How To Manage The Redundancy Process – A Guide For Employers
PLEASE NOTE: This guide is written for information only and does not constitute legal advice. Every redundancy situation will be different and specific advice should be sought.
It’s an unfortunate fact of business but when times are hard, employers may need to make employees redundant to ensure a company’s survival. This guide has been written to help employers facing this possibility understand how to manage the redundancy process.
It’s important to note that the redundancy processes requires time and care to ensure that employees are treated fairly and reasonably. If you infringe an individuals’ employment rights, this could prove costly both financially and reputationally. We therefore always recommend that any business considering redundancies engage with a lawyer or HR professional.
Redundancy process guide
Below is a step-by-step guide on how to manage the redundancy process. This guide is designed to inform employers of the various stages and provide a guide for employees on what they can expect in the event they are at risk of redundancy.
This guide has been written on the basis that less than 20 redundancies will be made. Where 20 or more redundancies are considered, things become much more complicated and employers have a legal obligation to formally conduct a collective consultation. Failure to properly carry out a collective consultation can be very expensive and result in up to 90 days gross pay per affected employee. Collective consultation also requires the following consultation periods take place before any redundancies can be made:
20 to 100 redundancies at one site = 30 day consultation period.
100 or more redundancies as one site = 45 day consultation period.
The obligation starts when redundancies are proposed, not when they have been decided. One of the key functions of collective consultation is for there to be two-way dialogue between the business and the employees to discuss the reasons for the proposed redundancies and whether some or all can be avoided.
Step 1 – Are redundancies necessary?
Employers should carefully consider whether there is a genuine redundancy situation before speaking to any of the employees and beginning the redundancy process.
The legal definition of a genuine redundancy situation is:
- Business closure (closure of the business altogether)
- Workplace closure (closure of one of several sites, or relocation to a new site)
- Diminished requirements of the business for employees to do work of a particular kind.
Employers should consider preparing a business case or written analysis of why redundancies are necessary. By doing so employers can critically analyse their business and operations and test their assumptions and views. Employers can (and probably should) also gather the necessary evidence and data to support their views. A business case should consider questions such as:
- Why are redundancies necessary?
- How many redundancies?
- Which roles?
- Is there evidence and (financial) data to support the need for redundancies?
- What will the structure of the business be after the redundancies?
- If the duties of those to be made redundant are to be absorbed by others – which duties and who will absorb them?
If you’re not sure whether your circumstances meet the definition of a genuine redundancy situation, or you’re not sure how to properly articulate your situation, then contact our employment law specialists for a no obligation discussion.
Step 2 – Who is at risk?
Employers cannot target a specific individual for redundancy without inviting scrutiny, which is why a pool of employees at risk of redundancy should be put together.
One of the most common reasons why redundancy dismissals are found to be unfair by employment tribunals is that the selection pools were too narrow and not adequately considered. With this in mind, employers should not only consider which employees are at risk but also why they are at risk, avoiding any arbitrary or personal excuses.
Employers should also consider whether employees in roles that remain should be included in the selection pool. It may be that an employee currently in a role at risk could work in a role not at risk and therefore the incumbent employee should be considered as part of the selection pool.
Step 3 – Selection Criteria
Once an employer has decided on the selection pool they need to be able to decide who should be made redundant. This can be achieved by a scoring selection criteria.
The selection criteria need to be fair, objective and with scores being based on evidence.
Step 4 – Warning
Employers should warn those employees at risk of redundancy both verbally and in writing.
The warning letter should contain information on:
- Why redundancies are deemed necessary (perhaps the employer’s business case could be shared)
- Why the employee is at risk
- The selection pool
- The scoring criteria and how it will be scored
- The employee should be invited to an individual consultation meeting and they should be given the opportunity to be accompanied by a fellow colleague or trade union representative.
Step 5 – Scoring
Prior to the consultation meeting, the employer should score each employee. It is advisable for employers to have evidence and data to support the scores (for example disciplinary records, targets and KPIs).
Step 6 – Consultation meeting
We strongly recommend seeking legal advice in the early stages of the redundancy process, rather than waiting until step 6. This is the employee’s opportunity to ask questions, raise concerns and challenge the proposed redundancies. It should be viewed as a two-way dialogue where employees are encouraged to put forward their suggestions and raise their concerns.
During the consultation meeting the following topics should ideally be covered:
- The reason why the employee is at risk
- The employee’s individual score is under the selection criteria
- The evidence and data upon which the score is based
- Whether the employee could be considered for any suitable alternative vacancies to avoid redundancy.
Step 7 – Invitation to further or final consultation meeting
Following the consultation meeting and consideration of everything discussed, the employer should invite the employee to a further or final consultation meeting. The letter should:
- Summarise what was discussed during the consultation meeting (selection criteria score, vacancies and responses to any questions or suggestions raised)
- Invite the employee to a further consultation meeting
- If it is intended that it be a final consultation meeting the employee should be warned that one possible outcome is that the employee may be made redundant
- The employee should again be given the right to be accompanied by a fellow colleague or trade union representative.
Step 8 – Final consultation meeting
This meeting should summarise the consultation meeting and to discuss the outcome of the redundancy process including confirmation of redundancies.
Employers should discuss notice, redundancy pay and accrued annual leave with those being made redundant. This should also be confirmed in writing.
Employers should consider whether to allow redundant employees to appeal their redundancy.
The guide above provides a summary of the key steps to be taken when considering a typical redundancy process. If you believe your redundancy situation to be atypical or if there are exceptional considerations to take into account, our employment team can help you navigate the situation. For more information, contact GA Solicitors’ employment team on 01752 203500 or email the head of our employment law team directly via robert.zacal@GAsolicitors.com.