Employing people within a business can be a fantastic thing, but sadly the time may come when you are forced to make redundancies. This is never a nice experience for anyone, but employers must be extremely careful that they handle this process correctly and legally. Redundancy is a process of dismissing someone from their job and can affect one role within the business or many of them.
If you need to make someone redundant, then there are some strict processes that you need to go through to ensure that it is done fairly and correctly. The experts here at Lovedays Solicitors can help you with this process. Their expert knowledge can guide you through all of the requirements that are necessary to ensure that any redundancies are selected fairly and are handled in the correct way.
What is Redundancy?
Redundancy is a form of dismissal that is used when a business needs to reduce the number of its employees. This should not be used as a disciplinary method but should only be required when the job role itself is no longer needed.
This means that the process cannot be used to replace one employee for another. If you make one or more employees redundant then you may be required to provide redundancy pay, a notice, a consultation process, options to move to a different role and time off to find a new position. It is important to remember that some of this will vary depending on the individual situation and how many people you are making redundant.
If you are proposing to make at least 20 redundancies in the same establishment within a period of 90 days, then it will be necessary for you to hold a collective consultation while the proposals are still in the development stages. For redundancies fewer than 20 then you will need to consult with the individuals concerned.
It is important to remember that redundancy should only ever be used as a last resort, and you should try and find alternative approaches wherever possible before turning to redundancy.
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Legal Requirements for Redundancy
You may make a redundancy if you no longer need someone to do a particular job role. This could be due to the fact that the business is changing what it does or doing things in a different way, such as employing new forms of technology. It may also be the case if the business is changing location or closing down entirely. In order for a redundancy to be considered genuine and legal, you must be able to demonstrate that the employee's job will no longer exist.
Employees will have a number of very important rights during the redundancy process which need to be adhered to at all times. Any employees who are under notice of redundancy have the right to reasonable time off to look for a new job and to be selected in a fair way. There is also a requirement for employers to try to find suitable alternative employment within the organisation for any employees that they have made redundant, if possible.
If you decide to make compulsory redundancies, you must identify which employees will be made redundant through a fair selection criterion. You will also need to go through a consultation process with the affected employees and then serve them notice based on their length of service. You should give staff notice pay based on their pay rate and notice, and employees who have given at least two years of continuous service may be entitled to statutory redundancy pay as well.
The Redundancy Process
Step-by-Step Redundancy Procedure
When making staff redundancies, there is a strict procedure that you need to go through, and this starts with determining the need for redundancy in the first place. Redundancies should only be made in order for a business to reduce the size of its workforce or if a role has become obsolete. Wherever possible, you should try to find alternative employment within the business for those who have been affected. You should identify the roles which are at risk based on whether a section of the business is relocating, work is being undertaken by others, or new forms of technology or if the business is changing the way in which it is working.
If you are making more than 20 redundancies, then you must consult with the workforce collectively to let them know that redundancies are being considered. For less than this, you will need to consult with people on an individual basis.
You will then need to decide on a selection criteria which must be fair and objective. You may want to ask for any volunteers for redundancy, or you may want to consider common methods for selection such as last in, first out, looking at disciplinary and attendance records, considering performance or doing a review of skills and qualifications. There are a number of characteristics which will be considered to be unfair to include in the selection process and so you should make sure that all decisions are transparent and within the law.
Any employees who are considered to be at risk should be informed in writing with an explanation about why redundancies are necessary, what the selection pool and criteria is, as well as a likely timetable. Once you have made your final redundancy decisions, then you must inform. Your employees as soon as possible. You will need to give them notice that their employment is coming to an end and detail the length of the notice, as well as any redundancy pay that they will be entitled to.
Ensuring Fair Selection
Redundancies are never nice, but they should always be fair and so you need to make sure that your criteria for selecting employees for redundancies is objective. Whilst you can use a disciplinary record or attendance as part of your selection considerations, you should not use the redundancy process as an excuse to get rid of an employee without going through a full disciplinary process.
There are also a number of characteristics which it might be considered unfair to include. These are:
- Sex/gender
- Marital status
- Sexual orientation
- Race
- Disability
- Religion or belief
- Age
- Your membership or non-membership of a trade union
- Health and safety activities
- Working pattern, for example, part-time or fixed-term employees
- Maternity leave, birth or pregnancy
- Paternity leave, parental or dependants leave
- An employee who is exercising statutory rights
- Whistleblowing
It is important to remember that this is not an exhaustive list as there may be other reasons which might also be considered unfair, depending on the individual situation.
Alternatives to Redundancy
When making redundancies, you are required to take reasonable steps to determine whether there is suitable alternative employment for an employee within the company or any group companies. You could also look at other methods of working, such as reducing working time or withdrawing any overtime. It may be possible to redeploy or retrain some employees or try to implement some job share opportunities. You could also offer flexible shifts as well as freezing any recruitment processes, bonuses and pay rises.
You may also want to offer voluntary redundancy, which gives financial incentives for an employee to lead the business on good terms. Any employee who volunteers for redundancy can qualify for statutory redundancy pay if they have given at least two years continuous service. You may also want to offer additional incentives. To make the offer more tempting, this could be based on the length of the employee's notice, how long it might take to find a new job and any benefits they are entitled to under their contract.
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Redundancy Payments
Statutory vs. Contractual Redundancy Pay
There are two types of redundancy pay that can be offered to an employee. Statutory redundancy pay refers to what the law says employees are entitled to, and contractual redundancy pay is extra money that is offered on top of the statutory amount. It is important to remember that only employees are entitled to statutory redundancy pay.
If you have employees on a fixed term contract and decide not to renew it because the job doesn't exist anymore and they had a fixed term contract for at least two years, or shorter contracts following on from one another adding up to two years, then they will also be entitled to statutory redundancy pay.
There are no entitlements to statutory redundancy pay if you offer to keep an employee on and they refuse, or if you have offered suitable alternative work which has been turned down without good reason.
In addition to the statutory redundancy pay that is required to be paid to an employee, you may also wish to offer contractual redundancy pay as well. This should be outlined in an employment contract and cannot be less than the statutory amount.
Redundancy pay should be paid on the date that the employee leaves work or a new agreed date soon after. They should be paid in the same way that wages are paid, and you should provide details in writing about how the pay was calculated and when it will be received.
Calculating Redundancy Pay
Any employees who have worked for you for two years or more will be entitled to half a week's pay for each full year if they are under the age of 22 as part of their statutory redundancy pay.
Those who are aged between 22 and 41 will be entitled to one week's pay for each full year, and those aged 41 or older will get one and a half week’s pay for each full year. If an employee turned 22 or 41 whilst working for the business, the higher rates will only apply for the full years that they were over those age limits.
This length of service is capped at 20 years and weekly pay is calculated based on the average that has been earned per week over the 12 weeks before redundancy notice was given.
For those being made redundant on or after the 6th of April 2024, their weekly pay will be capped at £700, and the maximum statutory redundancy pay they can receive is £21,000. There are a number of online calculators available that can help you to work out what employees are entitled to. Employees will not need to pay tax on the statutory redundancy pay.
Importance of Legal Advice
Making any employees redundant can be an emotional business for everyone concerned. It is therefore important to make sure that your entire process is completely transparent and that you have followed all legal requirements. A failure to do so could leave you open to an employment tribunal for a case of wrongful or unfair dismissal.
It is therefore essential that you seek professional legal advice throughout the redundancy process to make sure that you have done everything correctly. An employment law solicitor can help you to identify a fair selection criteria and ensure that you do not make any selections which could be considered to be unfair.
Knowing that you are working with a professional employment solicitor can also offer your staff a certain degree of peace of mind that you are going about everything in the correct way, and you can also ensure that your business is fully protected from any claims that may be brought about in the future.
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How Lovedays Solicitors Can Help
Lovedays Solicitors have been working with a variety of businesses across Derbyshire since 1905. We have a number of employment law specialists who can advise you on the best course of action for your business and your employees if you are facing a redundancy situation.
They can help you to determine whether there are any alternatives to redundancies that you can offer and will also help you to work out how many redundancies you might need to make. We can assist you in the entire process by helping you to identify which roles need to be made redundant and why. We can also ensure that you have full legal support for any employee consultations that you hold and can help to draft any written documentation that you issued to your employees.
When going through the selection process, we can also advise you on what will be considered to be fair and unfair criteria so that you can make selections which are legal and will not leave you facing disputes or tribunals as a result.
No business owner wants to make redundancies and our sensitive and professional team at Lovedays Solicitors understand this. We will support you to help make the process as easy as possible for everyone that is involved. We understand that your situation will be unique and so all of our advice will be tailored specifically to your business and its needs to ensure that you can receive the most positive outcomes.
Conclusion
It is an unfortunate fact of business that sometimes redundancies need to be made. However, when doing so, it is essential that all decisions are made clearly and fairly.
Communication with employees is vital throughout the whole redundancy process so that everyone knows exactly what they're facing and why the decisions have been made in the way that they have, and we can help to draft any necessary documentation to explain the situation and the rights of your employees.
We can offer full professional legal advice to ensure that you are always within the law from the very start, in order to protect the rights of your employees and also ensure that your business is not left open to any claims in the future.
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