Making staff redundant – key steps you must follow

The impact of COVID19 on the UK economy has resulted in a high volume of businesses forced to make redundancies. 

As the UK government begins to reduce the support available through the furlough scheme, it is expected that another wave of redundancies will be announced. Businesses are forced to make tough decisions around whether they can afford to keep staff on furlough now they are required to contribute towards the cost. The alternative, of course, is to make redundancies. 

If you are facing your post COVID19 future and must begin the complicated process of making redundancies, we've compiled some key steps you must follow.

The key steps to follow when making redundancies

Firstly, are you sure this is a redundancy situation?

Redundancies are not an excuse for dismissal for poor performance or misconduct. To clarify if you are facing redundancies, ask yourself the following questions:

• Are you closing, or intending to close the department in which the individual was employed?
• Are you closing, or planning to close the place of business where the individual was employed?
• Is there a reduction, or do you anticipate a reduction in the work the employee or employees carry out?

If the answer to any of these questions is ‘yes’ then it is likely you are facing a redundancy situation. To make sure that you are upholding the UK’s employment law, we advise you to seek legal advice before beginning the redundancy process.

Redundancy consultations - what is the scale of redundancies?

Keep in mind the number of redundancies you are looking to make, as this will dictate the procedure you need to follow. 

If making small scale or one employee redundant, there is not a specified time limit for the consultation period. However, it would be best if you allowed enough time to allow for ‘meaningful’ consultation. 

If making collective redundancies of between 20-99 people in 90 days, the consultation period must start at least 30 days before the first dismissal. If the business is looking to make more than 100 employees redundant, 45 days is the minimum consultation period.

Things to keep in mind:

• You must not make any dismissals before the end of the specified periods. Failure to adhere to this could result in a protective award claim.
• You are required to notify the Redundancy Payments Service (RPS) before you begin the consultations. Failure to disclose can lead to an unlimited fine.

The consultation process

The consultation process is the time that is allocated for you to meet with your team and employees before redundancies are formally agreed.

If you are dismissing fewer than 20 people, you are not legally obliged to carry out the consultation process, but it is best practice to do so. Failure to carry out the process fairly and thoroughly could mean you are risking a potential employment tribunal later. 

In any consultation, you will need to do the following:

• Inform staff of the reasons they are facing redundancy and if there are any other options.
• Allow employees to communicate their views. Redundancies can be a highly emotional time, and you must show support and sensitivity.
• Consult with each employee that is facing redundancy individually.

You are also required to provide written communication to each employee at risk of redundancy. This letter will need to explain:

• The reasons for redundancies
• The number of people at risk of redundancy
• The departments and areas of the business that are affected
• How the redundancies have been selected
• How the process will be carried out
• How redundancy payments will be calculated

Once the consultation process has taken place, employers are required to provide notice of redundancy. This depends on how long an employee has worked for the company; the minimum notice periods are as follows:

• An employee with between one month and two years’ service = one weeks’ notice
• An employee with two years and 12 years’ service = one weeks’ notice for every year of service
• Employees with more than 12 years’ service = 12 weeks notice.

Are there other options?

Compulsory redundancy should be the last resort, and all other options should be exhausted before beginning the process. 

Alterative options to redundancy include:

• Voluntary redundancy
• Early retirement
• Agree to flexible working hours
• Temporarily reduced working hours
• Moving employees into other departments
• Let go of temporary employees or contractors
• A hold on the recruitment of new staff
• Limited or a stop to overtime

Redundancy pay

A member of staff that has been employed for two years or more is entitled to statutory redundancy pay. 

Age and length of employment dictate the amount payable, but if staff were made redundant on or after 6 April 2020, the amount is capped at £538 per week for 20 years of service. 

The maximum amount of statutory redundancy pay an employee can receive is £16,140. If redundancies were made before 6 April 2020, these amounts will be lower. Also, if you offer employees a right to enhanced redundancy payments in their contractual rights, this figure may differ.

How we can help

Redundancies can be a complicated process to navigate, regardless of how you may have to navigate. 

As well as making sure that you notify the employee properly, you must give notice to multiple other parties, set up an appeal process, carry out consultations, and arrange payments where applicable. Getting any aspect of this process wrong can result in potential challenges later down the line. 

To support you in getting this highly complex process right, our employment solicitors can work with you to make sure you are carrying out the process within the frame of the law.