We know redundancies are a last resort for businesses. A redundancy process is also neither cheap nor straightforward, and the consequences of getting it wrong are costly on several levels – financially, in reputational terms and potentially damaging to you and the staff left in the business. We’d recommend you seek legal advice before proceeding with any redundancy programme.
This guide gives an overview of the fair process you need to employ and the important considerations when embarking on redundancies where your employees have at least 2 years continuous service at the date of the proposed redundancy.
You should also consider the alternatives to making redundancies. These may enable you to make savings and avoid or reduce the volume of redundancies. All alternatives are worth exploring.
A redundancy is a type of dismissal which happens for financial or restructuring reasons. It is the role which is redundant and is not meant to be based on anything personal about the employee themselves (performance, attitude, etc.) who occupies that role.
A redundancy might happen for a number of reasons: work moving to another site, a workplace closure, a drop-off in work or a cost-cutting exercise. Sometimes work is being outsourced or new technology may have eliminated the need for a role.
Can we ask for volunteers?
Although traditionally a redundancy is thought of as a compulsory dismissal of an employee, you can indeed ask for volunteers to opt for redundancy if you prefer.
There several advantages to a voluntary redundancy process. Often it can be more pleasant way of reducing your staff than compulsory redundancy dismissals. It avoids the need to select employees, which can be stressful and upsetting for those affected – and those doing the selecting too. It can also avoid the risk of legal claims.
However, volunteers for redundancy will usually expect receive an enhanced redundancy package in return for volunteering, so you should think carefully about whether asking for volunteers will be the best approach for your organisation. Also bear in mind that the ‘wrong’ employees might volunteer – those whose skills and experience you’d rather keep. You can reserve the right to refuse any application for voluntary redundancy, but doing do can create a level of resentment and demotivation. You should therefore think very carefully before you choose to ask for volunteers and be very mindful of the consequences (intended and unintended).
How do we select employees for compulsory redundancy?
It’s always a case of deciding that you no longer require a particular role or roles to be carried out in your organisation any longer (or it now needs to be done in a very different way, perhaps on very different hours, at a different location or by someone with a different set of skills).
Remember that you are not permitted to make this decision based on the personal attributes of the person in a particular role (performance, skills, attitude, conduct, attendance, etc.). The selection can only be based your organisation’s need (or lack of need) for the role to exist.
If there is a unique role that you choose to remove from your organisation, with only one person in that role, then it is said that they are in a ‘selection pool of one’, and the selection part of the process here is essentially an automatic one.
If there are several people doing the same role and you want to reduce the number of people in this role then they will ALL need to go into a selection pool. Defining precisely who should be in a selection pool and whose roles it should contain can sometimes be complicated. Sometimes similar (but not identical) roles should be included, sometimes managers too – this is where taking legal advice can be of real value.
Once a person has been told they have been selected for redundancy (either from a ‘pool of one’ or from a selection pool of several) we call them being ‘at risk’ of redundancy. It is important to tell them that they are ‘at risk’ as soon as you can.
To show that you followed a fair selection process you typically need to demonstrate that:
How do we ensure an objective selection process?
Assessing your employees should look at their attributes and how they match your future requirements. The methodology of ‘last in, first out’ is not recommended. You must consider who will be most valuable to the business – but without favouritism! Length of service may be considered in a tie-break situation, but only in the case where skills and performance are equal.
Taking performance into consideration is a fair way of selecting those for redundancy, but objectivity remains the watch-word. Scoring cannot be made on the employer’s perception – it must be backed by sound evidence like results. Look at your employee’s actual outputs – sales figures, project budgets and timescales or the employee’s performance appraisal record. We appreciate this is easier done for some roles than others!
If you use attendance as a criterion, objectivity still rules. It is fair to retain those with a reliable attendance, but you need to make adjustments for those who may have a poor attendance record due to an underlying medical condition. You also need to be sure that an employee’s poor attendance in the past is a reliable indicator of their attendance in the future. If a period of ill-health or an accident for example resulted in a lengthy absence, this may have been a one-off. We’d recommend you take into account how you measure sickness absence in reaching a score.
Better criteria might include disciplinary records, qualifications and experience. Of course, these may not provide the best match for your future business needs, often it is the less measurable principles such as potential, flexibility or attitude that employers are interested in but are harder to explain. Evidence with examples of the employee’s behaviour will be required to support your assessment.
The bottom line is to consider whether the criteria could be used in a discriminatory way. Could you prove your decisions if challenged? How would these look in front of a Tribunal Judge?
What about parents?
Pregnant employees and those on maternity leave, shared parental leave and adoption leave (and anyone who has recently returned from any such leave) should not be disadvantaged in any redundancy process. What this means is that their situation should not influence your decision to make them redundant in any way. For example, consider what this means for consultation (they must be consulted too even if they are on leave) and for your selection criteria. You can use KIT days for consultation meetings. For anyone on leave, ensure they receive relevant communications and correspondence at the same time as other employees.
When considering alternative work, preferential treatment must be applied for those who are on maternity leave. This is a legal obligation: if there is an alternative vacancy, this must be offered in this instance, even if a more qualified or suitable candidate is available.
The process will depend on the numbers being made redundant. For a large-scale redundancy process, where you’ll be making 20 or more roles redundant in a 90-day period, you will be required to hold what is known as collective consultation process. This will either involve consulting with your recognised trade union (if you have one) or with elected employee representatives (who you will have to elect if you don’t have any already elected with a mandate for such consultations).
Collective consultation law and procedure is complicated. There are a series of different timescales to follow and different legal considerations and requirements. Take legal advice for these.
Once you have completed the collective consultation, you will then need to hold individual consultation meetings with the ‘at risk’ staff, as described below.
If you are making 19 or fewer redundancies in a 90-day period, you are only obliged to consult with your ‘at risk’ employees individually (not collectively). Even so, an individual consultation process requires several meetings – typically 3 meetings with each individual over a 7-10 day period, looking something like this:
1st meeting: The information-giving meeting. Why are they ‘at risk’ of redundancy? What are the reasons for making redundancies and what will the process look like? What were the selection criteria?
2nd meeting: A chance for the employee to offer arguments as to why their role should not be made redundant, why they should not have been selected, etc. You need to listen carefully, debate the points raised, and provide reasonable explanations for the need for the redundancy, for their selection and why any suggestions they have for avoiding their redundancy/selection are not workable. You may wish to adjourn (pause) such a meeting in order to think about issues raised. At this stage of the process you must also provide details of all current vacancies in your business (see below).
3rd meeting: If you are still of the view that you must still make this person redundant, you’ve reached the final ‘dismissal’ stage. You will need to invite the employee to a final meeting. They will still have the chance to argue their case for why they should not be made redundant. If these arguments are unsuccessful and you choose to confirm their redundancy, you will confirm this at the end of this meeting and offer them the right of appeal.
This individual consultation process can be complex and full of queries and legal risks. You should ensure that you have access to good legal advice while you are going through it.
Wherever you decide to confirm a redundancy dismissal, the usual options of the employee either working out their notice or being paid in lieu of notice still applies. Confirmation of a redundancy dismissal is still a notice of dismissal, even through it comes as a result of a redundancy process rather than for some other reason.
Traditionally, all consultation meetings would take place in face-to-face meetings. However, the COVID pandemic reminded us that consultations can also be done over the phone or video call, whenever a face-to-face meeting is not viable. This is worth remembering where an employee is perhaps a long distance from their workplace or is off sick or otherwise unable to meet in person.
On the subject of sick leave, the general rule is that sick leave should not cause a redundancy process to be paused or delayed, especially if it is a redundancy process involving several people and/or there is an urgent need for the organisation to complete its restructure. If it is a redundancy of one or two people only, and/or there is no urgency to complete the process, there may be more scope for delaying the redundancy process a little due to sick leave. However, sometimes an employee will go off sick in order to avoid being made redundant (or to prevent the process from being completed) and in such situations employers will often be reasonable in continuing with their process. Legal advice should be taken here.
Redeployment, vacancies and alternative roles
Employers are under a legal duty to try to avoid a redundancy dismissal if possible, and instead look for a way to redeploy their ‘at risk’ employees to alternative roles. This means that during the individual stage of the process you must provide the ‘at risk’ employees with details of all current vacancies in your business (anywhere in the UK). (And if you are part of a group, you must include details of all current UK vacancies anywhere in the wider group.)
You should not limit the list of vacancies merely to those roles you feel the employee could do, or is suitable for, or would be likely to want to apply for.
You must also provide details of the location, job title, salary, benefits and job tasks associated with each such vacancy.
Remember that your legal duty to is to look for ways to avoid dismissing this employee, by redeploying them if you possibly can, rather than ending their employment.
Suitable alternative employment and redundancy pay
There is a specific rule relating to ‘suitable alternative employment’ which can cause confusion, especially to employees. The rule is that if you offer an ‘at risk’ employee a new role that you consider to be a suitable alternative, and they refuse it (including before or during a trial period) then they will forfeit their right to receive a statutory redundancy payment.
A role is considered ‘suitable alternative employment’ under this rule if it does not involve a substantial change in status, pay, type of duties or commute (or similar significant aspects of a role). If you are offering roles that you consider to be ‘suitable alternative employment’ then you should take legal advice before denying (or threatening to deny) someone their statutory redundancy payment if they choose to reject the vacancy.
With any potential alternative role, you need to clearly set out whether any trial period will apply, and what will happen if either party is unhappy with the arrangements before, during or after the trial period. There is a default 4-week statutory trial period for a new role considered to be suitable alternative employment, although you can agree to extend that by a few weeks if you wish.
What are the redundancy pay costs we need to consider?
Employees with at least 2 years’ continuous service at the time of the redundancy dismissal (the end of their notice period, if they are serving out their notice) are entitled to statutory redundancy pay if dismissed for reasons of redundancy. The exact amount depends on their age and their length of service (latest gov.uk figures: https://www.gov.uk/redundancy-your-rights/redundancy-pay).
Some businesses like to pay an enhanced or additional amount of pay (less likely in smaller businesses). There is a specific way of calculating an enhancement to avoid falling foul of age discrimination, so you should take legal advice if you are considering making an enhancement here.
Payment in Lieu of Notice (PILON): in some cases you may want to offer the employee a cash payment without requiring them to work their notice. You should take legal advice on the implications here.
Holiday pay: employees will need paying for any accrued but unused holiday entitlement for the current year (calculated up until their last day of employment). If holiday has been taken beyond their entitlement, you may wish to deduct for this from their final pay.
Settlement Agreements: these are sometimes used where extra payments (above and beyond what they are strictly entitled to) are offered to an employee. You should take legal advice on whether it would be useful for you to consider settlement agreements in such a situation. Sometimes they can seem overkill.
We are often approached by employees/claimants for advice because they don’t believe their job is genuinely redundant or they feel they’ve been unfairly treated in some way, perhaps as the result of an unfair or flawed redundancy process (e.g. faulty/biased selection process or a lack of genuine consultation).
Some employers try to ‘dress up’ a dismissal as a redundancy when the real motivation is poor performance, misconduct or simply that the employee’s face doesn’t fit any more. Such situations can result in an unfair dismissal or discrimination claim and are to be treated with caution.
Employment Tribunals can award unfair dismissal compensation of up to a year’s pay. Separately, if a redundancy process is found to be discriminatory in some way then the financial consequences can be substantial.
If the above financial risks aren’t off-putting enough, consider also the reputational damage a case like this can create for an employer, as well as the bad feeling, the unravelling of trust for remaining employees and the management time/hassle/stress of having to defend a Tribunal claim.
We therefore always strongly recommend that you take some legal advice before making any redundancy, whether of just one person or several.
We sometimes advise employees/claimants who feel their redundancy consultation was not a genuine one, and that it’s clear a firm decision to make them redundant was ‘already made’ before the consultation process took, even though the law requires an employer to keep an open mind at that stage. It is understandable that many employees will feel this way, and to be honest the reality is probably that most employers will indeed have made up their mind to a fair extent prior to the individual consultation process taking place. Despite – and because of – this risk, it’s really important that you do your very best to act and speak in a way that adheres to the requirement that, while you have put an employee ‘at risk’ of redundancy, you have not finalised your decision to dismiss them at the point at which you start their individual consultation process.
Here are some recommendations to help make this so:
Your redundancy proposals must not be finalised before the consultation ends. You should take care to explain to selected employees what being ‘at risk’ means and what it doesn’t mean – specifically that it doesn’t mean they will definitely be dismissed for redundancy, and that currently that is only a proposal, pending the consultation process. Ensure all your managers are ‘on message’ here! In both any general/open meetings with staff and also in the individual meetings with ‘at risk’ staff, you should maintain the position that these discussions are an opportunity for genuine discussion and consideration of alternatives to dismissal, and that you will approach the issue with an open mind, remembering your legal obligation to look for ways to avoid redundancy dismissals if possible.
When the selection criteria have been created and applied, those who have been selected should be told why, and how they were assessed/scored against the criteria. They also should have the chance to correct any mistakes they may feel have been made in the assessment which could affect their scores. You need to demonstrate that the selection criteria were:
During the individual consultation meeting(s) you then need to be open to explaining and debating these selection criteria, the scoring method and the score results.
3. Hear your employees out on alternatives to dismissal
Employees may have really viable ideas as to how their proposed redundancy could be avoided. Whilst you may well have considered these options before embarking on a redundancy exercise, it is really important for you to listen to what your employees have to say on this point in case they suggest a scenario which could indeed avoid a redundancy. For example, two employees may consider a job share, or an employee may now consider a part-time/reduced hours position when previously they wouldn’t have. Don’t presume to know what they will or won’t accept until you’ve asked them.
The following recommendations come from our collective decades of experience of how to reduce your risk of fall-out (legal, financial and psychological) from a redundancy exercise:
Tell your affected employees what you need to tell them, tell them again and then tell them again what you’ve told them. This may seem like overkill, but upset, scared and confused employees will often not hear what you’re telling them – and they will then fill in the gaps in their understanding with ‘emotional reasoning’ (e.g. ‘I always felt they were out to get me, and now they are!’). Give them clear contact points for asking questions, consider information or briefing sheets they can read when they’re ready and use honest, plain English, not business-speak (e.g. call a redundancy programme what it is, and don’t hide behind “restructure” or “workforce optimisation” or the many other too-afraid-to-speak-its-name euphemisms that the corporate world has come up with over the years to avoid the R word). Explain restructuring plans clearly, such why a restructure is needed and what it will achieve for the business. Those affected are more likely to accept what they understand, and anyone staying post-restructure will also be reassured.
Recognising you are dealing with people whose lives will be severely impacted through redundancy is important to keep in mind at all times. This will help people feel a process was followed but a humane one.
Holding redundancy process meetings can be scary and make managers feel awful. But don’t fall into the trap of coming across as robotic or unfeeling (which is a common mistake). Admit to ‘at risk’ staff that it’s a ghastly time for everyone and that you’d rather be anywhere else but having to sit in this consultation meeting with them. Sure, you may not be the one facing dismissal, but you can still show you have emotions and are fully aware of how they may be feeling.
Create a process for the redundancy programme and follow it. If you don’t have a pre-existing agreed company process for this sort of thing, ensure that you get professional advice and create a process out of that. Once you have a process, ensure you follow it in all cases. If you don’t, you’re at risk of claims for unfair dismissal: Employment Tribunals will usually deem a redundancy dismissal unfair if you don’t follow your own process.
Determine the competencies needed in your new structure. The roles which are important will become clear. Measure everyone fairly against the criteria. Those with the fewest points will be ‘at risk’ and may be redundant but you will have been fair and you will have been transparent.
We are aware that finances are often under pressure and that extensive outplacement support is not necessarily affordable. However, good support for redundant employees does not need to be expensive (sometimes there will be little or no cost to you) and can be of massive help to employees. Job Centre +, The National Careers Service and other providers* have funding to provide CV, job preparedness and skills training to redundant employees. Any support you can organise will reflect well on you, both to departing employees and those remaining with you.
*A wide range of redundancy support and skills training for redundant individuals is available through Serco. We have worked with them on a major site closure project for one of our clients. You can find out more about by emailing them at: firstname.lastname@example.org