26 Feb 2021
In 2020, unfortunately, redundancies were at the forefront of everyone’s mind. Although it is unpleasant, getting the procedure right will reduce the risk of costly claims against your business. It will also ensure that everything is fair and considered. This means you may even find an alternative.
In this article, we’ll review the steps and variations of the redundancy process, ensuring you get it right.
What is the redundancy process?
Before we explore the process of being made redundant, we need to understand what redundancy means. It isn’t getting rid of an employee because you dislike them, or believe they are underperforming. It isn’t the same as a dismissal for conduct reasons.
You make an employee redundant because their role is no longer required.
There are many reasons why this might be the case, for example:
- The business (or part of it) may be closing down or moving location
- You may be fundamentally changing the way your business works (automation)
- The business may be changing the service/product it offers
This is important, as you’ll need to demonstrate that the role is no longer viable for a redundancy to be fair. If you’ve managed that, you’re off to a good start.
When is a redundancy fair?
If the employee you are making redundant has worked for you for at least two years, you need to ensure you conduct a full, fair process. If they’ve worked for you for less than two years, the redundancy process still needs to be fair, it’s just a little different. We’ll go into the specifics of a redundancy for an employee with less than two years employment a little later.
A fair redundancy process isn’t just about proving that business no longer need the role. There are several steps you must follow for it to be fair.
First, you should check your handbooks, contracts, and company policies. Make sure they are clear on how to conduct the process. If you deviate from this plan you may put yourself at risk of an unfair dismissal claim. Similarly, if your documentation doesn’t line up, you’ll struggle to prove the procedure was fair.
Consider if a consultation process is necessary – if over 19 employees are to be made redundant, collective consultation is necessary. If not, consultation is not a legal requirement but it is advisable
Finally, all staff have the right to appeal the decision to make them redundant. You must make them aware of this right and give them opportunity to use it. If you’ve done everything right, you shouldn’t need to worry about a drawn-out appeal.
In this next section we’ll plot out the basic redundancy process step by step…
The redundancy process – step by step
The first stage of the process is recognising that redundancies are necessary. It’s worth taking time to figure out if you can avoid making a redundancy. You can do this by offering alternative work or reducing overtime, to give a couple of examples. This will prove that your company has done everything it can to avoid redundancies.
The redundancy selection process
If you find it necessary to make redundancies, then your next step is to decide who is eligible. It’s vitally important that this stage of the process is free of discrimination. You must select employees fairly. The criteria for which you can base your decision include:
- Employees’ skill level and qualifications
- Standard of work and overall performance
- Disciplinary record
- Length or service
Remember, at this stage you aren’t choosing who to make redundant, just who is at risk of redundancy.
The redundancy consultation process
Once you’ve agreed who you’re considering for redundancy, you must inform them. You can do this by issuing them an at risk of redundancy letter. This will not only inform them that they’re at risk, but also tell them what to expect from the consultation process.
Before we look at the consultation stage, it’s important to note the following:
This redundancy process is for employers, if you’re an employee, please visit acas to see the redundancy process for employees.
First, you must notify the Redundancy Payments Service (RPS) before beginning consultation. The deadline for this changes depending on how many redundancies you’re making.
Once you have done this you can begin consultations. You can meet with trade union representatives or elected representatives. If neither of these apply, you must consult with your employees directly. There is also collective consultation. In this situation, you meet with union reps/elected reps (you may need to organise an election as well.)
Provide your employees with information on the redundancies, including how much time they have to consider them, why you’re making them, and how you plan on selecting which employees to make redundant.
You must respond to any requests for further information and make yourself available if the employee or representative wishes to meet.
Giving employees notice of redundancy
Once you’ve finished consultations you need to issue redundancy notices. When you do this you have to ensure you give them their statutory notice period. This depends on how long they’ve worked for you.
This is how it works:
- One week’s notice for employees who’ve worked for you between one week and two years
- A week’s notice for every year employed for employees who’ve worked for you between two years and 12 years
- At least 12 weeks’ notice for employees who’ve worked for you more than 12 years
If an individual wants to leave earlier than their notice period, you can offer them pay in lieu of notice (PILON)
And finally, ensure they are aware that they can appeal the decision.
Redundancy appeal process
The first instance of the appeal should come in the form of a letter from the employee. It’s up to you whether you accept the appeal or not. If you do, you should arrange a meeting with the employee as soon as possible to discuss.
The appeal process for redundancy doesn’t have a strict time limit—however, an employee has 3 months, minus a day of their contract ending, to begin legal action. Keep this in mind when handling an appeal.
Variations to the redundancy process
The redundancy process for one employee is different to the redundancy process for less than 20 employees or the voluntary redundancy process. So, in this section, we’ll take a look at some of the variations.
Possibly the most important change is the length of the consultation process. This differs depending on how many employees you are planning on making redundant.
- 20-99 redundancies = 30 days of consultation
- 100+ redundancies = 45 days of consultation
If your redundancy process affects less than 20 employees there are also changes. you don’t need to hold an extended consultation process for example. However, this doesn’t mean you shouldn’t conduct an individual redundancy consultation process as failing to do so may mean a claim of unfair dismissal.
Voluntary redundancy is when you announce that you plan on making redundancies, and an employee put themselves forward before you select them. It’s best for employees to do this in writing. The key points to remember with voluntary redundancy are the following:
- You don’t have to accept the redundancy just because they volunteered
- Refusing their offer due to a protected characteristic may result in a claim of discrimination
Otherwise, you should treat a voluntary redundancy the same way as a regular redundancy.
Variations can also occur due to other employment law processes. The TUPE process may result in redundancy too, for example. Sometimes, they’re even a condition of a TUPE transfer. This is often the case if the new owners don’t want to take on all the staff. In this case, it’s the responsibility of the old employee to conduct the full redundancy process. If the new employer decides to make a redundancy, they must inform the old employer about them. Failing to do so will mean any claims that arise from the redundancy will be the sole responsibility of the new employer.
Failing to follow the correct redundancy process…
What are the consequences of failing to follow the correct redundancy process in the UK?
The first is the risk of an unfair dismissal claim. If you’re making mass redundancies, you multiply this risk by however many people you plan to make redundant. The maximum compensation you may have to pay for a single claim is currently capped at £88.519. This is in additional to the basic award—up to a maximum of £16,140.
This is why managing the redundancy process properly is so important. A fair and carefully planned process mitigates risk and disruption.
If you’re facing a redundancy scenario and you’re unsure how to proceed, speak to one of our HR experts today on 01455 858 132
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