filling headlines for the redundancies they’ve recently made.
Of course, redundancy is never easy; it places both employee & employer alike in a significantly difficult situation where each party’s wellbeing and financial livelihood are at stake. Not to mention, there is also the added factor that there are often personal relationships extant between those within the organisation, further heightening the inherent unpleasantness. But, redundancy is sometimes unavoidable, and that is where employers find themselves under a legal obligation to adhere to a lawful redundancy process, as well as a moral obligation to exhibit transparency and supportiveness. So that you can come to terms with everything entailed, we’ve put together this piece which goes over how the redundancy process in the UK works. By reading it, you’ll help yourself to negate any serious consequences in the future.
Procedures for Redundancy
Your first step to making redundancies should be to create a general outline of all the involved procedures which you will undertake. Naturally, the specifics of the outline, such as the timescale and overall extent, will vary from business to business. Albeit, it’s categorically best practice for you to establish a formal redundancy process which comprises every essential facet. Namely, this refers to:
Selecting those for redundancy is your basis for the entire process and must be carefully thought out. That is, it’s integral for you to define the criteria by which you will measure each employee.
On the back of this, your selection process must clearly indicate that all employees have been treated without discrimination. Ultimately, this means you cannot make an employee redundant for a reason solely relating to their age, gender, race, religion, sexual orientation, disability, pregnancy status, or persistent long-term illness. Although the ‘Last in, First Out’ mentality can be common, we advise you to avoid this approach due to how it can lead to potential discrimination, even inadvertently. Likewise, it’s noteworthy that tribunals tend to view selection procedures which utilise a points system, relative to defined criteria, in a positive light.
These rules for selection apply to both whether you intend to make an individual redundant, or a collective group. However, in the latter case, you must identify a specific pool for selection. Meaning, the group should be characterised by those who carry out a similar type of work or have carried out similar work, operate within a certain department or division of the business, or are based in a particular location. Depending on the severity of your business’s situation, you may have to identify an array of selection pools. Furthermore, you should ensure that you thoroughly document the selection procedure, keeping a written record of the criteria and how it has been used. This will serve as a form of evidence against any allegations of unfairness made towards your business.
Redundancy consultation is an important aspect of the whole process, your employees have a right to be kept adequately informed from the very beginning. In essence, the employer is legally obliged to impart the reason for redundancies, the amount of redundancies to be made, the job types at risk, the specific selection approach, the outlined process, and the calculation for redundancy pay.
Saliently, employees are entitled to provide feedback and raise any concerns they have in regard to the systemic process, as well as offer developmental suggestions for improvement. Also, each employee should be given the opportunity to attend at least two meetings so as to discuss the probability of their being made redundant, all while having the chance to propose alternative action.
If redundancy will apply to less than 20 employees, then it isn’t mandatory for you to conform to a statutory timescale for consultation. However, the consultations should carry just as much weight and permit the employee to be accompanied by a co-worker or trade union representative, as is their prerogative. For redundancy cases concerning between 20-99 employees, the minimum time scale for consultation is at least 30 days before workers have been notified of possible dismissals, and at least 45 days before for instances wherein 100 or more employees are concerned, i.e., collective consultation must be carried out before notifications of redundancies for dismissals are issued.
If there are no distinct trade unions extant, then employers must exert an employee-led election to nominate a consultation representative. If an employer fails to consult their employees, then compensation for employees will follow in the form of a Protective Award. A Protective Award embodies between 45-90 days’ pay per employee. Moreover, failure to notify the Redundancy Payment Service (RPS) of a collective redundancy could lead to an unlimited fine for the employer.
Identifying Volunteers for Redundancy
One way to avoid going through with the compulsory redundancy scheme, which entails aforementioned lengthy consultation, is to identify those who would voluntarily take redundancy and offer them an incentive, typically fair financial compensation, to depart from your organisation. Voluntary redundancy may turn out to impact your expenses more, although it does circumvent the previous stage and the legal involvement therein.
The redundancy package you offer will arise from a negotiation between you and your employee(s). Employees can request voluntary redundancy, but the employer is not absolutely required to accept these requests and must approve the resignation and there must be a formal settlement agreement, endorsed by the employees legal representative which describes the terms offered and termination of employment.. If more employees volunteer than you had anticipated, you will have to create a selection pool and then fairly select those applicants, i.e., similarly to the compulsory redundancy procedure. On the other hand, if too few employees come forward, then you will be required to go ahead with the compulsory redundancy scheme, somewhat prolonging the process.
Considering Alternatives to Redundancy
As we mentioned in the preamble, redundancy should be treated as a last resort. Consequently, it’s required that you seriously consider plenty of alternatives to dismissing your staff in this manner. If you neglect the presence of an alternative option during the process, it’s entirely possible for an individual to make a tribunal claim against the redundancy. Relatedly, you could mitigate the situation of potential redundancies by reducing your staff’s working hours, reducing their pay, freezing pay rises, introducing flexible working shifts or suspending overtime.
Again, while you’re investigating possible alternatives to redundancy and how viable these are, taking into account your business’s available resources, you should record your process for doing so. Thereafter, it’s necessary that you ensure your employees’ acceptance for any changes, and that these changes do not open a breach in their contract, in order to avoid legal complaints. In part, the consultation stage consists of this matter, and so should be open to suggestions from employees. If an employee does accept an alternative role in your organisation, they will not be viewed as having been dismissed. In practice this process is far more complex hence its always recommended you seek HR advice.
Handling Dismissal by Redundancy & Appeals
If it has been decided, after having completed all of the involved procedures, that you must make one or more of your employees redundant, then you must provide those selected with a formal notice. Afterwards, you should invite each of them to at least one further individual meeting so that you can notify them that their role at the organisation is at risk, and so that they can voice any immediate questions or doubts they have.
Once this meeting has taken place, it is then up to the employer to assess their current suitability and issue dismissal if applicable. In the event of the employer making an employee redundant at this stage, they are required formally terminally the employees employment by providing a written redundancy notice, which should also contain a letter regarding their right to appeal, and explicate the redundancy pay calculation. Employees who have been employed for between 1-2 years are permitted one week’s notice, whereas those who have been employed for between 2-12 years are permitted to have one week’s notice for every year of their employment’s length. Its important to note this could vary dependent on your own internal policies and employee contracts. Subsequently, it is then up to the employee to decide if they wish to appeal against the final decision or not. If they do not choose to appeal, then you should provide them with a reasonable amount of time off where they can look for new employment.
Providing Redundancy Pay
All of those whom you have continuously employed for more than 2 years, and who are over 18, are legally entitled to statutory redundancy pay. The amount of the total payment is determined by how long they’ve worked for you and their age, in addition to if you have offered payment in lieu of notice (PILON) and if they have any leftover holiday pay.
For employees aged between 18-22, half a week’s pay from their usual wage represents one year of employment, for those aged between 23-40, 1 week’s pay for each year of employment applies, and for those aged 41 and above, one and a half week’s pay is to be issued for each year of employment. The sum of the calculation should come to the total standing before tax has been deducted. Of which, statutory redundancy pay is tax free and not subject to National Insurance for up to a threshold of £30,000. The maximum number of years of employment for which your employees can receive corresponding payment is 20. Further, if redundancy is mentioned in an employee’s contract then the final payment depends upon the contractual redundancy pay details therein.
Wellbeing Support for those made Redundant
Redundancy is something that often has a profoundly negative impact upon an individual’s mental health. After all, employment is an area relating to personal worth, belonging, and growth. Followingly, being made redundant foremostly signifies a sharp separation from these desirable features. As such, we strongly suggest that you offer support to your workers throughout the entire process, especially during finalisation. As an employer, your position of authority intrinsically carries with it principal moral responsibilities which you should reasonably fulfil.
Redundancy doesn’t just facilitate financial vulnerability, but personal vulnerability too, given that it represents a wholly isolating experience. In order to keep the people you’ve made redundant safe & healthy, it’s considered best practice to encourage their wellbeing by offering counselling and health assessments via an employee assistance programme (EAP), all while encouraging prospective employment in a practical way. EAPs can be of great value to employees made redundant months after the process has taken place. By the same token, beyond benefiting the employee(s) who have been directly affected, offering support services will also work to establish an effective sense of workplace morale and reputational strength when it’s most needed.
It’s easy to see how dealing with redundancy is a lot for employers to assimilate all while attempting to keep their business functional, even notwithstanding the inextricable emotional toll implied. That’s where we at advo come in. Our team of HR consultants have years of experience in dealing with the burdensome task of redundancy and have developed relevant methods to guarantee that it goes smoothly when it becomes inevitable. If you’re interested in our services, then be sure to get in touch today and we’ll start working on a tailored solution for you. For further reading, head over to our news page which is full of equally-useful information.