Making employees redundant fairly – key tips for employers

The redundancy process can be difficult for all involved. As a time of change and often financial strain on both parties, this can lead to employers making quick and sometimes rash decisions and employees seeking recourse. Employers therefore need to handle redundancies with sensitivity and of course, in accordance with the law. Here, we’ve put together a few key tips to help with managing this challenging task.

Explore whether redundancies are absolutely necessary

Redundancy is one of the potentially fair reasons for dismissal. Redundancies may arise when a business is altering its location, changing how it operates (e.g. outsourcing work or restructuring) or closing.

A business should always explore alternatives to redundancies. For instance, it may be possible to redeploy employees into another part of the business. Another option could involve changing employees’ working hours; this can be done via agreement or through temporary lay-offs or short-time working, where permitted in an employee’s contract.

Consider the selection criteria and process

Employees must be selected for redundancy fairly. Where a business is undertaking a general reduction in headcount, objective selection criteria will need to be applied and used to score employees consistently.

The selection criteria and the scoring process must not be discriminatory. There are additional protections relating to protected characteristics such as age, gender and disability, which can interact with the criteria chosen and the scoring applied. It is important to ensure that an employee is not being treated unfavourably due to a protected characteristic. Employers also have additional responsibility towards those in the pregnancy/maternity protected period; this period begins when the employer is informed of the pregnancy and finishes 18 months after the date of the birth or ‘the expected week of childbirth’.

Adhere to consultation requirements

Before making employees redundant, the employer must consult with them. Consultation involves discussing matters such as the changes the business requires, the redundancy selection criteria and employee concerns. Where less than 20 redundancies are to be made, there are not set consultation rules to adhere to, however, fully consulting employees is always advisable and can reduce the likelihood of unfair dismissal claims.

If a business is considering making twenty or more individuals redundant in 90 days, collective consultation will be required. This involves consulting with a trade union or with employee representatives. The rules around collective consultation are much more prescriptive on timescales and there are significant penalties for non-compliance. Where there are between 20 and 99 redundancies, consultation must begin no less than 30 days prior to the proposed redundancy date and where there are at least 100 redundancies, it must start no less than 45 days prior.

For more guidance on consultation, see here.

Consider suitable alternative employment

The employer should also strive to offer suitable alternative employment to employees chosen for redundancy. Certain employees, like those who are pregnant or on maternity leave, must be offered suitable alternative roles before others. If an employee accepts such an offer, they will be entitled to a 4-week trial to determine whether this new role is suitable. Where an employee rejects a role, they must be able to justify why it is unsuitable. If there is no valid reason for refusing the role, the employee may lose their entitlement to redundancy pay.

Understand employees’ contractual and financial entitlements

In the event that, following a full consultation and fair process, it is decided that an employee will be made redundant, it is vital that the employer observes the employee’s financial and contractual rights on redundancy. Employees may be eligible for statutory redundancy pay or contractually entitled to enhanced redundancy pay. Moreover, employees will be entitled to be given the appropriate amount of notice or payment in lieu of notice. They will also have the right to other contractual entitlements, such as accrued annual leave.

Want to know more?

You can find further information on this topic on the Acas and gov.uk websites.

If you would like support with managing redundancies at your organisation, don’t hesitate to get in touch with us. Our employment solicitors are highly experienced in advising on redundancy situations and can guide you through the process, to ensure you meet your legal obligations.