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 alternatives, 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.
Employers should avoid breaking employees’ contracts when considering alternatives.
Identifying the pool for selection
The group from which employees will be selected for redundancy (the selection pool) must be considered carefully. The 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.
Employers may identify a range of selection pools. For example, the pool can be widened by redeploying an employee at risk of redundancy into another employee’s role and dismissing the person in that role as redundant instead. This is known as ‘bumping’; failing to consider this may make a dismissal unfair.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 DBT (the Department for Business and Trade)
If the redundancy involves more than 20 employees, the employer must inform the Redundancy Payments Service acting on behalf of DBT 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 existing employee representatives, then an employer must enable the employees to directly elect representatives. The law requires ‘meaningful’ consultation on matters such as the proposed selection process and scoring system.
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
Employers should choose individuals from within the selection pool objectively based on 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.
Suitable alternative employment
Employers must look for suitable alternative work, if any, for potentially redundant employees 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.
Employees with at least two years’ service who have been given notice of redundancy dismissal are entitled to a reasonable amount of paid time off to look for new work or for training.
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.
Following individual consultation, if the employer decides the employee is redundant then a written redundancy notice should follow, providing either the statutory minimum notice or the contractual notice, whichever is the greater.
Employees should be allowed to appeal against the redundancy decision.
