Redundancy can be a long and complicated affair. As an employer, you have a legal obligation to follow correct procedures and to ensure you treat all staff fairly.
There’re two main reasons for redundancy. It could be due to:
- Closure/moving of a business/workplace.
- Or a decrease in the need for employees/a particular role.
As well as defining redundancy, this piece explores redundancy rights and the process for meeting your legal obligations to avoid claims of unfair redundancy.
What is redundancy?
It’s a form of dismissal that occurs when employers are in a position where they have to reduce their workforce or expenses.
As well as the reasons highlighted above, it could able be due to the impact of new technology or systems that makes certain positions redundant.
Redundancies may be:
- Individual: Dismissing less than 20 employees in one establishment within a period of 90 days or less.
- Collective: Dismissing 20 or more staff in one establishment within a period of 90 days or less.
While both can occur for any reason, however, collective redundancy generally occurs when your business or building closes down, relocates or goes through reorganisation.
According to the Employment Rights Act 1996, your employees’ redundancy rights extends to certain entitlements when you're considering redundancy, one of which is for statutory redundancy pay. To receive this pay, employees must have worked for your two years or more, they’ll receive:
- Half a week’s pay for each full year of service under the age of 22.
- One week’s pay for each full year of service between the ages of 22 and 40.
- One and half week’s pay for each full year of service after reaching the age of 41.
It’s worth noting, a week’s pay is currently capped at £525 per week.
Other entitlements include the right to:
- A notice period.
- Reasonable paid time off to look for new work.
- A consultation.
- The option to move suitable alternative employment.
The Redundancy process
So how does redundancy work?
You’re required to follow a redundancy process that’s not only fair to your employees but also considers alternatives before deciding on redundancy. The process should include:
- Providing your reasons for redundancy.
- Determining which roles are at risk of redundancy.
- Informing all employees affected by the prospect of redundancy.
- Deciding on selection criteria.
- Conducting individual consultation meetings for feedback on the selection criteria with all employees affected.
- Scoring each employee in the redundancy pool based on the criteria set out in the previous two steps.
- Following up with a second consultation meeting to run through the scoring process and to collect any information pertinent to their selection for redundancy.
- Considerations for suitable alternative positions within the company.
- Informing selected employees of your decision to make them redundant. Remember to confirm your decision in writing.
- Reminding them of their right to appeal.
It’s important to follow these steps to avoid making an unfair redundancy. This occurs when you haven’t followed the correct procedures set out in the Employment Rights Act 1996 or if you use sham redundancy as an excuse for dismissing an employee. While you aren’t required to follow the acas redundancy process, it’s best practice to do so to avoid claims of discrimination. You must show that you followed a fair selection process and that you don’t base decisions to dismiss on an individual’s protected characteristic.
Consider following the redundancy procedure flowchart below avoid claims of unfair dismissal.
Disclaimer: This flowchart is meant to serve as an example. We don’t take any responsibility for inaccurate or inappropriate use of the document in your business.
These are the two different types of redundancy, voluntary and compulsory.
With voluntary redundancy, you’ll inform your employees of the need for redundancy and offer the option for them to volunteer for redundancy.
You may also offer incentives for early retirement as an alternative to voluntary redundancy. It's worth reminding voluntary applicants that selection for redundancy isn't guaranteed because they've applied for it.
With compulsory redundancy, like the name suggests, you’ll be choosing employees for redundancy based on a fair selection process.
Employment law and redundancy
Redundancy law can be a complicated one, according to redundancy laws in the UK, you’re required to carry out a fair selection process when considering making someone redundant.
The first and most important thing to remember is to treat all staff members fairly and in accordance with the legal redundancy rights.
During the selection process, you must select employees for redundancy in a way that doesn’t discriminate against specific people or groups. To initiate a fair process, consider using selection criteria to choose which employees to make redundant.
Some popular selection methods include:
- Last in, first out.
- Disciplinary records.
- Skills, qualifications and experience.
However, before commencing the redundancy process, you should take steps to avoid compulsory redundancies. Consider the following options as opposed to redundancy:
- Finding employees for early retirement or voluntary redundancy.
- Switching to flexible working options.
- Cutting down on contractors and freelancers.
- Restricting recruitment and working overtime.
- Temporary lay-offs or short-time working.
By law, your employees must:
- Receive appropriate notice in advance of their redundancy date.
- Continue to receive their wages until they leave the job.
- Receive redundancy pay if they’re entitled to it.
Remember to put the details of their redundancy in writing so you can refer to it in the future if needs be.
According to the redundancy rules, the statutory redundancy notice periods are:
- At least one-week’ notice for those that have spent between one to two years at the organisation.
- One week’s notice for each year if employed between two and twelve years
- 12 Weeks’ notice for those employed for 12 or more years.
Depending on the contract of employment in your organisation, you may allow for a longer notice period.
So when does the redundancy period start? It doesn’t start when you inform employees that they’re at risk of being made redundant. Instead, it only starts after you’ve told them their being made redundant and you provide them with a finishing date.
Still not sure how to go about the redundancy process? Speak to a Croner expert today for help with your selection process or general redundancy guideline. Call us free on 0808 145 3380.
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