Redundancy – Following a Fair Process

What do employers need to consider in a redundancy situation?

With the recent increase in the National Minimum Wage and higher National Insurance contributions placing additional cost pressures on budgets, we have seen a rise in businesses reassessing their workforce structures. Whilst it is understandable that some difficult decisions may need to be made, be careful that financial pressures do not lead you to rush or poorly execute a redundancy process.

What is redundancy?

Redundancy is a form of dismissal initiated by a reduced need for work of a particular kind. Unlike performance-related exits, redundancy reflects business needs rather than individual shortcomings. This makes fairness and consistency essential.

At a time when you might be trying to tighten the purse strings, failing to follow a proper procedure can do quite the opposite and lead to the risk of significant tribunal costs, as well as other non-monetary consequences such as employee dissatisfaction and reputational damage.

Overview guide to a fair redundancy process

Outlined below is an overview guide including the steps to take to deal with a redundancy situation fairly and in line with legal obligations. Alternative or additional steps may be required, depending on the circumstances.

1. Business case and planning

• Clearly identify the reason(s) for the proposed redundancies and check it is a genuine redundancy situation (e.g. a reduced requirement for employees to carry out work of a particular kind).
• Establish how many redundancies are being proposed. For 20 or more redundancies within 90 days at a single site, collective consultation is legally required which requires additional steps to those outlined in this article.
• Consider the appropriate pool of staff members (i.e. the group of employees from which you will select those who are to be made redundant).
• If selection will be necessary, plan your selection criteria. Use fair, objective and consistently applied criteria and avoid any criteria that may indirectly discriminate.
• Put together a list of alternative vacancies.
• Consider whether there are any employees who have notified you that they are pregnant or are on, or have recently returned from, a period of maternity leave, adoption leave or at least six consecutive weeks’ shared parental leave or neonatal care leave, as special rules apply to them in relation to redundancy.

2. Consultation

• Engage in meaningful consultation with affected employees. Discuss the rationale, pool(s), proposed selection process (if relevant) and any alternative vacancies.
• Redundancy should be presented as a possibility only at this stage.
• Ask the employees for suggestions of ways to avoid redundancies and consider asking for volunteers for redundancy.
• Offer support by having an assigned point of contact for queries and provide a reminder about any health and wellbeing resources that you offer (e.g. Employee Assistance Programs).

3. Scoring

• Score each potentially redundant employee objectively using your pre-agreed selection criteria.
• At least two-line managers should separately conduct the scoring, to help ensure scores are objective.

4. Individual consultation

• Meet individually with each employee who has been provisionally selected for redundancy, to discuss their scores, the proposal to select them for redundancy, and the terms of the redundancy. Invite them to bring a trade union representative or colleague to this meeting.
• Discuss the details of any available alternative roles.
• After the meeting, follow up on any suggestions made to avoid the redundancies and consider any representations made on scores.
• At this stage in the process, you should confirm whether any other roles can be offered, the terms of any offer, and provide the details of the roles.

5. Outcome

• Where a decision has been made to make an employee redundant, meet with them to confirm this and to go through the redundancy package, as well as informing them of their right to appeal. Again, allow them to bring a trade union representative or colleague to this meeting.
• Follow-up in writing, setting out their termination date, the arrangements for their notice period, their redundancy pay (if relevant) and their right of appeal.

6. Documentation

• Keep clear records of all decisions, meetings, criteria and communications throughout to demonstrate fairness and legal compliance.

Redundancy is never easy, for the business or the people affected; however, when done properly it can be managed in a way that maintains trust and respect and importantly minimises legal risks.

We recommend that you reach out to your internal HR or get in contact with a member of our team before initiating a redundancy discussion, to ensure the correct procedure is followed every step of the way.

For a more detailed step by step guide on the redundancy process, including example selection criteria and template letters, see our DIY redundancy toolkit for employers, available on the below link.

Redundancy Documents for Employers