Redundancy

For every employer, redundancies can prove to be complicated and difficult.

There are several reasons why an employee could be made redundant. For example, a whole department could be made redundant because their workplace closed down.

You need to be cautious with these types of job terminations. Any employer could action unfair dismissal if they neglect proper procedures–resulting in compensation penalties, job reinstatements, and reputational damage.

In this guide, we'll look at what redundancy is, different types of job termination, and how to end employee relations on a professional note.

What is redundancy?

Redundancy is a type of job termination used when an employer needs to reduce their workforce. A genuine redundancy may occur because:

• The employer's business no longer runs efficiently.
• An employer's requirement for the employee to carry out work of a particular kind has ceased or reduced.
• The employee’s job location is no longer available.

Whether it involves one employee or a whole department, redundancy affects everyone within a business. As an employer, it's your legal duty to care for the welfare of your staff during these pressing times.

Are there different types of redundancy?

There are three paths an employer can take when deciding to make someone redundant:

Individual redundancy

Individual redundancy is when you disclose to an employee that their job is being terminated.

All employees are entitled to a consultation meeting to talk about their redundancy. And this includes those, ‘at risk’ of being made redundant, as well as anyone affected by the terminations (directly or indirectly).

Voluntary redundancy

Voluntary redundancy is when you ask employees who are at risk if they want to put themselves forward for redundancy, i.e., if they were thinking of leaving anyway.

An employee may choose to be made redundant voluntarily. Maybe they've found a new job or are considering a lateral move. Whatever the case may be, an employer cannot enforce it. For example, an employee cannot be made redundant because of their age.

You should highlight rules and entitlements linked to voluntary job terminations. Like redundancy pay, amended parental leave, or paid time off to look for a new job. That way, the employer can support them in the best means possible.

Collective redundancy

Collective consultation is required when 20 or more redundancies are proposed at one establishment within 90 days.

Affected employees have a right to elect an ‘employee representative’. Only those affected (of being named redundant) can stand for election as employee representatives.

With collective redundancies, employee representatives should be consulted on:

• The reasons behind the proposed redundancies.
• Any steps initiated to avoid them.
• Whether redundancy pay will be provided.
• Methods for keeping selection criteria low.
• Support procedures for other employees who are affected.

How much statutory redundancy pay are employees entitled to?

Employees (with two years’ service) are entitled to statutory redundancy pay whilst being made redundant.

From the 6th of April 2022, employees can receive a weekly pay of £571 (which is a capped amount). The maximum statutory redundancy payment an employee can receive is £17,130.

To receive statutory payment, there are certain requirements needed. Employees who are:

• Under 22 years old: Receive half a week's redundancy pay for each year fulfilled.
• Between 22 and 41 years old: Receive one week's redundancy pay for each year fulfilled.
• Are 41 years and older: Receive one and a half week's redundancy pay for each year fulfilled.

Contractual redundancy pay can also be offered by an employer. Whatever amount is agreed, contractual redundancy pay must be provided within a reasonable timeframe (from the period where they were made redundant).

What other termination payments are employees entitled to?

Employees who are made redundant may be eligible for certain termination payments. For example, an employer may offer termination payment like:

• Statutory redundancy pay.
• Holiday pay.
• Unpaid wages.
• Employment benefits.

What is the UK law on workplace redundancy?

In the UK, the Employment Rights Act 1996 (ERA) outlines specific legal requirements on workplace redundancy.

It's illegal for an employer to make someone redundant based on a legally protected characteristic. If a tribunal finds evidence of this, you could be held liable for unlawful discrimination.

Under the Equality Act 2010, there are nine protected characteristics which you cannot discriminate against. These include:

• Age.
• Disability.
• Gender reassignment.
• Marriage and civil partnership.
• Pregnancy and maternity.
• Race.
• Religion or belief.
• Sex.
• Sexual orientation.

For example, you cannot make an employee redundant because they've requested maternity leave or are reaching retirement age. This also applies when an employee exercises their statutory entitlements, like whistleblowing or maternity leave rights.

If an employer fails legal compliance, they risk facing numerous business detriments. Employees made redundant may raise unfair dismissal or discrimination claims to an employment tribunal. Here, you could face paying compensation or reinstating them to a new job role.

How to manage a redundancy procedure in the workplace

Many employers will have to deal with making employees redundant. When this happens, you need to control the situation in the best means possible.

By controlling your redundancy process, you can ensure a smooth outcome for all. In the end, work relations end on professional, mutual notes–which protects your employee's welfare, as well as the business's.

Here are things to consider when managing a redundancy procedure:

Try to avoid redundancy

Job terminations should only be used as a last resort. As an employer, you should try to avoid them in the first place by:

• Offering short-time working.
• Reducing or eliminating overtime.
• Presenting retraining or redeployment.
• Offering early job retirement (so long as this isn't done discriminatorily).

Select employees fairly

Every employer must comply with fair procedures when selecting staff for redundancies. Common methods used for a redundancy selection include:

• 'Last in, first out': This is when an employee with the shortest service is selected for redundancy first.
• Self-selection: This is when an employee volunteers to face redundancy situations.
• Disciplinary records: This is when you refer to an employee's disciplinary records for selecting potentials.
• Employee suitability: This is when you select employees based on factors like qualifications or experience.

Hold a consultation process

When an employee has been identified as at risk of redundancy, their employer should hold a meaningful consultation process.

Employers can hold individual and collective consultations, depending on how many employees are involved. These general guidelines per one establishment include:

• Less than 20 redundancies: Consultations have no legal time limit.
• 20 to 99 redundancies: Consultations should start at least 30 days before any dismissal occurs.
• Over 99 redundancies: Consultation should start at least 45 days before any dismissal occurs.

Provide suitable alternative employment

You may be able to offer employees the same job but with an associated or new employer.

If an employee accepts a suitable alternative role, they should start at the end of their notice period from their current job.

Employers must offer legal entitlements to the employee made redundant. Their statutory redundancy pay will cease once they’ve accepted their new role; and after their four-week trial from when their employment ends.

Give the statutory notice period

A redundancy notice period has the same requirements as a general one. A notice period should follow statutory minimum requirements:

• For service between one month to two years: At least one week's notice period.
• For service between two to 12 years: One week's notice period plus one week for every year completed.
• For service that's 12 years or more: 12 weeks' notice period (which is the limit).

Sometimes, an employer may offer a contractual notice period within an employment contract. This amount may be more than the statutory amount–but it cannot be less.

Employees are also entitled to statutory redundancy pay, which is calculated against their normal pay (per week), their age, and the number of years’ service.

Redundancy payments are considered alongside other financial payments, like maternity leave pay or end-of-year bonuses.

Support their well-being throughout

When job terminations occur, it affects everyone (not just fewer people being made redundant). Employees are going through stressful times where the impacts can affect their professional and personal life.

The employer may provide support through employee assistance programmes (EAPs). Affected employees can seek confidential employment advice about their job termination. For example, EAPs offer advice on parental leave during terminations.

Employers should also try to be empathetic towards them during this time. End work relations with care and caution, so they can depart in a professional manner.

Get expert advice on redundancy with Health Assured

Whether the reasons for initiating them, redundancies are complicated matters.

Make sure you follow proper procedures throughout, like providing redundancy pay and notice. If not, an employer could unintentionally action unfair dismissals–leading to reinstatements, compensation, and reputational damage.

Health Assured offers expert guidance on redundancy. If you have an employee assistance programme with Health Assured, we’re here for you 24 hours a day. Get in touch via the helpline to speak to one of our counsellors or legal and financial specialists. Call 0844 891 0352.