Redundancy Advice for Employers

What to do before commencing the redundancy process

Depending on the type and size of business, employers need to identify reasons why the redundancy is necessary. Redundancy planning should be considered, so that you have fair reason to back up your claim. Alternative options that could be used to avoid redundancies should be examined during this stage. This might include ending contracts with agencies and contractors, re-training employees, offering reduced pay.

For a smooth handle of the redundancy process, the employer should develop a plan of the entire process including a timeline and specific targets. Redundancy for employers can be stressful should you find yourself in legal complications with employees, so be sure to have redundancy plans in place. With the right redundancy planning, you can protect yourself and your business should you find yourself facing a claim.

Redundancy process

Although every business facing financial difficulty haste to cut staff costs, it is essential not to haste and instead meet some legal obligations when making redundancies. The risk is that an unfair procedure may give rise to claims of unfair dismissal.

Employer duty to undertake a fair selection process

Selection stage in redundancy entails firstly the choice of the criteria for selection process, secondly identifying a pool of employees and finally the application of the chosen criteria to the pool of the employees. The selection criteria should be as possible objective and must not be discriminatory. Although the criterion Last in, first-out (‘LIFO’) is extremely popular, the employer should be mindful of the indirectly discriminating against younger employees. A safer criterion to use is point scoring where several criteria should be applied to the employees in the pool and scores allocated to each employee. Unless there is only one employee affected by the redundancy, in all other cases the employer must identify the pool of employees who perform the same or similar roles.

Employer duty of consultation

Employers should be mindful of the consultation stage as the way it has been carried out shows whether the employer acted reasonably in deciding to dismiss or not. Consultation may also prove to be useful as the employees may come with solutions that the employer has not previously considered. Whenever practicable, the employer should give an advanced warning to the affected employees as soon as possible. Effectively communicating redundancy is particularly important because it can affect the employer's business reputation. It is good practice to ensure that the employees know about redundancy before any public announcement. On the same vein, the employees at risk of redundancy should be informed before the rest of the workforce.

Employers organize and hold individual meetings with each potentially affected employee. The consultation should be more like a dialogue between the employer and the employee over a number of weeks. The issues to be discussed during the consultation include the reason for the redundancy, explaining the selection criteria, the redundancy package, the alternative employment if any. The employer needs to allow the employee to express their views, suggestions, and objections. If no alternative solution has been agreed upon, in the final meeting, the employer will confirm to the employee the termination date, payments, and the right to appeal.

Employers make a reasonable effort to identify alternative employment. This duty is dependant on the size of the business. It might be an easy process for a small business, but it might take longer for a group of companies. If in doubt of whether the employee is a good fit, the employer may conduct an interview process. If the employee turns down the offer of employment, careful consideration should be given to the refusal. If there is an unreasonable refusal, the employer does not need to make any
redundancy pay to the employee. Alternatively, if a refusal is genuine, the employer must make the redundancy pay.

Apart from individual consultation, where an employer intends to make 20 or more employees redundant over a period of 90 days or less, the employees have a right to collective consultation. This would entail that the employer should provide the employees’ representatives with certain specified information and also consult with the employee representatives.

Duty to give employees a minimum statutory notice period

The employer is required to give the appropriate notice to the employee before dismissing them. It is important to know how much notice for redundancy the employer must provide their employees with as it is not allowed to give less than the minimum period required by law. The statutory minimum period that an employer must give to the employees is at least one week’s notice if they’ve been with the employer between one month and two years, an extra week’s notice for every year they have been in service between two and twelve years and twelve weeks’ notice for employees being in the employer service for twelve years or more. If the contract of employment provides a longer notice
period, the employer should give the employee this notice period. The notice period begins the next day the employee is informed and is advisable that the employer
ensures that records are being kept of the dates the notice was given to the employees. Depending on an employees’ particular circumstances, the employer may choose to terminate the contract without a notice period and instead to pay employees. This is known as ’pay in lieu of notice’.

Alternatively, the employer could choose that the employer does not work during the notice time, but the employment contract and the employee’s obligation are still in force – known as ‘gardening leave’. Exceptionally, under certain circumstances, the employer could dismiss an employee without giving them the notice period. Employees are entitled to time off during the notice period and the employer is under a duty to allow employees a reasonable period off to look for a job or arrange training.

Right to a redundancy pay

The employers are under a duty to make redundancy payments to employees considering both their statutory and contractual entitlements. The amount the employees are entitled is based on their age, weekly pay, and the length of service. Unless there is no contractual enhanced pay in place, the employees are entitled to half a week’s pay for each full year they were under 22, one week’s pay for each full year they were 22 or older but less than 41, and a week and a half pay for each full year they were 41 or older.

The weekly salary is capped at £538 per week and there is also an overall cap for the redundancy pay at £16,140. The contract of employment and/or staff books should be checked to see whether they mention a redundancy pay. If the contract states a higher amount of redundancy pay, the employer should pay this sum.