Businesses are constantly evolving and changing as the economy continues to be turbulent and, as a result, redundancies are, unfortunately, common. Although redundancy processes typically occur when business are going through periods of financial constraint, redundancies can also happen when thriving business undertake restructures; it is not always financially driven.

This article highlights top-tips and practical issues when carrying out redundancy processes.

What is a redundancy?

Redundancy is considered a form of dismissal and arises in the following situations:

1. closure of the business;
2. closure of the employee’s workplace;
3. reduced need for employees to carry out a particular type of work.

Without establishing one of these grounds for the proposed redundancies there is no true redundancy situation, and subsequent dismissals are likely to be unfair.

Why is a fair redundancy process important?

Employees with over two years’ have a right not to be unfairly dismissed. A true redundancy situation is a potentially fair reason for dismissing an employee but only in circumstances where a fair consultation process has been undertaken. Employers should also be aware of discriminatory selection criteria (considered below) in relation to, for example, employees who are on maternity leave or who suffer from conditions that could be considered as disabilities. An unfair dismissal could leave a business liable for a compensatory award of up to one year’s salary per affected employee. If the process is found to be discriminatory, the one-year cap is removed.

What initial steps can be taken?

Taking steps to plan early on and in good time is essential for a smooth process. Employers should begin by assessing the business reasons for redundancies and explore alternative solutions, such as restructuring, retraining, or redeployment. This will form an important part of the subsequent consultation process. Once it is clear that redundancies are necessary, employers should develop a detailed plan that outlines the timeline for the process, relevant selection criteria, communication and consultation and consider whether wider support is required for the business (support from legal advisers) or the affected employees (outplacement support or employee assistance programmes).

Should employees be ‘pooled’?

Where multiple employees undertake duties that overlap and are interchangeable, they should be pooled for selection. This means that they will be scored against one another for the available roles (see below). Singling an individual out for selection when colleagues carry out the same / similar duties is likely to render a dismissal unfair and, potentially, be discriminatory. It may be the case that an employee is in a distinct role from anybody else, such as an isolated managerial role, and no one else carries out similar duties. If that it is the case, they could be placed in a pool-of-one.

How to carry out a fair selection process?

Once the relevant pool has been identified, it is crucial that the selection process for redundancy is fair, transparent, and based on objective criteria. Common selection criteria include: skills, qualifications, and experience; performance records; attendance records (excluding absences due to disability or maternity); and disciplinary record. Objective criteria are essential and, if challenged, the employer should be able to support its scoring with record based data such as appraisals and HR record. Subjective criteria such a ‘future potential’ should be avoided where possible. Employers should avoid discriminatory practices by ensuring that criteria do not unfairly disadvantage protected groups under the Equality Act 2010. For example, including pregnancy related absence in the scoring is likely to be discriminatory.

What is multiple redundancies are proposed?

For fewer than 20 redundancies, there is no set time for consultation, but it must be meaningful (see below). For 20 or more redundancies in a 90 day period, collective consultation is required which must last at least 30 days (or 45 days for 100 or more redundancies). Employers making more than 20 redundancies in a 90 day period must also notify the Secretary of State.

What is a meaningful consultation process?

The overriding objective with a meaningful consultation process is to ensure that the employees understand the business rationale for the redundancies, how they will be scored (or why they are in a pool-of-one), what their scores are and why / how they have received that score. This will take place over a series of meetings with the individual to consult with them in relation to the proposals. Between meetings, employees should be sent letter summarising each consultation meeting and formally inviting them to the next along with a reminder of their right to be accompanied. If the employees have this information, they will be able to engage properly throughout the process. A meaningful consultation should explore ways to avoid the redundancies and the employee should be given the opportunity to make suggestions as well as being made aware of any potential suitable alternative employment available in the business. Some employees may be reluctant to speak up during a meeting and may want to make written submission. Redundancy is a difficult time for everyone involved and clear, honest, and compassionate communication is essential to maintain trust and morale.

Making a decision

If, after a series of meetings (normally at least two), it is clear that there is no way to avoid the proposed redundancies and there are no outstanding points and queries, a final meeting should be arranged to communicate the decision to the individual. The individual should be aware of the financial package available to them as well as the right to appeal the termination of their employment. Individuals who were pooled for selection but not made redundant should be informed that their role is safe and that the process has finished.

Can an employer make enhanced payments?

Yes – employers may wish to enhance the package on offer to employees to put them in a better position following the termination of their employment. If that is the case, it is advisable to have a Settlement Agreement in place which records the enhanced package and, in turn, waives the employee’s accrued employment rights removing the risk of a claim post-termination. 

What records should be kept?

It is essential to keep thorough records throughout the redundancy process including detailed records of all decisions, communication (letters and emails), records used for the selection and scoring process and consultation meeting minutes and notes. This documentation is crucial if any legal challenges arise and can also help in reviewing the process afterward. Litigation is common following redundancy processes, so clear and thorough records will put businesses in good place to be able to defend claims.