Redundancy - An Employment Law Guide

Redundancy is an unfortunate part of running a business. Sometimes it is necessary for an employer to reduce the size of their workforce and one method that could be considered is staff redundancies. 

Redundancies should only be used in a correct manner and for the correct reasons. Meaning, employees must receive all their legal rights from start to end. If an employer neglects any of these steps, they could end up facing unfair dismissal claims through an employment tribunal.

Ensure you get the redundancy process right. Contact the HR and Employment Law experts at Croner on 0800 142 2784 and get award-winning redundancy advice.

Check that redundancy is necessary

Redundancy should only be used when absolutely necessary, Using them in place of, for instance, a disciplinary procedure, is grounds for claims of unfair dismissal. 

Be sure to consider the following:

• Why do you think redundancies are necessary?
• What issues are you trying to solve?
• Are there alternative options?

Before you start the redundancy process consider the alternatives. This will help you conclude whether making staff redundant is the best option or whether it can be avoided.

Alternatives for redundancy

Whether your business is restructuring, or underperforming, you may be considering making your employees redundant, but there are some alternatives that you can consider before making a redundancy.

Reduce working hours

This may mean you’ve had a decrease in business demand. If this is the case, you’ll simply not have any work for staff to come back to.

One way to solve this issue is to ask staff to work fewer hours in order to help save costs. Employees may not be overly enthusiastic with the prospect of reducing their hours. However, if the alternative is redundancy, they’re more likely to agree.

Remember, you’re not permitted to make such a change to a term in their contract of employment. Staff will need to agree to this change before you can implement it.

Freezing training budgets

Some businesses spend a significant amount of money on training. It’s a great way to develop internal talent, but is also something you can afford to cut, temporarily.

Make employees aware of the fact that the change is only temporary. You can resume training once the business is in a healthier place.

However, be cautious if staff are engaged on a training contract. Removing the training part of their role could lead to a breach of contract claim.

Freezing pay

This is a particularly good option if you offer annual bonuses as a way of rewarding staff. If possible, try not to provide these for the financial year.

But again, it’s worth checking your contracts of employment. If you freeze pay and employees are entitled, by contract, to receive bonuses/benefits, you could be in breach of contract. If you have a discretionary clause, outlining that you will only make these payments if the business needs permits, you could rely on this clause to freeze pay.

If bonuses have been paid regularly for the last few years, you may also encounter an issue, employees may be able to argue that bonuses are a “custom” or a “practice” due to their frequency. This means they may be entitled to receive it even without a contractual clause.

Introducing flexible working arrangements

You may think that redundancies are the only way to help you reduce the number of staff at work. However, flexible working offers an alternative to this.

For example, you could permit staff to work from home on a more permanent basis. Or, you could stagger shifts to reduce numbers in the building at any one time and keep overheads low.

Lay-offs

Another alternative is placing employees on temporary redundancy. This means you provide them with no work or corresponding pay for a period of time until there is work for them to do.

Without a clause permitting this in their contract, staff will need to agree to be laid-off without pay. Otherwise, you will need to pay them in full. If they have worked for your company for at least a month, they may also be entitled to statutory guarantee pay (SGP). SGP is currently £38 per day for a maximum of five days.

If staff have at least two years’ service, and are laid off for four or six weeks in total, they may be eligible to receive statutory redundancy pay.

Offering alternative employment within your organisation

If possible, you must try and move employees elected for redundancy into other positions within your company, this is known as ‘suitable alternative employment’. 

You should look at any suitable alternative roles within your organisation and talk to your employee(s) facing redundancy to see if any other available roles are suitable, if so you should offer them the role instead of making them redundant. 

In cases where there is only one role available and multiple employees, you must offer the role to any employee on parental leave (maternity leave, shared parental and adoption leave) first. For all other employees, you should follow a fair process, such as holding interviews for the position.

When you offer an employee another role with your company it must be put in writing and offered before their current contract ends. It should also differ from the role that the employee is currently undertaking and start with a four week period of their current role finishing. 

Please note: Pregnant employees and new parents have additional protection, you should prioritise them over other employees when it comes to offering suitable alternative vacancies.

Trial periods for alternative roles

Your employees are entitled to a four-week trial period when they accept a new role, this should start after their current notice period and contract has ended. Training time can be accounted for if they need it by extending the trial period if necessary. 

If the new role is suitable then the employee waivers any right to redundancy. If the new role is unsuitable then the employee can leave at any time during the trial period without having to give additional notice. 

If an employee turns down a suitable role then they have to have a valid reason, these could include the following: 

• The role is paid less than their previous role.
• Health issues would stop them doing the role.
• Difficulty in commuting: e.g. the new role is based further away, and journey time and transport costs would increase.
• It would disrupt the employee’s family life

Create a plan for proposed redundancies

To ensure that a fair process is followed at every step you should recreate a redundancy plan, this can be shared with staff to better keep them informed of the process and progress. Consider working with a member of a trade union or an employee representative when undertaking this, as they could offer vital insight.

In your plan you should include:

All options considered as an alternative.

• The number of proposed redundancies.
• Information regarding keeping staff informed and supported.
• Consultation with all employees affected, this includes those off work due to sickness or parental leave etc.
• A roadmap or timeframe of when the process is due to be completed.
• A fair selection criteria.
• Whether redundancy pay and notice is statutory or contractual.
• An outline of the appeals process for employees if they believe the process was unfair.

Need help creating your redundancy plan? Talk to one of our HR experts today. Call 0800 142 2784.

Communicate proposed redundancies to staff

This should be done as soon as possible. You should make sure to inform all employees that the business is looking to make redundancies and hold meetings will all staff affected, not just employees directly at risk of redundancy. If you have staff working remotely be sure to include them. If necessary, conduct the meetings online. 

In these meetings you should communicate

• The risk of redundancy
• The number of positions being made redundant
• The next steps including how consultations will be held

You should also field any questions from your staff and encourage them to be forthcoming with any queries they have.

For employees who are at risk of being made redundant, you should confirm this in writing and clearly communicate the options they have available, such as voluntary redundancy. You should also include plans about the consultation process in this communique. 

Hold consultations with employees

Part of the redundancy process is the consultation stage. This is where you sit down with employees to explain planned changes, get their feedback, and discuss alternative measures.

This isn’t the part of the process to make final decisions. You must always be open to your employees’ suggestions and try to implement them if possible.

You should always aim to be as open and contactable as possible during this time. It will be a period of heightened tension, and failure to communicate or actively refusing to listen will only make things worse.

When does redundancy consultation start?

This depends on the total number of redundancies. For example, consultation for redundancy for less than 20 people has no set rules for when to begin. Whereas 100 or more must begin at least 45 days before the first redundancy takes place.

You must include voluntary redundancies in that total, as well as employees moving to other roles. And, you only need to include employees on fixed-term contracts if you plan on making them redundant before their contract ends.

Individual redundancy consultation process vs collective

To reiterate, when your consultation begins depends on how many redundancies you are planning on making. The thresholds are as follows:

• Less than 20 employees: no set rules on when to begin.
• 20 to 99 employees: must begin at least 30 days before first redundancy.
• 100 or more employees: must begin at least 45 days before first redundancy.

Don’t think because you’re only making a couple of people redundant you can skip the consultation process. You still need to have one, it just doesn’t have a set start date.

On the other end of the spectrum, there are no rules that dictate how long a collective redundancy consultation should last. If it’s 100 or more employees, the minimum is 45 days, but it can last much longer than that if needed.

Aside from the length and complexity of the cases, the process remains largely the same. The main change is that if you are dealing with a collective redundancy, you have to involve employee representatives.

Redundancy consultation meeting checklist

What questions should you be asking in a consultation meeting?

Well, the main points you want to discuss are the following:

• How to avoid or reduce redundancies.
• How to reduce the impact of redundancies across the organisation.
• How to restructure.
• The plan for the future.
• How employees have been selected for redundancy.

Those are broad points which you can narrow down in individual meetings, but it serves as a good starting point for any redundancy consultation meeting.

REMEMBER: In this meeting you must listen, consider, and attempt to implement employee suggestions if possible.  

UK employment law: redundancy consultation

The first and most important point is this:

Failure to consult with employees will almost certainly make the redundancies unfair, when consultation is legally required. An employment tribunal is likely to follow. Failure to meet the minimum requirement of days for the consultation period will also result in unfair dismissals.

There are other UK redundancy consultation rules you need to follow too. These include:

• Notifying the Redundancy Payment Service (RPS) before consultation starts.
• Providing written information to representatives and/or staff.
• Responding to all requests for further information.
• Giving affected staff termination notices showing the agreed leaving date.
• Issuing redundancy notices only after the consultation period is complete.

One important factor in collective redundancies is involving an employee representative in the redundancy consultation. A representative may be from a trade union, or an elected employee. You must consult with them during the consultation period.

Although this isn’t required, open communication during this period is still encouraged and you should be willing to receive and respond to requests for further information.

If employees are represented by an elected individual, they must be appropriate for the role. For example, a rep from the sales department is not suitable for speaking on behalf of the canteen staff.

Can a redundancy consultation period be extended?

Yes. If the consultation becomes more complex, you can extend it so long as you keep your employees in the loop. There is no upper limit for how long a consultation can last, just a minimum.

Sickness during redundancy consultation

A common issue that occurs during the consultation process is an employee becoming sick. Sickness absence is an issue all employers face, but it’s significantly trickier during the consultation phase.

It’s possible to fairly make an employee redundant while they’re absent. However, to ensure it’s not classed as an unfair dismissal, you need to make the process fair.

Keep the employee up to date with the redundancy process. Provide them with the same written information as their colleagues. Just because they’re not at work, doesn’t mean they can’t play a part in the process. In some cases, it may even be possible to hold a meeting.

Consultation can still take place by phone, letter, or email, if needed. Virtual consultations are likely the norm these days due to the pandemic. And, in a collective redundancy scenario, you may be able to consult with their representative, and not involve the sick employee directly.

Ultimately, as long as you follow a fair process, and do all you can to consult with the employee, you should be relatively safe from unfair dismissal. However, take extra care if the employee is absent as a result of a disability, or disability-related illness.

How much consultation is needed?

The simple answer is this:

As much as is needed.

There’s no set number of meetings that should be held during a redundancy consultation. A minimum of two will be necessary to convey the appropriate information and have the adequate discussions. However, as with the length of the consultation period, there’s no upper limit.

With this in mind, don’t refuse requests for meetings or more information from employees nonchalantly. It’s vital you listen to your staff and take on board their suggestions.

Selecting employees for redundancy 

Once the consultation process has been completed, you’ll need to select employees for redundancy, you must do this in a fair way in order to stay compliant with employment law. 

For instance you cannot select employees for redundancy based on any of the protected characteristics laid out in the Equality Act 2010, or any of the additional criteria covered in other areas of employment law, such as:

• Parental leave (Maternity, Paternity, shared and adoption etc.)
• Parental bereavement leave
• Time off for dependants and carer’s leave
• The individual's role as an employee or trade union representative
• Being a member of a trade union
• Being on a part-time or fixed-term contract
• Working time regulations, e.g. raising concerns regarding rest breaks etc. 
• Concerns over demanding the national minimum wage
• Concerns over whistleblowing

You’ll need to create a selection criteria as well as a selection pool of the roles that are being considered for redundancy. 

Creating a selection pool

Creating a selection pool will help you select employees for redundancy in a fair way, you should consider all roles that are similar or include a similar skill set in your selection pool. 

You should consider referring to any existing redundancy policy or agreement with a trade union before setting up the pool. If none exist you should consult with a recognised trade union or alternatively contact the employment law advisors at Croner to advise the best course of action and ensure that your process remains legally sound.

Creating a selection criteria

This should be included in your consultation so employees will know the metrics used to score them. This must be measurable and the same for all employees in the selection pool.

A good example of a selection criteria is:

• Standard of work
• Experience, skills and qualifications
• Attendance (not including absences relating to disability, pregnancy or maternity) 
• Disciplinary record

This will ensure that the criteria can be applied to everyone and that it can easily be explained and communicated. Because employees have a better understanding of how they’re being scored, this will ensure that they feel fairly treated.

Because a good selection criteria showcases a clear and consistent system for selection, it can also be used in the event that a redundancy decision goes to tribunal as it can help defend your decision. 

Scoring employees based on the selection criteria

You should outline each of the scores ‘weighting’ for transparency and have written evidence for each of the criteria. 

For example, you could score performance out of 10 and attendance out of 5, as long as it’s agreed that performance is of higher importance. 

Once you have selected the roles for redundancy you will need to work out any pay you will owe employees and serve them their notice. 

Need advice on making redundancies? 

With over 80 years of experience in supporting employers, Croner can assist your business with all your HR, Employment Law and Health and Safety needs.

Call us today on 0800 142 2784 and get award winning advice from one of our expert advisors.

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