Legal: The right approach to making staff redundant

Kate Palmer, associate director of advisory at Peninsula Group, gives advice to business owners on what to do if they need to make redundancies.

Redundancies can be one of the most challenging things a business faces. Not only will you have to tell people you work with that they are losing their job, but you will also need to make sure the way you approach making staff redundant is fair.

As long as you are not making at least 20 employees redundant, there are no specific minimum consultation periods to follow. However, by making someone redundant, you are technically dismissing them and there are still rules you need to follow here. If you do not handle this carefully, you could find yourself facing an unfair dismissal claim at the employment tribunal.

Here are some of the things you should think about:

Firstly, make sure you can clearly outline why the redundancy is necessary. For example, maybe you need to let some staff go because you’ve recently lost a big contract or client and cannot afford to keep all of your employees.

Secondly, before making any final decision, think about any potential alternatives and be prepared to consult with your employees on this. For example, maybe some of your staff could share their role, or reduce their hours slightly, to avoid them losing the job altogether.

Thirdly, make sure you select those who are to be made redundant fairly. Consider the skills or attributes you don’t want to lose and maybe score employees on these. Never make any decision based on characteristics such as the ethnicity, gender or pregnancy of an individual.

Ideally, you should have already informed your staff you may have to make some of them redundant. This is especially important as it gives them time to process this information and start considering their options. Remember that gossip can spread like wildfire in a business and your employees are likely to feel much more secure if all the news comes from you first.

Once you have identified the pool of employees from whom you will choose those to be made redundant, you should consult with them directly and sensitively. This is likely to be difficult for them to hear and they should certainly not receive this news by text or email. If possible, these employees should be provided with a point of contact going forward to discuss any issues they are having or the potential options open to them.

The affected employees should be invited to discuss the redundancy with management in more detail. They may have some ideas to avoid the redundancy that you haven’t thought of. You don’t have to take on board what they say to you, but if you do choose to continue with the redundancy, you should be prepared to clearly outline why their suggestions are not being taken on board.

Some employees may take issue with how they were selected and could alert you to the fact your selection process was flawed. For example, you may have unfairly focused on employees of a particular age group without taking into account other factors, such as their performance in their roles.

Once you have made your final decision, you should confirm the redundancy in writing. Employees should work their statutory notice or, if their contract provides for longer notice, the period specified there. They will also be entitled to any outstanding payments, such as accrued but untaken holidays.

If the employees have worked for you for two years or more, they should receive statutory redundancy pay. This is calculated from the worker’s age, length of service and weekly pay and is capped at a figure that increases every April. You may provide a separate redundancy sum in your contract and, if you do, this is the figure they should be paid.

While the individuals work their notice, you should keep an eye on them. They may need further assistance to minimise the effect of the redundancy, such as arranging for some training on the best ways to write a CV. This may not be possible for all companies but, regardless of this, employees who have been issued a dismissal notice are entitled to take a reasonable amount of time off
to look for a new job or seek further training.

Remember that the situation gets more complicated where 20 or more employees are being made redundant. Here, there are strict rules that must be followed and you should seek further advice if you are unsure.

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