When does redundancy happen?

Redundancies are not uncommon. They are the results of market changes, economical outlooks and business performances. Below are some examples of when and why companies might choose to start this process:

• The work is no longer required

Even if the business is operating, a specific role in the company might no longer be needed because of reduced workload or due to a skill set being no longer required.

• Enhanced processes have been implemented

Technology can sometimes replace the work done by employees. If a change in a process means that the work of an employee is no longer required, redundancy can be engaged.

• Other teams are doing the work

It may happen that the work still needs to be completed, but will be done by another team in the business or another employee.

• The organisation is relocating

If the relocation is outside the area where staff are currently employed, the business may need to consider redundancies.

• A branch of the business or the full business is closing

If a branch of the business closes or if the business shuts down in its entirety, redundancies will be inevitable.

All of the above are examples of situations where making staff redundant may apply. Organisation development may also result in waves of redundancies. When it comes to making staff redundant, each situation should be looked into thoughtfully and alternatives should be prioritised where possible.

Statutory redundancy and contractual redundancy explained

This section provides more details on the two types of redundancy pay.

• Statutory redundancy pay

This is the legal entitlement to redundancy pay for employees in the United Kingdom. It applies to employees who have been in the business continuously for two years or more. Statutory redundancy pay applies when the worker is an employee, either full-time or part-time.

• Contractual redundancy pay

Staff who cannot get statutory pay as they do not fit the criteria may still be entitled to contractual redundancy pay. Individual contracts should be checked to establish whether contractual redundancy pay applies. The law ensures that contractual redundancy pay is not less than statutory pay. See our article on temporary workers and agency workers for more information on this topic.

In any case, there must be a fair reason for the employee to be made redundant. The rationale should be clearly communicated to the employee in question.

Employee entitlement to statutory redundancy pay

The UK Government provides clear information on statutory redundancy pay. Employees who have been continuously employed by a business for two years or more are entitled. The amount of entitlement varies depending on the number of years of service. It is clustered as follows:

• one week’s pay per full year employed
• length of service is capped at 20 years
• weekly pay is the average the employee earned per week over the 12 weeks before the day of the redundancy notice and is capped

The above information varies for those under 22 years old and above 41 years old. There are also exceptions. Employees may not be eligible if, for example:

• the employer offers to keep the employee and suggests a suitable alternative in writing that is refused by the employee
• the employee is being dismissed for misconduct reasons

See the UK Government website for more details.

A step-by-step guide to redundancy for employers

Managing redundancy is never a pleasant or easy task for employers and employees alike. In the section below, we list some key steps to make this process as smooth as it can be.

Step 1: Assess staffing and ensure that any redundancies are necessary

Redundancy usually happens when a position is no longer needed. Employers should only make this step if a department or section of the business is closing, the type of roles is changing or the location is changing. Before moving to mandatory redundancy, you may want to consider voluntary redundancies, change of working hours, letting go of contractors, stopping overtime work and pausing recruitment. It is essential for the business to ensure that the redundancies are necessary and that they will solve the issue that needs to be addressed. You may need to pay particular attention to the fact that discrimination has no place in this, and offer voluntary redundancies first to as many employees as possible.

Step 2: Establish the process with the HR department

There are some key steps to take when launching a redundancy process. It is the employer’s human resources team’s role to ensure that they have the right policies in place and an appropriate collective agreement with the applicable trade union(s). A fair redundancy process includes consultations with members of staff. Employers can seek volunteers to represent groups of employees. Collective consultations may also be deployed if there are more than 20 employees at risk of redundancy. It is highly recommendable to create a redundancy plan to ensure that all the steps are followed and to make the process as smooth as possible. The plan is to set out the communications to take place with employees about the process, consultation with the employees affected, fair selection criteria for redundancy and more.

Step 3: Communicate with employees and be transparent

Communicate the process with employees as soon as the plan for redundancies is created. It is recommended that all employees be informed, and not just those at risk, as this will increase transparency. The risk of redundancy can be communicated early, together with the rationale for it. Transparency would require that the anticipated number of employees affected, the process and its associated timeline are communicated clearly. Informing employees who are at risk of redundancy in writing is standard practice. Communication is key and deserves a lot of thought.

Step 4: Hold consultations

Consultations are critical. Managing them in a meaningful way can avoid any backlash with employment tribunals for unfair dismissal. Consultations can serve as a guide to the actions to undertake, particularly if groups of employees have representatives. Discussing openly the reasons for the changes being implemented is essential in this step. It is important to note that employers meeting with employees who are being made redundant privately is recommended at least once during this process.

Step 5: Select employees to be made redundant

Fairness is key when it comes to redundancy. The selection criteria set in the plan are followed throughout the process. In doing so, employers follow their appropriate policies. Selection criteria may include work performance, skill set, disciplinary and attendance records and more. These can form a scoring system that may be used to determine the employees to be made redundant. Always remember that unfair factors for selection such as age, gender, disability, civil status, ethnicity and other such criteria are excluded from the scoring.

Step 6: Assess statutory redundancy pay and give notice

Many organisations refer to official government sources to understand how statutory and contractual redundancy arrangements are typically described. Notice is often provided in writing so employees have clear information about the next steps. Employers may also review individual contracts to understand what notice periods are outlined there and how these relate to their internal processes.

Step 7: Look into potential other jobs in the organisation

To minimise the number of employees being made redundant, employers can look at alternatives for such staff. Transposable skills can be examined and matched with open positions in other areas of the business, where possible. Employees are not required to apply for the role. It may happen that an employee who is offered a new role will decline this alternative. If this is the case, the employee presents a valid reason for their refusal.

Step 8: Provide sufficient support

Redundancy is never a pleasant process. It will affect employees’ lives and create difficult conversations. It is the employer’s responsibility to care for the staff members and therefore to provide the right level of support to employees being made redundant as well as to managers who are handling the communication and other employees involved in the process. It is advisable to think about offering counselling, financial advice and face-to-face meetings to the individuals concerned. 

When it comes to redundancy, following some key steps can help to ensure that this painful process goes as smoothly as possible. Organisations benefit from looking at ways to make the process as human and thoughtful as possible.