Redundancy Situations – The Redundancy Process
There are a number of reasons why an employee’s role may become redundant. Redundancy situations vary but this guide advises on the redundancy process based on current UK employment law.
Our guide walks you through the basics of the process, but you should always take proper legal advice before conducting any redundancy exercise.
We aim to assist you along the way and make it as fair as possible for all involved.
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doneA consultation on your current redundancy situation
doneDrafting all required legal documentation including letters and statements
doneAssistance with a fair selection process to avoid unfair dismissal claims
doneGuidance on the redundancy consultation process
doneDrafting all appropriate written responses including any terms and conditions
How We Can Help You
doneWe have many years’ experience dealing with small and large scale redundancy
doneOur priority is to support the employer ensuring the process is fair and efficient
doneWe provide informed and up-to-date advice based on current UK employment law
What is redundancy?
An employee’s role may become redundant in the following situations.
There is a change in workplace
Such as a workplace relocation. Tribunals look at where the employee normally carries out their duties, not from where they could be required to work contractually.
There is a reduced requirement for work
This is where the employer does not require as many employees to carry out the type of work which the employee is contracted to perform. In this context, business reorganisations can often result in a reduced work requirement for employees.
The Redundancy Consultation Process
When a redundancy situation arises, the following five steps should be followed.
Step One: Warning
Give all affected employees an ‘at risk’ letter confirming there is a redundancy situation which affects their position. Employers should contact those who are away from the workplace to advise them of the situation in writing, e.g. employees on long-term sick or maternity leave.
Remember, it is the position (and not the employee) which is at risk of redundancy.
Step Two: Arrange a Fair Selection Process
This is by far the most complex part of the redundancy process. Arranging a fair selection process may involve selection criteria and a selection pool.
Read our full guide on How to Arrange Fair Selection Pools here.
Step Three: Redundancy Consultation Process
The consultation process should be a meaningful, two-way dialogue between employer and employees at risk and ways to avoid dismissal on the grounds of redundancy. This includes consideration of alternative employment, as discussed below.
The employer should listen to all submissions which the employee makes and fully respond to these before moving to dismissal. It usually takes a minimum of two consultation meetings, before you can have a final meeting to terminate employment due to redundancy.
Step Four: Offer Alternative Employment
During the redundancy process, the employer should:
Identify any vacancies within the company or any group company, which it considers may be suitable for the employee; and
Then provide full details, including a job description and remuneration package to allow the employee to consider the role(s).
Failure to do the above may render the dismissal unfair. If an employee unreasonably refuses an offer of alternative employment, they may lose their entitlement to a statutory redundancy payment.
Step Five: The Final Meeting
Before carrying out the final meeting, you should bear in mind the following:
All steps in the process should be confirmed in writing with a rationale as to why the employee’s role has been selected for redundancy; and
You should allow the employee to bring a work colleague or trade union representative as a companion to each meeting. If the employee is disabled, it may be reasonable to allow them to bring a family member instead.
The employer should always provide a written statement of reasons for dismissal and a right of appeal to a manager or equivalent, if not senior to the one who carried out the redundancy process.
Avoiding Claims of Unfair Dismissal
Redundancy situations vary but normally only employees with two years’ service or more can claim unfair dismissal. Read our unfair dismissal guide here.
Exceptions can occur where an affected employee successfully argues their selection for redundancy is for a discriminatory reason or because they ‘blew the whistle’ for example. Therefore, it is best practice to follow a fair process as described to avoid anyone being unfairly dismissed.
Compulsory vs. Voluntary Redundancy
As the employer, you may be able to avoid a compulsory redundancy situation by inviting volunteers.
If you do so you should reserve the right to refuse applications for genuine business reasons and take advice on a short-form process to ensure employment law compliance.
You can make ‘volunteering’ more attractive by offering an enhanced redundancy payment or tax-free payment (up to a combined total of £30,000), in addition to notice pay and holiday pay which must always be taxed.
If you offer enhanced redundancy, you may wish to ask the employee to sign a settlement agreement, which waives their rights to bring a claim against you, in exchange for the severance package. This would give you peace of mind.
Calculating Redundancy Pay
Employees with two years’ service or more are entitled to receive a statutory redundancy payment based upon their age, length of service and a week’s pay.
Further information can be found here on how to calculate redundancy pay:
If you are proposing to dismiss as redundant 20 or more employees at one establishment within a period of 90 days or less, you must follow a collective information and redundancy consultation process in addition to the redundancy procedures above.
This area of law is complicated, and you should take specialist advice before proceeding.
DISCLAIMER: This document is intended to be a guide to the current law only. It does not constitute legal advice and you are not entitled to rely upon it. You should always take proper legal advice relating to your own situation before acting.