HR Advice from HR Experts
If your company is considering going through the redundancy process, take a look at our helpful guide to ensure you stay legal and compliant.
In our redundancy guide we’re discussing:
- How to avoid redundancies
- Who qualifies for a redundancy?
- Redundancy pay entitlement
- Redundancy consultation procedure
- Redundancy assessment process scoring
- Redundancy appeal
What is a redundancy?
Under the Employment Rights Act 1996 redundancy is defined as a dismissal which is wholly or mainly caused by:
- The employer has ceased or intends to cease continuing the business
- The employers specific work requirements have ceased, diminished, or are expected to do so
- The employer ceases to carry on the business in the destination where the employee is employed
Can you avoid redundancies?
Employment Tribunals expect redundancies should always be as a last resort and employers should take all reasonable steps to avoid redundancies.
Here are some redundancy alternatives employers have a duty to consider:
- Seek applications for early retirement or voluntary redundancy
- Reduce overtime
- Re-train employees to re-deploy internally
- Stop using temporary, contract and agency workers
If you are making an employee redundant due to a reduction of specific duties, you must show there has/or will be a change in work duties. You cannot use redundancies if you are unhappy with the standard of work being carried out by an individual. Basically, it must be a genuine redundancy and not a manipulation to deal with a problematic or non-performing employee.
Need help? Our experienced HR consultants can help you every step of the way.
Who qualifies for a redundancy?
Employees must have worked in your business for at least two years to qualify for a statutory redundancy payment.
There are also occasions that an employee can claim redundancy payment from you without declaring themselves redundant, this is related to lay-off and short-time working or contract termination prior to re-engagement on different terms.
If an employee is;
- Laid off (ie. no payment other than the statutory guarantee pay and no work is provided
- Short-time working (i.e. less than 50% of the normal weekly pay excluding overtime)
For a period of 4 consecutive weeks or for a total of 6 weeks in any 13 week period, the employee can claim a redundancy payment. The claim must be in writing.
If you do not contest the claim, you will have to pay the redundancy payment plus either one week’s pay in lieu of notice or notice pay for the contractual notice period the employee must give you, whichever is the longer.
If you do wish to contest the claim, you must reply in writing to the employee within 7 days of receiving his/her notice, guaranteeing to provide at least 13 weeks’ continuous normal work, commencing within 4 weeks of the date of your reply.
If you cannot guarantee to provide the work in question, you must accept the situation and will have to pay a statutory redundancy payment.
Redundancy pay entitlements
A redundancy payment is calculated by the period the employee was continuously employed and the age of employee during their employment period. There is a maximum of 20 years’ service which can be taken into account.
- Under 22: half a week
- 22 or over but under 41: One week
- 41 and over: One and a half weeks
Exclusions from a Redundancy Pay Entitlement
Employees with less than 2 years continuous service
Employees laid off or on short time working for less than a continuous 4-week period or for a total of 6 weeks in any 13-week period
An employee who unreasonably refuses an offer of suitable alternative employment
An employee dismissed for conduct justifying summary dismissal
An employee on strike and then dismissed due to redundancy
If the employee becomes entitled to an occupational pension on being dismissed such payments may be set against redundancy payments
Employers must send a written statement to the employee explaining how the redundancy payment has been calculated. If you do not supply this, you are liable to be fined.
One of the key requirements of a redundancy procedure is consultation. Consultation should be directly with the employees likely to be affected by the proposed redundancy and must begin when the proposals of redundancy are still at a formative stage.
Consultation must be carried out even if the employers considers that this could result in loss of productivity, morale or even damage to company property. Consultation should not be cut short, even if the employee pushes for this to happen.
What should you discuss in the redundancy consultation?
During the consultation meeting you should explain the following to the employees
Remind the employee they can have a suitable qualified trade union representative or work college at the consultation
Explain the reason for the redundancies in detail
Explain their job is at risk, but it does not mean at present they will be redundant. They are currently in ta potential redundancy situation
How many employees are being considered
How many position will remain
Provide a copy of the proposed selection criteria and ask for their feedback
Explain how the selection process will be carried out and by whom
Remind them they will be consulted on ways to avoid redundancies
When the first consultation is finished, explain that the employee should take some time to consider what has been discussed and arrange a second consultation meeting in a few days’ time to discuss the points covered in the consultation.
For a full explanation on what should be considered in each redundancy consultation, please download our guide.
Redundancy Assessment Process Scoring
Tribunals look favourably on selection procedures based on a points system which scores the employee against the relevant criteria. However, care must be taken in the choice and application of the criteria to avoid factors which may be discriminatory on the grounds of someone having a protective characteristic (Equality Act 2010).
What should be considered when scoring?
- Score each potentially redundant employee using the selection criteria and internal guidelines
- Make sure that at least two managers conduct the selection process to ensure the ratings are applied objectively and in a fair and consistent manner
- Make sure that you’ve the supporting evidence to justify all the ratings
- Rank the employees based on their overall score and check that you’re comfortable with the outcome and that the scores awarded can be justified
Next Steps after Redundancy Consultations
Prepare and issue the confirmation of redundancy letter including:
- Breakdown of the redundancy entitlements
- When will the redundancy take place
- Relevant time frame for an appeal
A suitable letter is available from our SafeWorkforce team.
Make sure you have a note taker with you at this meeting.
- If the employee appeals, invite them to attend a further meeting to hear their appeal. The appeal should be held by a more senior person who has not been involved in the process to date
- Allow the employee to be accompanied by a suitably qualified trade union official or work colleague
- Following the meeting, write to the employee advising the outcome of the appeal and stating that this decision is final
A suitable letter is available from our SafeWorkforce team.
Are you going through a redundancy appeal? We’re here to help you though the redundancy process and provide practical advice if you’re going through a redundancy appeal.