An employers guide to redundancy

A genuine redundancy situation is where:

• you intend to close the whole of your business
• you intend to close the part of the business the employee works in
• you intend to close the workplace the employee works at
• you need less employees to do this type of work.

If there is a genuine redundancy situation then you can consider making redundancies.

The process needs to start before final decisions have been made on the redundancies. The purpose of the process is to take into account the employees’ views, consider any suggestions they might make and allow their input into the process. You should never be seen as having made a final decision until you have completed the process. When you mention redundancies to your employees, you should talk about “potential” or “possible” redundancies.

A fair process will usually involve at least the following steps:

• an initial meeting: you will need to meet with everyone who is at risk of redundancy. You can do this in a “townhall” style meeting. Explain the reasons for the redundancy situation, the group of people who will be at risk (known as the “pool of selection”) and how you plan to decide who will be chosen (the “selection criteria”). Write a letter to each employee confirming this
• a first consultation meeting: meet with each employee individually to discuss the reasons for redundancy, the pool of selection and the selection criteria
• consider any comments on the pool and selection criteria and make any changes
• scoring exercise: score each employee against the selection criteria and confirm in writing to those with the lowest scores that they have been provisionally selected for redundancy
• further consultation meetings: meet with each employee who is provisionally selected for redundancy. This is a chance for the employee to challenge their score, as well as discuss any ways of avoiding redundancy and any alternative vacancies
• consider any comments and make any changes needed to the scoring process
• dismissal meeting: once queries have been resolved, hold a final meeting with the employees to let them know they are being dismissed
• appeal: employees must be given the right of appeal. If they choose to appeal then you need to hold an appeal meeting an confirm the appeal outcome in writing.

Further meetings and discussions may be needed at any stage, depending on what happens.

We will now look at some of these points in a bit more detail.

This is a decision for you to make as the employer. As long as you can show that you have carefully thought this through and the pool is reasonable, an Employment tribunal is unlikely to challenge your decision. You need to consider which employees should be in the selection pool. You’ll need to take into account:

• are other groups of employees doing similar work?
• are there other employees whose jobs are interchangeable?
• are there employees at a different site that should be included?

If everyone in the pool is going to be made redundant then selection criteria are not needed. For example, if you are closing the whole business or a whole site. However, where you are looking to reduce numbers within the business, you will need to apply selection criteria to determine who will be chosen for redundancy.

The selection criteria should be as objective as possible. This reduces the risk of employees being able to challenge the fairness of the redundancy decision. The criteria must also be applied consistently to all of the employees.

The best approach is usually to prepare a matrix of selection criteria. Common selection criteria for a matrix include:

• skills and qualifications
• output of work
• attendance record
• time keeping
• quality of work
• disciplinary record.

You need to be aware of the risk of claims for discrimination in relation to some criteria and how you score employees. For example, if you choose to use attendance then you should ensure that absences relating to pregnancy or disability are excluded from the scoring, to avoid claims for pregnancy or disability discrimination.

The consultation process should involve a discussion about whether you have any other suitable vacancies within the business. You need to discuss these roles with the employees, even if you think they would not be interested in them.

You are under a duty to look for suitable alternative vacancies during the redundancy process. This duty applies until the end of the employees notice periods, so you need to keep this under review even after the employee has been dismissed.

If the employee accepts a suitable alternative vacancy, they have a right to a 4 week trial period. If the employee decides the new role is not suitable then they will be redundant and will be entitled to their redundancy payments.

Pregnant employees have special protection from redundancy dismissal. They have a right to any suitable alternative vacancy in preference to any other employee who may have been interested in the role. This special protection has been extended to employees returning from maternity or adoption leave or a period of shared parental leave that lasted at least 6 weeks. These employees will be covered by this special protection until 18 months after their child’s birth or placement date.

Employees with more than 2 years’ service are entitled to a statutory redundancy payment. There is a statutory calculation for this payment which takes into account how many years they’ve worked for you, how old they are and how much they earn. Employees must also be given notice in the normal way.

Special rules apply if you need to make 20 or more redundancies within a period of 90 days. This is called a collective redundancy process. It’s a more complex process with stricter timeframes and consultation requirements and harsher penalties for failure to comply.

For more information on handling redundancies, click the following link where we look at dismissal, garden leave and redundancies in our guide to terminating employment.