Sometimes businesses face a redundancy situation. To protect the business employers must act quickly but it is absolutely critical that they follow a fair procedure. Employers should consult with the employees likely to be affected to see if the redundancies can be avoided and to discuss alternatives and the criteria for selecting people for redundancy. If you are planning to make 20 people or more redundant then statutory procedures must be followed.
Sometimes employees would like to take voluntary redundancy under a settlement agreement.
Knowing how to handle redundancy situations effectively is essential in order to minimise the impact on your employees and your business.
Helix law can help you to make the right decisions.
A Fair and Reasonable Process
Sometimes, a business faces a decision whereby the best course of action to protect the business is to make redundancies.
If you find yourself having to make such a decision, it is best to gain legal advice before sharing this news with your employees. You need to be assured that your process for choosing employees to make redundant is legal and best prevents any claims of unfair dismissal or discrimination against you. Contact Helix Law to discuss issues surrounding redundancy to minimise impact to your business and employees.
Scroll to the foot of this page to see our FAQs regarding employment law and redundancy.
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Frequently Asked Questions
- Identifying a reasonable ‘selection pool’ of employees considered for redundancy. Fair, objective criteria must be applied to all employees within the pool.
- Consulting with and warning the selected employees about the possibility of their redundancy.
- Consulting with and informing employee representatives where collective redundancy is an option.
- Fair and reasonable procedures for making individuals redundant.
- Seeking the opinion of any workers’ union involved.
- Considering alternative roles within your company for employees whose current roles are redundant.
- Allowing reasonable paid time for redundant employees to look for work or make other arrangements for gaining new employment.
For more information on redundancy procedures, see the Acas guide or contact Helix Law.
- Fewer than 20 dismissals: it is obviously courteous to give as much notice as you can, and to observe notice provisions in your employees’ contracts.
- Between 20 and 99 dismissals: consultation must start a minimum of 30 days prior to the first dismissal.
- 100 or more dismissals: consultation must start a minimum of 45 days prior to the first dismissal.
Remember, when making collective redundancies, you are under statutory duty to consult and inform employee representatives about the proposals.
- Why you are making redundancies
- The number and roles of employees whom you plan to dismiss (e.g. 20 customer advisors)
- The total number of such employees currently working at your establishment (e.g. there are currently 50 customer advisors)
- The planned method of selecting people to dismiss
- The planned method of actioning the dismissals, along with the time period over which they will take place (e.g. ten notices to be issued in the next 90 days, and a further ten before the end of the year)
- The planned method of calculating the redundancy payments (not including statutory redundancy payments)
To help you construct your proposal to employee representatives, read the Acas guide or speak to Helix Law.
- If the person is aged 21 or younger, they receive half a week’s pay for every full year served
- For ages 22 to 40, a person receives one week’s pay for every full year served
- For ages 40 and over, a person receives one and a half week’s pay for every full year served.
Employees must have served two years’ continuous employment at the date of dismissal to qualify for redundancy payment. Maximum length of service that can be taken into account is 20 years.
Age-related restrictions for redundancy entitlement and pay remain, despite the legislation which bans age discrimination.
The week’s pay has a statutory maximum of £508 per week up to a maximum of £15,240.
If you would like to encourage voluntary redundancy, you could consider offering a larger amount than the statutory redundancy payment. However, you may want to be careful not to create a contractual ‘right’ to enhanced payments. An employee once successfully argued in a Court of Appeal case that a mention of enhanced redundancy payment ‘entitlement’ in his company’s staff handbook meant that he should be paid over the statutory minimum. Also, be warned that your scheme could benefit older workers much more than younger ones – the latter could claim age discrimination unless you can show that the older workers’ benefit was a proportionate means of achieving a business need. Such needs or aims can be defined as encouraging motivation or loyalty or promoting a rewarding experience for some or all employees.
To clarify issues surrounding redundancy pay, contact us.
- Standard of work
- Disciplinary record
Unfair criterion listed by gov.uk are:
- Reasons relating to pregnancy; maternity, paternity, parental or adoption leave; and time taken off for dependants
- Acting as employee or trade union representatives
- Joining or not joining trade unions
- Being a fixed-term or part-time employee
- Marriage or civil partnerships
- Religious or other beliefs
- Gender reassignment
- Sexual orientation
- Working hours and pay, including annual leave, Working Time Regulations and the National Minimum Wage.
Always obtain legal advice before actioning potential criterion for dismissal. Even criterion considered legally ‘fair’ must be enforced in a way which eliminates possibilities for dispute.
If the new job offered is similar or the same as the former in terms of pay, working hours, content and prospects, it is considered a suitable alternative. However, you will have to give redundancy pay to those who turn down alternative employment within a reasonable radius if it is not suitable for them, or their refusal is reasonable.
The assessment for determining whether an employee may reasonably refuse it is dependent on their individual circumstances. For instance, if an identical job is offered twenty miles away, it would probably be seen as reasonable for the employee to refuse it if it posed problems with regards to travel time and expenses or domestic commitments.
However, this depends whether the Tribunal accepts your proof as reasonable. It also depends on whether the former employees convince the Tribunal that a pretext of redundancy was used in order to get rid of them; in which case you will be ordered to pay unfair dismissal compensation.
- Reducing overtime
- Offering early retirement to those who volunteer
- Letting go of temporary employees
- Retraining or redistributing workers (even to roles with less responsibility and pay)
- Pushing back starting dates of new recruits
- Offering sabbaticals
- Arranging secondments (where one or a group of workers are temporarily assigned to different roles within the business or even different companies for a set time period).
You could also attempt to negotiate a reduction of workforce by offering compensation payments. In this case, you should ask employees to be willing to sign a settlement (formerly compromise) agreement, which prevents them from bringing a future Employment Tribunal claim. In any case, legal advice is highly advised.
It can also cause trouble if you make some new recruits redundant and not others, unless there were additional criteria used to select them that justifies the difference in treatment. For instance, you could choose to keep some new recruits on the basis that they have completed a training programme and let go of the ones who haven’t.