Every employer should consider having a formal redundancy procedure. Exact procedures will vary according to the timescale and size of the redundancy programme, but organisations should follow these stages as a minimum:
- Planning (including seeking alternatives to redundancy).
- Identifying the pool for selection.
- Seeking volunteers.
- Notifying the Department for Business, Energy & Industrial Strategy (BEIS).
- Consulting employees.
- Selection for redundancy.
- Suitable alternative employment.
- Appeals and dismissals.
- Redundancy payment.
- Counselling and support.
Planning
Organisations should always try to avoid redundancies and consider alternative approaches, such as:
- Recruitment freezes.
- Stopping or reducing overtime.
- Offering early retirement to volunteers (subject to complying with age discrimination law).
- Retraining or redeployment.
- Pay freezes.
- Short-time working.
However, employers may not be able to adopt these without breaking their employees’ contracts, so they need to take care when considering alternative approaches.
Identifying the pool for selection
The group from which employees will be selected for redundancy (the selection pool) will usually consist of at least one of:
- Those who undertake a similar type of work.
- Those who work in a particular department.
- Those who work at a relevant location.
- Those whose work has ceased, been reduced or is expected to be.
However, the selection pool does not always involve those engaged in similar work. A redundancy process may involve ‘bumping’, where an employee whose role within an organisation is at risk of redundancy is redeployed into an alternative role, and the person who previously undertook that role is dismissed as redundant instead.
In many redundancy situations, the employer may identify a range of selection pools. If an employer fails to consult and consider a selection pool correctly, the dismissals will be legally unfair.
Seeking volunteers
After the careful planning stage, offering a voluntary redundancy package and seeking volunteers may avoid compulsory redundancies.
Notfying BEIS
If the redundancy involves more than 20 employees, the employer must inform the Redundancy Payments Service acting on behalf of BEIS by completing an advance notification of redundancies in form HR1.
Consulting employees
Employers are required to consult individual employees and give them reasonable warning of impending redundancy.
Although there’s no minimum statutory timescale when fewer than 20 employees are made redundant, the consultation must be meaningful. An employee is entitled to be accompanied at all individual consultation meetings by a trade union representative or colleague.
In addition to individual consultation, if 20 or more employees at one establishment are to be made redundant, collective consultations with recognised trade unions or elected representatives must start within minimum time scales:
- At least 30 days before the notification of redundancies for dismissals of 20-99 employees.
- At least 45 days before the notification of redundancies for dismissals of 100 or more.
Collective consultation must be completed before notices of dismissal are issued. If there are no recognised trade unions or employee representatives, the employer must facilitate an election, by the employees, of representatives for the consultation. The law requires ‘meaningful’ consultation. For example, employees are entitled to be consulted on the proposed selection process and scoring system. If employers fail to collectively consult, the maximum extra compensation payable, known as a protective award, is 90 days’ pay per employee.
At the start of the consultation process the employer is legally obliged to give the following information to the representatives:
- The reason for the redundancy dismissals.
- The number of proposed redundancies and their job types.
- The total number of employees affected.
- The proposed methods of selection.
- The procedure to be followed in dealing with the redundancies.
- The method of calculating redundancy payment.
Selection for redundancy
When the consultation is finished, the employer may need to choose individuals from within the selection pool if there are not enough volunteers for redundancy. These choices must be based on objective criteria such as:
- Length of service (only as one of a number of criteria).
- Attendance records.
- Disciplinary records.
- Skills, competencies and qualifications.
- Work experience.
- Performance records.
‘Last in, first out’ (LIFO) is a risky selection method as those with shorter service are likely to be younger, which could result in potential age discrimination claims.
Employment tribunals look favourably on selection procedures based on a points system which scores each employee against relevant criteria. Employers must take great care in choosing and applying the criteria to avoid discrimination. For example, selecting part-timers could be discriminatory if a high proportion of women are affected.
Scoring should, if possible, be carried out independently by at least two managers who know all employees in the selection pool.
Suitable alternative employment
Employers making redundancies have a duty to look for suitable alternative work for potentially redundant employees. Employers are not obliged to create alternative employment if none already exists, but should search for alternative employment thoroughly and be able to show the steps they have taken to do so.
If employees unreasonably refuse suitable alternative work they may lose their entitlement to a statutory redundancy payment. Employees can have a four-week trial period in a new role. If the employer and employee then agree that the role is not a suitable alternative, the employee reverts to being redundant.
A dismissal is likely to be unfair if the employer did not consider whether any suitable alternative employment existed within its business.
The law requires employees who have at least two years’ service to be given paid time off to look for work during the final notice period.
Dismissal and appeals
The employer should give written notice to those selected for redundancy, stating that they are ‘at risk’ of redundancy and inviting them to individual meetings. At least one further consultation meeting should be held, with the actual number of meetings depending on what the employee has to say.
Once the individual consultation is complete, the employer must decide whether the employee is to be made redundant and give a written redundancy notice. This will be either the statutory minimum notice or the contractual notice, whichever is the greater. The employer must also explain the redundancy payment calculation.
Employees should be allowed to appeal against the redundancy decision.
