Making someone redundant can be one of the trickiest things you’ll have to do as an employer. It’s important to think about whether it is the right call and how it will affect your employee.
In this guide, we’re going to be explaining how you can go about redundancy lawfully and in a way that is least stressful for everyone involved.
What is Redundancy?
Redundancy is the process of dismissing an employee from the company when there is no longer a need for their job. This could be because your business is:
- Changing what it does
- Altering operations (e.g. using new machinery)
- Moving location
- Closing down
In order for a redundancy to be genuine, you are required to demonstrate that the employee’s job will no longer exist once they have left the company. This is the key differentiation between redundancy and termination.
Termination is when you fire someone for performance or misconduct reasons. Someone else can then be hired into their position to resume the role.
Confusing the two, such as making someone redundant for misconduct, can make your company vulnerable to legal action and you may have to pay out large amounts in compensation.
This is why you should make sure that you meet all of the required criteria to be compliant prior to making any redundancies.
How to Avoid Redundancy
You should do your best to avoid compulsory redundancies by taking the following steps:
- Seek applicants for voluntary redundancy or early retirement (more about this below)
- Seek applications from existing staff to work flexibly
- Lay off self-employed contractors, freelancers etc
- Don’t use casual labour
- Restrict recruitment
- Reduce or eliminate overtime
- Fill vacancies elsewhere in the business with existing staff
Non-Compulsory Redundancy and Compulsory Redundancy
Non-Compulsory Redundancy (or Voluntary Redundancy)
Non-compulsory redundancy is where you ask your employees if they would like to volunteer for redundancy.
Whilst this might seem like an odd thing to do, for some people, voluntary redundancy can be an attractive option. For example, if they are considering a career change or approaching a different stage in their life, voluntary redundancy may be an appealing offer.
This also helps to give added protection to team members who depend on their jobs more and gives those who are open to redundancy the chance to take it.
Early Retirement
You can also offer employees incentives to retire early as an alternative to voluntary redundancy. This offer must be made across the workforce you cannot single out specific individuals or this may be considered age discrimination.
The decision to retire must also be that of the employee- you cannot force an employee into early retirement.
Offers or Alternative Work
If you have selected someone for redundancy, you can still offer them an alternative role within your company in order to keep them.
In order for this offer to be valid, it needs to be unconditional and in writing and made before the employee’s current contract ends. The offer needs to explain how the new job differs from their existing one and must begin within 4 weeks of the old job ending.
Employees who do accept this offer are allowed a 4 week trial period to ensure the work is suitable. If you both agree that it isn’t, they can still claim redundancy pay.
Compulsory Redundancy (or Involuntary Redundancy)
If your business still needs to let some employees go after taking steps to prevent redundancy and having offered voluntary redundancy, you will move on to compulsory redundancy.
If you decide to make compulsory redundancies, you must identify which employees will be made redundant in a fair and reasonable way, ensuring you aren’t discriminating.
How to Fairly Select Employees to Make Redundant
Fair reasons for selecting employees for redundancy include:
- Skills, qualifications and aptitude
- Standard or work and/or performance
- Attendance
- Disciplinary record
You are also able to select employees based on their length of service, with those hired more recently being the first to be made redundant, however, you must be able to justify this with other criteria as it could be considered indirect discrimination (age discrimination) if it affects one group of people more than another.
What is Considered Unfair Selection Criteria for Making Someone Redundant?
There are certain criteria which are automatically considered unfair. You must not make an employee redundant for any of the following reasons:
- Pregnancy, including all reasons relating to maternity
- Family, including parental leave, paternity leave (for both birth and adoption), adoption leave or time off for dependants
- Acting as an employee representative
- Acting as a trade union representative
- Joining or not joining a trade union
- Being a part-time or fixed-time employee
- Age, disability, gender reassignment, marriage and civil partnership, race, religion or belief, sex and sexual orientation.
- Pay and working hours, including the Working Time Regulations, annual leave and National Minimum Wage
Redundancy Consultations
If you fail to consult employees in a redundancy situation, any redundancies you do deceive to make will be considered unfair and you could potentially be taken to an employment tribunal.
If you’re making 20 or more redundancies within any 90-day period, you must follow ‘collective consultation’ rules.
Collective Consultation
- You must notify the Redundancy Payments Service (RPS) prior to consultation beginning.
- Consult with trade union representatives or elected employee representatives or with staff directly if there are none.
- Provide information to representatives or staff about the planned redundancies, giving representatives or staff plenty of time to consider them.
- Respond to any requests for further information.
- Give any affected staff termination notices showing the agreed leaving date.
- Issue redundancy notices once the consultation is complete.
Redundancy Notice
Once you have finished the consultation stage, you must give staff notice and agree a leaving date with at least the statutory notice period based on how long they have worked at your company.
| Length of Service | Notice You Must Give |
| 1 month to 2 years | 1 week minimum |
| 2 years to 12 years | A week’s notice for every year employed |
| 12 or more years | 12 weeks |
Notice Pay
You must give your staff notice pay based on their pay rate and notice period, or you can make a payment in lieu of notice.
Your employee’s notice pay is based on the average they earned per week over the 12 weeks before their notice period starts.
If you have decided to include a payment in lieu of notice clause in the employment contract, you can end your staff’s employment without any notice. This allows you to make a payment to cover the notice period that they would have worked.
Redundancy Pay
Any employees you make redundant may be entitled to redundancy pay- also known as ‘statutory redundancy payment’.
In order to be eligible for the redundancy payment, an employee must:
- Be working under a contract of employment
- Have at least 2 years’ continuous service
- Have been dismissed, laid off or put on short-time working
Anyone who has taken early retirement does not qualify for redundancy pay.
Redundancy Pay Rates
Pay rates are based on an employee’s age and length of service. It is also counted back from the date of dismissal.
Employees get:
- Half a week’s pay for each full year of employment up to their 22nd birthday
- 1 week’s pay for each full year of employment after their 22nd birthday
- 1.5 weeks’ pay for each full year of employment after their 41st birthday
Length of service is capped at 20 years.
Their weekly pay is the average they earned per week over the 12 weeks before the day they got their redundancy notice. This is capped at £571 and the maximum amount of statutory redundancy pay is £17,130.
Professional Guidance on Redundancy
If you think you are going to have to make redundancies in your company, the best thing you can do is seek professional advice. With expert guidance from a team such as Ryans, you can ensure you’re making the right decision and doing so legally.
Get in touch with our team of experts today to find out the best redundancy process for your business.
For more information and advice, check out the rest of our handy guides here.