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Are you making redundancies? Follow the right procedures

The decision to make staff redundant is never an easy one.

Whether you are restructuring your business, downsizing, or coming to the end of your business operations, redundancies can be hard on staff.

To make the process easier, you must ensure that staff are properly compensated and given a chance to take alternatives when possible.

When can you make staff redundant?

You must be able to demonstrate that your employee’s job will no longer exist. That can be because your business is:

Changing what it does
Updating how things are done, such as using machinery or automation
Moving locations
Closing down

Outside of these circumstances, you may risk being taken to an employment tribunal.

You should also consider alternatives before going straight to laying staff off. This should include offering staff alternative employment within the business where possible.

Compulsory vs non-compulsory redundancies

There are two types of redundancies that can be offered to your staff.

Non-compulsory redundancies can come in two forms:

Asking for voluntary redundancy
Offer incentives for employees to retire early

For both, you must ensure that you have a fair and transparent process. It must be offered to all staff, and no one should be singled out.

Compulsory redundancy should only be undertaken if there is no other option available.

To do this, you must select staff members to be made redundant in a fair and non-discriminatory way.

Fair selection should be selecting staff based on:

Skills and qualifications
Standard of work and performance
Attendance
Disciplinary record

Many companies consider a policy of last in, first out. However, this can potentially be construed as discrimination based on age, so should be avoided where possible.

Do not select staff based on:

Pregnancy, maternity, and paternity leave
Acting as an employee or trade union representative
Joining or not joining a trade union
Being a part-time or fixed-term employee
Age, disability, gender reassignment, marriage and civil partnership, race, religion or belief, sex, and sexual orientation
Pay and working hours

As well as this, you should always consult employees as part of the process.

Redundancy consultation

Making staff redundant without a consultation can result in unfair redundancies, leading to potential legal issues.

A ‘collective consultation’ must be taken if you are dismissing 20 or more employees. Whilst there is no requirement to do so under 20 employees, it is still good practice to consult employees and their representatives.

In a collective consultation, you should:

Contact the Redundancy Payment Service (RPS) before starting a consultation
Consult with trade union or staff representatives, or if there are none, you should communicate directly with staff
Provide information about the redundancies, with a fair amount of time to consider
Respond to requests for further information
Give affected staff termination notices with the agreed leaving date
Issue redundancy notices once the consultation is complete.

Paying staff

Not every employee who is made redundant will be entitled to payment.

To be eligible, employees must:

Be working under a contract of employment
Have at least 2 years of continuous service
Have been dismissed, laid off, or put on short-time working

If staff meet the above criteria, then you must give them statutory redundancy pay. You can pay them above this amount, but you must not pay them below.

Employees can get up to £19,290 in total, depending on their age and length of service.

You can use the redundancy pay calculator to help work out payments.

Get legal help

To ensure that you follow all your legal obligations, get the help of a solicitor.

Our experts in employment law can help at every stage, from ensuring that consultations are carried out correctly to helping if your business gets taken to an employment tribunal.

Get in touch with our team today to find out more.

Amanda Hyam

Head of Dispute Resolution and Employment

I have specialised in Dispute Resolution, Civil Litigation and Employment law for more than 15 years. I understand how daunting the prospect of litigation can be and because of this I am always available to discuss concerns.