Going through a redundancy process can be stressful, and doing so without following the law could lead to expensive penalties. Thorough consultation with all those at risk, and continuing to look for alternative options to redundancy throughout, are essential steps to getting things right.
Redundancy also brings up several tricky questions, including whether it’s possible to make someone on maternity leave redundant, and when it’s ok to recruit again following a redundancy.
- Step 1: Be clear on your reasons
- Step 2: Determine which roles will be placed at risk of redundancy
- Step 3: Let people know their post is at risk of redundancy
- Step 4: Draw up a selection criteria
- Step 5: First individual consultation meeting
- Step 6: Selection criteria scoring
- Step 7: Second consultation meeting
- Step 8: Consider alternatives
- Step 9: Final consultation/redundancy dismissal meeting
- Step 10: The right to appeal
When might you need to consider redundancy?
A redundancy situation might arise when a business or a workplace closes (maybe due to a relocation to a new site) or when there’s a reduction in the number of employees required to carry out a particular role.
In our experience, redundancies in small businesses usually happen for two reasons:
1. Cost saving
Fluctuations in the market and financial and cash flow problems can drive employers to look at ways to reduce their overheads, and employees are normally one of the biggest costs to a business.
With growth (especially rapid grown) there is normally a point in time where the organic structure of a company is no longer fit for purpose. You might find that you now have the wrong skill sets in important positions and that you could make more efficient use of roles and duties. This might give rise to a restructure where employees are moved around but there is no reduction in the workforce (redeployment rather than redundancy) or you might need to change the roles substantially (usually a redundancy situation).
The redundancy process explained
Before you start a redundancy process, it’s essential to be completely sure there are no alternatives.
You’ll need to make sure that there’s no other way to solve the issue giving rise to the potential redundancy.
Some considerations when checking for viable alternatives include:
- Carrying out a cost review
- Looking at benefits or bonuses etc. that could be cut
- Considering reduced working hours or pay
Your research at this stage will also give you a good grounding for discussions with your employees during consultation. If you do find an alternative in making changes to an employee’s terms and conditions, e.g. reduced hours or pay or bonuses, you’ll still need to consult with them about this.
If you don’t find any alternative, and reducing your workforce appears to be your only solution, you’ll need to follow the following steps, exercising fairness throughout.
Step 1 – Be clear on your reasons
The first thing to do is to be clear about the reason(s) why you need to make one or more roles redundant, so that you can communicate these effectively with your staff.
Key to remember here is that you’re looking at the roles you need to make redundant, not who will be dismissed as a result. If the employee must be dismissed because their role is redundant, they are dismissed by reason of redundancy.
Step 2 – Determine which roles will be placed at risk of redundancy
If several people perform the same or a similar job within the area of your business where you feel changes must be made, you’ll need to include all these individuals within the ‘pool’ of people at risk of redundancy.
If there is just one person in a standalone post then it’s more straightforward, but this does need to be a true standalone post. Where there are other people who do similar jobs at a similar level, you should consider adding them to your possible ‘pool’ of people.
Step 3 – Let people know their post is at risk of redundancy
Now you’ve selected the pool of people likely to be affected, you need to start consulting with them about the elimination of the role or the substantial changes to the role or roles. This is usually done in a group meeting and is a key part of the redundancy process. It gives the employee the opportunity to comment on and influence the proposed changes before they take effect.
At this point it’s important that you make it clear that the changes are just proposals for discussion, rather than foregone conclusions.
You’re legally required to start consultation as early as possible, so we’d advise getting the pool of people together informally and advising them of your concerns and proposals. At this meeting you should let them know that this is the start of the redundancy consultation.
Step 4 – Draw up a selection criteria
Determine the criteria you will use to ‘score’ staff against in order to determine who will be dismissed for reason of redundancy. It is important that the selection criteria are well thought out and easy to understand in order to put the individual scores in context.
We recommend that you bring a draft version of the criteria that you intend to use to the group consultation meeting, so that you can ask staff for their comments on the criteria.
Step 5 – First individual consultation meeting
Following the group meeting, you’ll need to hold individual meetings with everyone in your selected ‘pool’ to get their initial reactions, ask for comments on the selection criteria, seek volunteers to leave on redundancy terms, and provide them with an illustration of their redundancy entitlements.
They have the right to be accompanied at the meeting and are entitled to challenge your plans and suggest alternative options. You must consider these thoroughly, so take good notes to help you respond to each suggestion in your outcome letter following the meeting.
Your outcome letter should respond to all points raised by the employee during the consultation, and invite them to the next consultation meeting.
Step 6 – Selection criteria scoring (if applicable)
After the first round of consultation meetings you’ll have gathered feedback from staff on both the proposed redundancy situation and the selection criteria. Having made any amendments that you think necessary, you need to score each employee in the pool against the selection criteria.
Step 7 – Second consultation meeting
At this second meeting you should run through how the individual scored and offer them opportunity to comment. The employees will often want to know how others scored but you do not usually need to let them know about others.
You should also ask if they have any alternative suggestions which have not yet been considered.
Follow up this meeting in writing, responding to any new suggestions or comments about their scores. This letter will also invite them to a final consultation meeting, at which the outcome may be dismissal.
If you don’t have a pool or selection criteria, you can go straight into the final consultation meeting – but two meetings are the minimum we usually recommend.
Step 8 – Considering alternatives
At all stages of the redundancy process you need to keep considering alternatives and assessing whether any current vacancies might be a suitable alternative.
To be considered ‘suitable’, a role needs to be similar in regards of the tasks done, skills required and terms and conditions. If an employee refuses a role that is deemed a ‘suitable alternative’, then they would not be entitled to redundancy (you can of course choose to allow someone to leave on redundancy terms regardless).
If the role is not ‘suitable’ in legal terms, e.g. a more junior role, you still need to offer this role to the individual being made redundant. If they don’t accept it, however, they would still be entitled to their redundancy pay.
Step 9 – Final consultation/redundancy dismissal meeting
At this meeting you can make your decision to issue the employee with notice of redundancy.
You’ll already have discussed everything in detail at the previous meetings, so just recap the discussion and justification. Before you make a final decision, ask the employee if they want to add anything else. Listen and then have a short break to make your decision, respond to their points and, if necessary, issue a notice of redundancy.
Follow up this meeting in writing, confirming that their post has been selected for redundancy, they will be dismissed and detailing their leaving arrangements and redundancy terms. This letter must also include their right to appeal this decision.
If you issue notice of redundancy the employee is entitled to their contractual or statutory notice, whichever is the greater.
If an employee is required to work their notice, you are required to continue looking for alternatives to redundancy. This is a legal requirement and demonstrates that you have done all you can to avoid making staff redundant. You should notify the employee of any suitable vacancies that come up even after you’ve issued notice.
Step 10 – The right to appeal
In order for the process to be considered fair, the employee needs to be able to challenge a decision that could impact their future employment.
It’s always best to get someone else to hear the appeal, and it’s worth thinking about who might do this at the beginning of the process. For example. You might have a manager carry out the redundancy procedure and leave a senior manager / yourself to do the appeal if necessary.
That’s not always possible in small businesses, however, and you may find that you need to carry out the process and hear the appeal. If this is the case, you must try to be as objective as possible.
Why follow the redundancy procedure?
Following the redundancy procedure set out above is a legal requirement for all businesses when considering making staff redundant.
Not only does it reassure staff that you’re taking all the appropriate steps, and that you’re doing it for the right reasons, but it also mitigates the risk of a successful tribunal claim.
By approaching the situation from the point of view that you’re seeking the help of your employees in a difficult time for your business, you may find that they come up with suggestions that save you from having to make any redundancies after all.
How long does it take to make a redundancy?
In straightforward cases, you might find that you can complete this process in around 2 weeks. More complex cases, where you have a larger pool of staff, can take 3-4 weeks or potentially longer.
Always keep the employee(s) involved. And remember, even after you’ve sent them the dismissal letter and they’re serving their notice, you’re obliged to continue looking for alternatives.
During the consultation process, you should offer all those at risk the option to volunteer for redundancy. By volunteering they will be offering to terminate their employment contract but will still be classed as having been made redundant, so they should be treated as such – with entitlement to redundancy pay (if eligible), and their notice period.
There are varying levels of redundancy pay, based on age and length of service.
The rates are:
Managing staff redundancy on a large scale
If your company proposes making redundancies of 20 or more employees within a 90-day period or less, there are some additional procedural requirements to follow.
Firstly, it’s essential that you notify the Secretary of State (for Business, Innovation and Skills) using an HR1 Form. Notice must be given at least 30 days before the first dismissal for 20 – 99 proposed redundancy dismissals and at least 45 days before the first dismissal for 100 or more proposed redundancy dismissals. Failure to do this is a criminal offence.
You’ll also need to carry out collective consultation with all those employees affected by the proposals. This could include those whose roles are not going to be made redundant, but who could be impacted by the redundancies in some way.
Collective consultation should be done with appropriate representatives of the employees, which could include representatives of a recognised trade union or elected representatives.
If you’re in a situation where you’re laying off large numbers of staff, it may be that your company is unable to provide redundancy pay at all. In this case, you’ll also need to report to the Insolvency Service, who can help to pay redundancy for those staff that are affected.
What if the ‘pool’ contains an employee currently on maternity, adoption, paternity, or shared parental leave?
You can still consider these people for redundancy but they may have some preferential rights over other employees.
You’ll need to make contact with them and let them know your concerns and proposals, and invite them to a meeting before any decisions are reached.
You can still follow our step by step guide above, but as part of step 8, you may need to give them, by law, first refusal on any suitable alternative vacancies that are appropriate to their skills.
How long do I have to wait until I can recruit again after making a redundancy?
This is usually around 3-6 months, but is largely dependent on individual circumstances.
If you’re hoping to re-recruit within 3 months of the employee leaving, then we would recommend that you write to that person to notify them of the change in circumstances and ask if they wish to be considered for the role.
Employees have 3 months to claim unfair dismissal so if they see you advertising their job shortly after you have made them redundant then they could make a claim against you.
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If you have any concerns or queries about the redundancy process, our HR consultants can help.
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