The prospect of making redundancies or restructuring your workforce can seem overwhelming. There is a lot to consider not only from a commercial standpoint but also from a legal perspective. Seeking specialist employment law advice at an early stage before you embark on the process can significantly reduce your business’ liability in relation to making redundancies.
To help your business prepare, below is a short guide and links to helpful articles so that you can consider redundancy in more detail.
Contents:
- Make sure there is a genuine redundancy situation
- Are there alternatives to redundancy?
- Is voluntary redundancy an option?
- Fair selection for redundancy
- What consultation obligations are there for redundancy?
- Is suitable alternative employment available?
- What notice and redundancy payments will I need to pay?
- How long does the redundancy process take and how can I best manage the working environment?
- What happens if the redundancy process goes wrong?
Make sure there is a genuine redundancy situation
To fairly dismiss on the grounds of redundancy, you will need to ensure that any planned changes fall within the legal definition of redundancy. A redundancy situation can arise when you:
- close a business
- close a workplace
- need fewer employees to carry out existing work, or there is less work for your existing employees
It’s also important to be clear about your business objectives and why the redundancies are necessary so you can clearly communicate this to your workforce. This article on ‘Establishing that a redundancy is genuine’ can help and if you require further specifics, our specialist employment lawyers can guide you.
The key legal risks from a redundancy process which can give rise to claims are:
- Unlawful discrimination – you will need to ensure that you do not directly or indirectly discriminate during the redundancy process and that a protected characteristic, such as an employee’s sex or race, is not the true motive for making someone redundant
- Unfair dismissal – if an employee can successfully argue that there was not a genuine case for redundancy or that the redundancy process used to dismiss was not fair and reasonable in the circumstances, they may be able to claim compensation from your business for unfair dismissal
- Automatic unfair dismissal because of pregnancy, childbirth or statutory family leave - it is automatically unfair to dismiss an employee or to select them for redundancy if the reason is connected to their pregnancy, childbirth or taking statutory maternity or other family leave.. Claims of discrimination are also likely to arise in situations like this
Before embarking on a redundancy process, it is advisable to have a clear plan of who is doing what and when. As part of this, get all the necessary documentation sorted beforehand, including a business case document, timetable, consultation scripts and letters, etc.
Are there alternatives to redundancy?
Redundancies should be a last resort and so it’s important to explore alternatives at an early stage with your employees. Failure to do so may give employees scope to argue that their dismissal on the grounds of redundancy was unfair and issue an Employment Tribunal claim against your business.
Alternatives to explore might include reducing pay, temporary layoffs, part-time working or job shares. We have a few further suggestions and offer more detail in our article here. Again, if you would like to discuss how one or more of these measures might work in your business and how to best implement them, our employment lawyers can help.
Is voluntary redundancy an option?
If there may be some employees that would be prepared to leave the business voluntarily, it may save time and money to offer this, depending on your business’ circumstances.
Fair selection for redundancy
For a redundancy to be fair you must identify the groups of employees who will be at risk of redundancy. This is the ‘pool for selection’. Once the pools have been determined, you must carry out a scoring exercise based on objective, fair and non-discriminatory selection criteria for each of the ‘at risk’ employees to select which employees are to be made redundant. Employees who have unique roles will not need to be included in a selection pool.
What consultation obligations are there for redundancy?
Your obligations to consult will depend on how many redundancies you are making and in what timeframe:
Collective consultation will be required if you are anticipating making 20 or more employees redundant at ’one establishment’ in a 90-day period. It’s worth noting that changes outlined in the upcoming Employment Rights Bill will remove the reference to ‘one establishment’, meaning that the obligations to collectively consult will apply to any redundancy exercise where 20 or more employees in total across the business will be made redundant.
The minimum consultation period for collective redundancies is:
- 30 days where between 20 and 99 employees are to be dismissed
- 45 days where 100 or more employees are to be dismissed
The collective consultation process is technical, so you may wish to seek professional advice from one of our employment lawyers, but more details on the process can be found here.
Where fewer than 20 redundancies are anticipated, this does not require the same level of consultation, and there are no set timeframes, but the process must still be meaningful and fair. More details on the individual redundancy consultation process can be found here.
Is suitable alternative employment available?
As part of the obligation to try to avoid redundancy, whilst you do not have to create a new role, you should make sufficient efforts to search for and point ‘at risk’ employees towards any other suitable alternative roles in your organisation
A redundancy dismissal is likely to be unfair if you do not identify and make employees aware of any suitable alternative roles that may be available.
If you have employees who are pregnant or who are on (or have recently returned from) maternity, adoption or shared parental leave, there is a legal duty to offer them any suitable alternative employment in priority to other redundant employees. This special protection will also apply to any employees returning from Neonatal Care Leave from 6th April 2025.
If you would like further guidance on how and to whom suitable alternative roles should be offered and considerations which may need further thought, our experts can assist.
What notice and redundancy payments will I need to pay?
If you dismiss an employee on the grounds of redundancy, the amount of notice they are entitled to will be dependent on what is contained in your employee’s employment contract.
If the employment contract is silent on notice or offers less than the statutory notice period for the length of the employee’s service, the statutory notice period will apply.
In terms of Redundancy Pay, again, it’s important to check your employee’s contract of employment or your redundancy policy to check whether there is any entitlement to an enhanced redundancy payment. If there is no such entitlement, an employee may be entitled to a statutory redundancy payment if they have worked for your business continuously for two years or more.
How long does the redundancy process take and how can I best manage the working environment?
This can vary depending on a number of factors, such as whether there are collective consultation obligations or not, the culture of your organisation, the number and particular individuals involved in the process , amongst other things.
Whilst you will want to ensure that the redundancy process is long enough to be consultative and meaningful, you will not want to unduly drag the process out, as it can be unsettling for employees working within an environment where redundancies are being made.
Particularly for those who are ‘at risk’ of being made redundant, it can be extremely stressful knowing that they may soon not have an income and extremely difficult to motivate themselves.
It is similarly difficult for those not ‘at risk’ of redundancy to be sensitive to those employees at risk but also to try and get them to be productive. If the quality or quantity of work is suffering due to the redundancy process, further cost-saving measures might be needed, in addition to the planned redundancies. For further guidance on managing the working environment during a redundancy exercise, please see our article here
If you have any questions after reading our article or would like more specific guidance in your business’ specific case, our employment lawyers would be happy to assist you.
What happens if the redundancy process goes wrong?
It’s not uncommon for employees to become aggrieved during a redundancy exercise – complaints about scoring, selection or the redundancy process itself can lead to tensions running high. Our article here provides some guidance on how to manage complaints during the redundancy process.
If you anticipate that issues are likely to arise or an employee has already made a complaint about the redundancy process, it is advisable to involve an employment lawyer as soon as possible
