Everything you wanted to know about…Redundancy…but were too afraid to ask!

No business likes making redundancies. However, when it becomes necessary to do so it is vital that employers get it right. We have therefore set out below some commonly asked questions about redundancies which will help you prepare for conducting a fair redundancy process should the need arise. 

What is redundancy and when does it arise?

A redundancy situation arises where an employerceases carrying on the business in which the employee worked or in the place in which the employee worked, or where the business needs fewer people carrying out work of a particular kind.

What is the process for making employees redundant?

Redundancy is a potentially fair reason for dismissing employees but the fairness of such a dismissal will be determined by the test of whether an employer’s decision to dismiss falls within the band of reasonable responses of a reasonable employer in those circumstances and in that line of business. This means that employers will need to follow a fair redundancy process as a failure to do so will normally render the dismissal unfair.

A fair procedure comprises a number of stages, namely:

  • warning and consulting with the potentially redundant employees about the proposal to make their role redundant;
  • adopting a fair basis for selecting employees for redundancy; and
  • considering alternatives to redundancy.

How do I warn and consult with potentially redundant employees?

This requires a series of consultation meetings with the potentially redundant employees prior to reaching a decision, to discuss the redundancy proposal, the reasons for the proposal, the employee’s selection for redundancy and any alternatives to redundancy which may be available.

How do I choose between potentially redundant employees?

Employers will first need to identify an appropriate pool of employees who are at risk of redundancy. The appropriateness of the pool will depend on a number of factors, including the roles or workplaces in respect of which there is a diminished requirement for employees.

Once an appropriate pool has been identified, employers may need to apply selection criteria to decide which employees in the pool should be made redundant. This typically involves a scoring exercise using objective and measurable criteria.

Do I have to find alternative work for redundant employees?

A fair redundancy process requires an employer to explore ways in which redundancies may be avoided. In most cases, amongst other things this will include identifying any suitable alternative roles which the potentially redundant employees may able to perform as an alternative to being made redundant. However, there is no absolute obligation to find alternative work for redundant employees where none can be found.

What are employees entitled to when they are made redundant?

Redundant employees with at least two years’ continuous employment will be entitled to a statutory redundancy payment which is calculated using a formula which takes into account their age, length of service and weekly wage. All employees are entitled to receive paid notice of their dismissal and a payment in lieu of any accrued but untaken holidays.

What are the consequences if a business gets redundancies wrong?

The main consequence of a poorly handled redundancy process is being on the receiving end of an unfair dismissal claim from your former employee. The compensation in such claims may be up to a year’s gross salary.

Please don’t hesitate to contact the team at MLP with ideas about topics or for detailed advice in connection with any of the issues raised. You can reach us at employment@mlplaw.co.uk or @HRHeroUK or on 0161 926 9969.