Making staff redundant may be necessary due to financial pressures or restructuring. UK law requires employers to follow a fair procedure and pay the correct redundancy payments. If this is not done employers risk unfair dismissal claims and damage to reputation. This guide explains what employers need to know about making staff redundant and remaining compliant under the law.
When Redundancy May Arise
Redundancy is the legal term that applies when an employer no longer requires employees in some area or when fewer employees are needed to do the same work. Making staff redundant is different to dismissing someone for misconduct or poor performance. There must be a genuine business reason and it cannot be used to exit problem employees. Tribunals will review the reasons for redundancy closely and so employers should ensure they are clear and honestly communicated.
The Legal Framework for Making Staff Redundant
The Employment Rights Act 1996 covers the rules governing redundancy. Employees with at least two years service are entitled to statutory redundancy pay, calculated based on their age and length of service. In addition employees are entitled to a notice of redundancy and individual consultation so the dismissal is not seen as unfair. Larger employers, where 20 or more redundancies are proposed within 90 day, need to meet collective consultation requirements. Failing to follow these rules can result in costly tribunal claims.
Steps in the Redundancy Process
The main steps in the redundancy process include:
- Planning: Identify genuine business reasons for the redundancy and consider other alternatives such as redeployment or voluntary redundancy.
- Consultation: Speak to the affected employees, explaining the reasons behind the decision begin collective consultation with employee representatives is required for 20 or more redundancies at the same time
- Selection: Use fair and objective criteria to decide who is at risk. This may include a review of performance and disciplinary record. Selection criteria should not be seen as discriminatory.
- Notice: Provide employees with their statutory or contractual notice period whichever is greater.
- Redundancy pay: Pay statutory redundancy pay to eligible employees and consider improved terms where company policy allows.
- Right of appeal: Allow employees to challenge their selection or raise concerns about the process.
Following these steps is crucial in the defence against future claims.
Consultation Requirements
Individual consultation is required in all cases but collective consultation is required when 20 or more employees are affected. This must begin at least 30 days before the first dismissal (or 45 days if 100 or more employees are affected). Employers must consult with trade union representatives or ‘elected employee representatives’ and share information about the reasons for the redundancy and show which employees are affected. Skipping the consultation process can automatically make the dismissals unfair.
If you would like free advice, John Bloor and the team are here to help.
Call John today on 01625 875587 or email enquiries@ebslaw.co.uk for tailored support.
Selection Criteria when Making Staff Redundant
When deciding who will be made redundant employers must use an objective criteria. This can involve looking at skills, qualifications, disciplinary record, performance and attendance. Employers should avoid potential discriminatory criteria, such as age, gender, disability or part-time status. For example, selecting only employees on maternity leave or with health conditions would amount to discrimination and could lead to tribunal claims. The process must be transparent with employees given the opportunity to challenge their selection.
Alternatives to redundancy should also be explored. Employers should consider redeployment to other roles, voluntary redundancy schemes, reduced hours or temporary lay-offs. Tribunals expect to see evidence that alternatives were considered before dismissal. Even if alternatives are not viable showing that they were examined demonstrates fairness.
Common Mistakes Employers Make
Redundancy claims can arise not from the decision itself, but from the way the process was handled. Common mistakes include:
- Failing to consult individually or collectively as required.
- Using biased or unclear selection criteria.
- Not considering alternative employment.
- Failing to give proper notice or pay redundancy entitlements.
- Targeting employees unfairly under the guise of redundancy.
Each of these mistakes can result in unfair dismissal claims or compensation awards. Employers should document every stage and seek legal advice where necessary to avoid these pitfalls.
Best Practice for Employers when Making Staff Redundant
A fair redundancy process will reduce legal risk and also maintain better relationships with remaining staff. Best practice includes:
- Communicating openly and honestly about the reasons for redundancy.
- Providing clear information and timelines to affected employees.
- Offering outplacement support or career counselling where possible.
- Ensuring managers are trained to handle redundancy conversations sensitively.
- Keeping detailed records of all meetings, the decisions made and alternatives considered.
How EBS Law Can Help
Making staff redundant is a sensitive and high-risk process under employment law. At Employers-Law we support businesses at every stage from planning and consultation to selection and dismissal. We can draft redundancy policies and represent you in disputes if claims arise. With our guidance you can ensure compliance while treating staff fairly and protecting your business reputation.
For further information, you may find these pages on our site useful:
- Long Term Sickness – Employment Rights
- Employee Called In Sick But Seen Out?
- Can an Ex-Employee Raise a Grievance?
For official information on redundancy procedures, see ACAS guidance.
Contact John Bloor today for expert support at Employers-Law. We’re here to ensure your business stays protected every step of the way. Call 01625 875587 or email enquiries@employers-law.co.uk.