Making redundancies are an unfortunate reality of running a business.
At each stage of the redundancy procedure, employers are under intense scrutiny to meet stringent legal requirements. Employers need to follow the law and treat workers in accordance with their rights.
Failure to follow a correct and lawful procedure will be detrimental to employee-employer relations and can potentially expose the organization to expensive and time-consuming Employment Tribunal claims.
Workers who have worked at your organization for a minimum of 2 years in continuous employment are entitled to a statutory redundancy payment. The longer an employee has been employed by your business, the larger their redundancy package will be.
You should seek legal advice as soon as you decide you will be making redundancies. Being proactive in seeking advice will ensure you meet your legal obligations at every step of the process. The key steps all employers must follow when making staff redundant are set out below:
Employers must inform all potentially ‘at risk’ employees as soon as the business is considering redundancies. This includes employees who are absent from work due to sickness or maternity leave.
Selection pool of employees
To avoid allegations of unfairness or discrimination being made by unhappy employees, employers should develop and implement fair criteria against which all at-risk employees can be scored against objectively.
Consultations (single and collective)
Employers must enter into a genuine and fair consultation process with the potentially affected employees. Failure to properly consult with affected employees can cause redundancies to be unfair. This can give rise to expensive tribunal claims.
The length of the consultation period is determined by the number of employees you plan to make redundant. If you plan to make less than 20 redundancies within a 90-day period, there are no set rules. It is still good practice for employers to follow the same process as where more than 20 employees are being made redundant to ensure any redundancies are legally sound.
If your business plans to make more than 20 redundancies within a 90 day period, you are under a duty to hold collective consultations. Only after the consultation process has been completed can you give notice to potentially affected employees.
Making redundancies should be a last resort for your business. Employers have to show they have made genuine efforts to ascertain whether suitable alternative employment exists within the organization or any associated companies. This can include freezing hiring and retraining or redistributing existing staff.
Settlement, or compromise, agreements can be used to bring the employment contract to an expeditious end by mutual agreement. The settlement agreement will cover notice periods, redundancy pay-outs and obligations of confidentiality.