The Redundancy Process - A Brief Guide

Introduction

Making staff redundant is never a pleasant experience. For employers it is usually a stressful and unfamiliar exercise, which makes it very easy to make mistakes during the process. However, the procedure itself, whilst detailed, is not very complex. The important thing is to ensure that:

  • you have a sound reason for making redundancies (a significant drop in sales being one very good reason)

  • you follow a fair procedure in making redundancies (including consulting with employees before making a final decision)

  • you have a fair and objective method of selecting the appropriate individuals to make redundant.

Planning Ahead

It is no good deciding on Monday that you need to make some of your staff redundant by Friday. Not unless you are prepared for some hefty compensation claims. You are expected to have a period of consultation with staff before deciding finally that you are going to make redundancies. The rule of thumb is two weeks but sometimes this can be reduced.

Also, it is important that you plan your communications. There will be a lot you need to tell your staff - e.g. the reasons for the proposed redundancies, the timescales involved, how consultation will take place, etc. - so it is important that you prepare a script so that you don't miss any of it out in the heat of the moment. It may well be that some of your staff will be away from work when you make your announcement, so you will need to plan how you will deliver the message to them and involve them in consultation. You should also think about how and what to communicate to any staff who are not at risk of redundancy. Finally, you may want to consider whether you should talk to the local press - particularly if you are a high profile employer in the community and if you believe some of your staff may talk to the press (it is always best to put your side of the story first).

You need to be clear about how many staff need to be made redundant and which roles will go. If it appears that you need to make more than 20 staff redundant you will need to notify the Department for Business, Energy and Industrial Strategy and conduct collective consultation with your staff over at least 30 days (this article does not cover the requirements of collective consultation so contact me for further information).

Redundancy Consultation

It is advisable to get all your staff together in order to make an announcement about the proposed redundancies. The best way to stop the rumour-mill is to give as much information as you can, be as honest as you can, and deal with any questions there and then. It is advisable to give staff a copy of your announcement in writing immediately after it has been delivered. Whilst it is tempting to do this last thing on a Friday, it is better to do it at a time when people will have the opportunity to discuss the implications with you and with their colleagues. However, you need to be prepared to see a sudden drop in productivity at this time.

After the initial announcement you need to arrange one-to-one meetings with all the staff at risk of redundancy. The idea of consultation is that staff can question your proposals and challenge them if they wish, they can also put forward their own suggestions (e.g. offering to job share, go part-time, etc.) You should ensure that staff have all the information they need in order to hold meaningful consultation and that you listen to the suggestions, even if you ultimately do not accept them, so that you can respond to them accordingly. You would normally be expected to hold at least two consultation meetings with each individual during this period.

I would recommend that you write to each member of staff after each consultation meeting with a record of what was discussed (if you have a lot of staff to see, it is sometimes easier to use a pro forma to record the conversation and copy that to them after the meeting).

Selection for Redundancy

In some cases selection will not be necessary. For instance, if you have one office manager and you are proposing to make that position redundant, then clearly the person doing the job will be redundant. However, it is often the case that you need to reduce a team of employees who all do the same job by a certain number. If that is the case then you will need a method for selecting which individuals are to be made redundant.

It is worth noting that employees with less than two years’ service cannot claim unfair dismissal, so you may be able to achieve the required reduction relatively risk free by just choosing those with less than this length of service. However, there can be a risk of discrimination claims if, say, all the individuals selected are women or if one of the employees with less than two years’ service is pregnant or on maternity leave.

Otherwise, you would be well advised to use a selection matrix consisting of 4 or 5 objective criteria (e.g. qualifications, skills, disciplinary record, attendance, etc.) Again you would need to check that none of the criteria could be considered discriminatory (for instance, you would need to discount any maternity absence when considering attendance records), and it is best to use criteria that you already measure objectively. It is important that you include the selection criteria and method as one of the subjects for consultation.

You should hold a further consultation meeting with individuals after you have given them their matrix scores, so that they have the opportunity to challenge them.

The Dismissal Procedure

At the end of the consultation period, you need to write to employees to notify them of the outcome, whether or not your proposals have changed. When writing to the employees to be selected for redundancy the letter should set out their entitlement (to notice, redundancy pay, outstanding holiday pay, etc) and you may wish to consider giving them the right to appeal your decision. You may wish to serve notices in a face to face meeting with the employees.

If the employee appeals you should try to ensure that someone more senior hears the appeal. It is accepted that in small companies that is not always possible, so you need to ensure that any appeal is dealt with as impartially as possible.

Common Pitfalls

Here are a few common pitfalls that you should try to avoid:

  • Forgetting about staff on maternity or assuming they won't want to return after maternity. You should include them in the consultation process and take extra steps to ensure they are fully involved. Employees on maternity leave have first refusal for redeployment to any suitable alternative positions within the company.

  • Using redundancy to deal with under-performance. If under-performance has not been clearly measured and addressed before the redundancy situation arises, it is unlikely that you will succeed in objectively justifying any low score given to an under-performer at the selection stage.

  • Rushing the process. It is rarely worth the risk.

Further Help

Our Redundancy Q&A for Employers answers many common questions.

As you can see, this is not a complicated process but there is a lot to remember and, therefore, much opportunity to get it wrong. Contact me if you would like help with the process (whether you would like me to run the process on your behalf or would like me to support you through it).

In addition, please contact me if you need help with calculating redundancy payment, notice pay and holiday pay; dealing with collective consultation (where you plan to make more than 20 employees redundant); or dealing with the employment issues if you are selling your business as a going concern.