Guide to managing redundancy9 minute read
If you are managing a redundancy process, this model guide provides effective support for you meet your obligations and help employees understand the process.
What is a Guide to managing redundancy?
Redundancy is the deletion of a role when it is no longer required. For example, if some or all of an organisation is:
- closing, or has already closed
- changing the types or number of roles needed to do certain work due to the work having diminished
- changing location
The guide will help you to plan and manage each stage of the redundancy process:
- Checking if redundancies are necessary
- Following the right process
- Calculating pay
- Giving notice
- Offering alternative employment
What legal and best practice aspects should employers be aware of?
According to the Employment Rights Act of 1996, a redundancy situation occurs when an employer stops operating the business in which the employee was employed, stops operating that business where the employee was employed, stops needing employees to perform a specific type of work, or stops needing employees to perform a specific type of work in the location where the employee was employed.
In other words, it is when:
- You shut down the business completely
- You close a particular part of the business, for example a team or department
- You shut down at a specific location (even if you are moving to a new location)
- You need less employees in a particular role (reduction in the size of the workforce).
As long as the following criteria are clearly met, redundancy is one of the five potentially reasonable reasons to terminate an employee's employment.
- If concerns are linked to an employee's performance, this should be handled in accordance with standard conduct/capability processes, not redundancy.
- The employer has followed a fair process (i.e., consultation and fair selection) and has provided alternative employment, if any is available, as well as looked into all other feasible choices in an effort to avoid taking redundancy action.
Guide to managing redundancy
Step 1: Checking if redundancies are necessary
When considering making redundancies, your first step should be to check:
- why you think redundancies are necessary
- what issues you’re trying to solve
- other options that might be available
Before starting a redundancy process, you should consider all options to reduce or even avoid redundancies.
For example, you could see if you can:
- offer voluntary redundancy
- change working hours
- move employees into other roles
- let go of temporary or contract workers
- limit or stop overtime
- not hire any new employees
Offer voluntary redundancy
You can give employees the option to put themselves forward for voluntary redundancy.
It's your decision whether or not to accept the volunteers, taking into account the wider needs of the organisation. It's a good idea to make this clear to employees early on.
If you do give the option of voluntary redundancy, it is important that you:
- should offer it as widely as possible, not necessarily just to those at risk of redundancy
- should not pressure or single anyone out
- must select employees in a fair way
This can avoid the risk of indirect discrimination. For example, it could be age discrimination if you only select older employees.
Change working hours
There could be ways for you to save costs by having staff work more flexibly.
You should always talk with employees and try to reach agreement first.
For example, you could offer employees:
- job shares
- to work fewer hours
If it's written in their employment contracts, you can tell employees that they need to:
- stop working for a while (known as a 'temporary lay-off')
- work fewer hours (known as 'short-time' working)
Lay-offs and short-time working are temporary solutions and must not be a permanent change to agreed working hours.
Move employees into other parts of the organisation
You should see if you can move employees into different areas of your organisation ('redeploy') to avoid redundancies. For example, by looking at:
- what transferable skills staff have
- if there other vacant or new roles in the organisation that require those skills
Step 2: Following the right process
If you do decide redundancies are necessary, you should check if you have:
- a redundancy policy you must follow
- a collective agreement with a trade union with details of what you must do
You must follow a fair redundancy process and this must include:
- consulting staff
- collectively consulting staff if more than 20 are at risk of redundancy
You might not always be able to avoid redundancies, but by working with employees you could find ways to save jobs and better understand how to plan for the future.
You should make a redundancy plan that you'll share with all staff and put into action. It can help you follow a fair process and avoid the risk of legal claims.
It's a good idea to work with any trade union or employee representatives when making a plan.
The redundancy plan should include:
- all the options you've considered before deciding on redundancies
- the number of redundancies you're considering
- keeping staff informed and supported throughout the process
- consulting all employees affected, including those off work, for example on maternity or sick leave
- timeframes, for example to leave enough time for consultation
- agreeing on fair selection criteria
- whether redundancy pay and notice periods are statutory or contractual
- an appeals process for if an employee thinks the redundancy process or their selection was unfair
Support and develop managers
An organisation with managers will need them to help handle the redundancy situation and keep staff informed.
You should make sure your managers:
- know why redundancies are being made
- understand in detail the redundancy plan
- are comfortable and confident to talk and work together with staff about the redundancy process
- know how to raise issues or ideas with those leading the redundancy process
- have training to be confident in carrying out any duties
- know where to go for further support
By involving managers from the start and keeping them informed and updated throughout, they'll be able to:
- come up with ideas that help ensure a smooth process and reduce or avoid redundancies
- effectively talk with staff about the redundancy process and plans
- make redundancy dismissals and give notice of when staff selected for redundancy will leave
- help restructure in the best possible way
Step 3: Informing
As soon as practicable, inform your employees that you're considering making redundancies.
Hold a meeting with all employees affected (not just those 'at risk'; for example, include anyone who may have to take on additional duties if a role is deleted), to explain:
- the risk of redundancy and the reason why it may be necessary
- how many redundancies you're considering
- what happens next, including how everyone will be consulted
Encourage employees to ask questions. The meeting can be held online if people are working remotely.
For employees who are at risk of redundancy, you should also confirm in writing:
- that they're at risk of redundancy
- whether they have other options, such as voluntary redundancy or redeployment
- the outline of your consultation plans
Continue to keep employees informed throughout the redundancy process.
Step 4: Consulting
You must consult with your employees before finalising any redundancies.
If you do not hold genuine and meaningful consultation before making redundancies, employees could claim to an employment tribunal for unfair dismissal.
Consultation is when you talk and listen to affected employees. In collective consultation you also consult with their representatives.
You should use consultation to try and agree actions wherever possible, for example the selection criteria.
During consultation, you should discuss:
- the changes that are needed, what you plan to do, and why
- ways to avoid or make fewer redundancies
- the skills and experience needed for the future
- the criteria for selecting employees for redundancy
- any concerns employees may have
- how you can support and arrange time off for affected employees, for example to update their CVs and get training
Employees will often have good ideas that may help to avoid redundancies. You do not have to agree to their suggestions, but it's important to seriously consider any ideas that could reduce redundancies, otherwise employees could claim the redundancy process has been unfair.
Check if you need to hold collective consultation
If you're planning to make 20 or more redundancies, you should check if you need to hold 'collective consultation'.
You might have a workplace policy or agreement that says you must collectively consult a trade union or employee representatives, no matter how many redundancies you're planning.
It can still be good practice to collectively consult even if you do not have to. It can help:
- you to fully be involved with employees about ways to achieve the change that's needed
- reduce negative effects on employees
- the process be fairer and quicker
- employees feel that any decisions are fair, and so reduce risks of legal claims
How to hold individual consultation meetings
Some parts of consultation could be in small groups or team meetings.
You should meet each affected employee in private, at least once.
Meetings can be on the phone if you both agree to it and there is a clear need, for example if someone works remotely.
You should consider allowing employees to be accompanied at any one-to-one meeting. A companion can be helpful as they can:
- give the employee support
- be a neutral person to observe
- speak for the employee if needed
You should make sure any managers who lead consultation meetings:
- have had training in managing the meeting appropriately
- are fully informed about the redundancy plans and process
- can present the plan for the redundancy process clearly
- can provide everyone with a questions and answers document
How long consultation lasts
There are no rules for how long individual consultation should last. But you should check if you have a policy or agreement in place that does have rules.
You do not need to reach an agreement for consultation to end. Consultation should be meaningful and you should be able to show you have genuinely considered any suggestions or points made by each employee, even if you do not accept them.
Step 5: Selecting
Select employees for redundancy fairly.
If you’re making an etire team or specific group of staff redundant, you’ll have already identified a clear criteria and list of roles you need to make redundant.
But if you need to reduce the number of employees in the organisation or team, you’ll need to set up selection criteria and make a list of roles to be considered for redundancy (a 'selection pool').
Selection pools help make sure employees are selected for redundancy in a fair way.
Where a number of different roles are at risk of redundancy, you may need to have more than one selection pool.
You should include in each pool all roles that are the same or similar.
You should also consider including roles that have similar skills. For example, all marketing roles are in a selection pool. You could also include roles from the press and communications team if the skills are similar to those needed for marketing.
When setting up a selection pool, you should check and follow any:
- agreements you may have with a recognised trade union
- existing redundancy policy
If there is no existing policy or agreement, you should consider consulting any recognised trade union on how the pool should be set up.
Using selection criteria
You should have included selection criteria in your consultation.
Criteria should be as 'objective' and 'measurable' as possible. This means it should be fair, be based on facts that can be measured and not be affected by personal opinions.
You must use the same way of scoring criteria for all employees in the pool.
Agreed selection criteria scoring is useful as:
- it can be applied to everyone (although you might need to use different scoring for different groups of employees – for example, the engineering team might have a different scoring from the sales team)
- it can be easily explained to everyone
- employees feel they’re being treated fairly
- it gives a clear, structured and consistent system for managing selection issues
- it can be used at employment tribunals to defend an employer’s decision
How to score employees
You can have different levels of points according to the importance of each criteria ('weighting') for your organisation’s needs.
For example, if it's agreed that attendance record is less important than performance, you can allow fewer points for this. So you could score attendance out of 5 points and performance out of 10.
You should have written evidence against each of the criteria.
It is discriminatory to select employees based on:
- gender reassignment
- marriage or civil partnership status
- pregnancy or maternity leave
- religion or belief
- sexual orientation
- family related leave – for example parental, paternity or adoption leave
- their role as an employee or trade union representative
- membership of a trade union
- part-time or fixed-term employee status
- pay and working hours, for example because they’ve refused to give up rest breaks or asked for National Minimum Wage or holiday entitlements
- Whistleblowing concerns
Step 6: Calculating pay
You must pay at least the legal minimum ('statutory') amount of redundancy pay to your employees who have worked for you for at least 2 full years.
You should check your employment contracts as they might say you need to pay more than the statutory amount.
You can choose to pay higher amounts if you want to encourage voluntary redundancies.
Step 7: Giving notice
You can only give an employee notice of redundancy once you've finished consulting everyone and gone through the selection process.
Meet with each employee who’s been at risk of redundancy. It’s best to do this face to face, but if this is not possible, you should talk with them on a call.
You should allow them to be accompanied at the meeting.
For those selected for redundancy, you should also put the details of their redundancy in writing. This can be by letter or email.
You should include:
- how they scored in the selection criteria and why they received that score
- their notice period and leaving date
- how much redundancy pay they'll get and how you calculated it
- any other pay due to them, for example holiday pay
- when and how you'll pay them
- how they can appeal the redundancy decision
How much notice should you give
By law you must give statutory notice. Some contracts might have longer notice periods, but you cannot give less than the legal minimum.
Step 8: Appeals
It's good practice to offer employees the chance to appeal if they feel they were selected unfairly for redundancy.
An appeals process can help to:
- give you early warning the redundancy selection process might have been unfair and the chance to correct it
- deal with and resolve an employee’s complaint, avoiding an employment tribunal claim
- show a tribunal that you have followed a fair process
If an employee is successful in an appeal, it’s likely to mean another employee will have to be made redundant in their place. This could be a very difficult situation, especially if the employee was previously told they were safe from redundancy. You should:
- prepare for how to handle the situation sensitively with the employees affected
- keep communication clear and open
- offer support
How an employee can appeal
If an employee thinks they’ve been unfairly selected or there was a problem in the redundancy process, you should give them the chance to appeal within a reasonable timescale of receiving their redundancy notice. For example, 5 days could be reasonable.
The employee should tell you in writing the reasons for their appeal.
Step 9: Offer alternative employment
You must try and move employees selected for redundancy into other jobs within your organisation instead (offer 'suitable alternative employment').
You must identify any available jobs in your organisation and talk to the affected employees to see if they agree they're suitable.
If a role is suitable, you should offer it instead of redundancy. If you do not, the employee could make a claim to an employment tribunal for unfair dismissal.
They should not have to apply for the role. But if more than one employee is interested in the same role, you must offer the role to any employees on maternity leave or Shared Parental Leave first. For all other employees, you must follow a fair process, for example holding interviews for the role.
When you offer an employee another role, it must be:
- put in writing
- offered before their current contract ends
- a different role to the one they're currently doing – you’ll need to explain how it's different
- start within 4 weeks of their current role ending
Employees have the right to a 4-week trial period if they accept a new role. If they need more time to train for the role, you can agree to a longer trial period. It must be agreed in writing and have a clear end date.
The trial period should start after they've worked their notice period and their previous contract has ended.
This avoids any confusion or disputes over dates if the trial does not work out. It's a good idea to set out the dates for the trial in writing.
If an employee turns down an alternative role
If an employee refuses your offer for a suitable alternative role, or turns it down after the trial period, they need to have a valid reason why it’s not suitable.
Examples of reasons could include:
- the job is on lower pay
- health issues stop them from doing the job
- they have difficulty getting there, for example because of a longer journey, higher cost or lack of public transport
- it would cause disruption to their family life
If the employee has a valid reason to turn down the job, they'll be entitled to redundancy pay.
But if the employee does not have a valid reason for turning down the job, you could refuse to pay their redundancy pay. You'll need to be able to prove the employee's decision was unreasonable if they make a claim to an employment tribunal.
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