How to Approach Staff Redundancy
No one likes to be the bearer of bad news, and making staff redundant can put you in a very difficult position. It’s a stressful time for all involved, so being sure to follow the correct procedure is essential in order to make the process as smooth and fair as possible.
Before you start the process of making redundancies, you must ensure that you meet the required statutory criteria. This can help to prevent future penalties being made against yourself and your company, such as any unfair dismissal applications by former employees.
Putting a plan in place according to this criteria before making any staff redundant can help make this process a little more straightforward. To help you make this plan, we’ve outlined everything you should consider before making redundancies, from notice periods to redundancy payments.
Is redundancy necessary?
Firstly, you should determine if the redundancy is absolutely necessary. Redundancies should only be made if a role or department is no longer necessary to the operations of the business, for what is known as Economic, Technical or Organisational reason – so replacements for this role cannot be made further down the line.
A redundancy may be required if your business is changing the way it works, moving location or closing down. However, there may be ways to avoid making redundancies and you should check whether this is possible in your circumstances.
One option is to offer the employee suitable alternative work within your business. You must be able to demonstrate how the new role differs from the employee’s original role and you must make the offer before the employee’s contract comes to an end.
Other options are to seek applicants for voluntary redundancy, lay off self-employed contractors, restrict further recruitment, reduce overtime opportunities and fill any vacancies within your business with existing employees whose roles would be becoming redundant.
Where alternative employment has been offered, the employee is entitled to try out the role for four weeks without giving up their right to redundancy pay.
What are the employee’s rights?
When making staff redundant, your employees have a series of rights, and you must be sure that you fully understand and comply with these. Employees may be entitled to redundancy pay if they are working under a contract of employment, have been employed for two consecutive years and have been dismissed, laid-off or put on short-time working.
This payment must be made upon dismissing the employee, or as soon as possible afterwards. You will also need to complete a written statement outlining the amount of redundancy pay made and how this has been calculated. If you do not pay, or the employee doesn’t agree with the amount, the employee has six months following their dismissal to make a claim for payment to an employment tribunal.
All employees are entitled to reasonable time off to look for a new job or undergo any training and must not be unfairly selected for redundancy.
As mentioned above, if the employee has been offered an alternative role within the company as an alternative to redundancy, then they are entitled to try this out for four weeks. If they are not happy within this new role, then they will still have the right to receive redundancy pay.
What can be considered unfair dismissal?
You should make yourself aware of anything that could be considered unfair dismissal when making staff redundant. According to gov.uk, any redundancy that has been deemed to be made due one of the following criteria is considered to be automatically unfair:
- pregnancy, including all reasons relating to maternity
- family, including parental leave, paternity leave (birth and adoption), adoption leave or time off for dependants
- acting as an employee representative
- acting as a trade union representative
- joining or not joining a trade union
- being a part-time or fixed-term employee
- grounds impacting any protected characteristic, which includes: age, disability, gender reassignment, marriage and civil partnership, religion or belief, sex and sexual orientation
- pay and working hours, including the Working Time Regulations, annual leave and the National Minimum Wage.
What is a redundancy consultation?
Employees must be consulted in any redundancy situation. Failure to consult with the employee will automatically make the dismissal unfair and you may be taken to an employment tribunal. When making a redundancy, you must follow the ‘collective consultation’ rules if you’re making 20 or more employees redundant within a 90-day period.
If you’re making less than 20 employees redundant, there is no set consultation criteria to follow, however it is best practice to fully consult employees no matter the circumstances. The consultation doesn’t necessarily need to end in agreement, but it must still be carried out.
How much notice are staff entitled to?
Following the necessary redundancy consultations, you then must set out an agreed leaving date with each employee that you are making redundant. This will be known as the notice period. Staff must be given the full statutory notice period as a minimum. This is calculated according to the length of their service:
- 1 month to two years – At least one week’s notice
- Two years to twelve years – A week’s notice for every year employed
- Twelve or more years – 12 weeks
Staff must be paid during their notice period, unless their contracts contain a PILON clause (Payment in lieu of notice) in which case, they can be paid in lieu of a notice period. This is calculated on their rate of pay and their contractual, or statutory number of weeks’ notice entitlement.
Carrying out redundancies can be a daunting task, especially with the potential for significant penalties if the process isn’t handled correctly. To ensure that you’re prepared to make staff redundant, you should seek professional advice.
If your business needs to make redundancies, or you’re struggling to determine whether redundancies are necessary, get in touch with our business rescue experts to receive professional advice that can help to keep you on the right track.