Guide to managing redundancy
Supporting information
If you are managing a redundancy process, this model guide provides effective support for you meet your obligations and help employees understand the process.
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:
- homeworking
- 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
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What is this for?
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
- Informing
- Consulting
- Selecting
- Calculating pay
- Giving notice
- Appeals
- Offering alternative employment
Employment law compliance
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.
There is a legal obligation to notify the Secretary of State of their intention to make 20 or more employees redundant within a period of 90 days or less using form HR1.
Failure to do so is a criminal offence, which can result in an unlimited fine being levied against the employer and individual directors can also be found liable, if the offence has been committed with their consent or connivance or is attributable to their neglect.
