17th July 2017
Redundancy is a form of dismissal for an employee. It happens when an employer needs to remove some job roles from the business. It is a difficult time for both employer and employee with strict redundancy law that needs to be followed.
There are two types of redundancy – compulsory, where an employee’s role is terminated by the employer; and voluntary, where an employee offers to end their employment once a period of redundancy has been announced. An employer does not have to accept an offer of voluntary redundancy if they wish to retain the employee.
When might you need to make jobs redundant?
There are a number of reasons why an employer may need to make jobs redundant. It may be that you’re changing the services you offer, or you’re changing how a job is carried out – perhaps with new technology – and a person is no longer required in a certain role. Unfortunately, in some circumstances it is down to business performance, and the need to downscale the workforce.
How can you avoid redundancy?
It’s best to avoid making compulsory redundancies where possible. Not only might your situation change again, but the negative impact on employee morale can be huge. Before getting to the point of redundancies, you should be ending any freelance contracts for similar roles, making sure no one is working overtime, and placing a ban on recruitment for as long as is needed.
Sometimes though, redundancies are inevitable. In these circumstances, you should ask your workforce if anyone is interested in voluntary redundancy, before putting the wheels in motion for making compulsory redundancies.
What are an employee’s rights during redundancy?
Employees have a number of rights during redundancy, although if they’ve been at a company for less than two years these may not apply.
They are entitled to a fair selection criteria. There’s no set rules on what is a fair selection criteria, although there are rules on what isn’t fair.
An employee can’t be chosen for compulsory redundancy because they are pregnant or on maternity/paternity leave; if they are taking lawful strike action; or on any grounds related to gender, race, age, religion or sexual orientation. These are just some examples of the exclusions for selection criteria, a more extensive list can be found here.
An employee is entitled to a one-on-one consultation as part of the redundancy procedure. This is a meeting where they’ll be told why they are being made redundant, and any alternatives to being made redundant. These could include the option of moving into another role in the company, which they should be offered if a suitable role exists. They cannot be made to interview for this, they must be offered the job.
If the employee is made redundant, they must be offered a notice period. This is one week for any employee who’s been with the business for between one month and two years. For employees between 2 and 12 years at a company, they’re entitled to a week’s notice for every year of employment. This is capped at 12 weeks for any employees who’ve been with the company longer than this.
The only exception to redundancy notice is when an employer makes an offer of payment in lieu of notice. This is when an employee leaves the business but is paid for their full notice, including any contractual benefits they would be entitled to during that time.
The laws on statutory redundancy pay
If you’re an employee who has been working at a business for more than 2 years, and you’re made redundant, you’re entitled to statutory redundancy pay. This is calculated based on your length of service, your age and your normal weekly wage.
You’ll get half a week’s pay for every year you completed in the business while under the age of 22, a full week’s pay for every year you were 22 or older, up to 41, and one-and-a-half week’s pay for ever year you were over 41. The weekly pay is capped at £489, with the total redundancy pay capped at £14,670. This isn’t taxable, so you’ll receive the full amount you are paid.
There are exceptions to this. Certain roles, including the forces and selected dock workers or share fisherman are exempt from redundancy pay rules. Apprentices who are still in training are also not entitled to redundancy pay. Nor are you entitled to pay if you’re offered an alternative role in the company which you refuse. If you offer voluntary redundancy but the company wishes to keep you on, then again you aren’t entitled to redundancy pay.
Breaking the news of redundancy
For an employee, the news of redundancy can sometimes be devastating. Often people get comfortable in their jobs, particularly if they’ve been in a position for a long time, and when they suddenly have to start worrying about being out of work, it can be scary and very upsetting.
It’s therefore appropriate for an employer to consider how to break the news of redundancy, to be as clear and honest as possible. If you try to be too soft, and break the news too gently, then you risk it being misinterpreted, but you should be considerate too.
Stick to the facts, and be concise – don’t spend too long trying to explain the decision. Don’t raise false hopes, but be supportive – make sure you’re available to answer any questions employees may have.
The most important thing is announcing the news correctly. Tell the whole business at once, if possible, and if there are any members of staff affected who are on leave or out of the office for any reason then you should make efforts to contact them. Even if they’re on holiday, they need to know – finding out from a colleague would be much worse.
A few final things for employers
It’s important to be considerate of your employee’s feelings during redundancy. Expect productivity to drop slightly while the process is ongoing – many people will start jobhunting or seeking emotional support from colleagues and friends. However, as an employer you should professional and make sure you follow redundancy law to avoid legal situations and appeals which could go to tribunal. Finally, make sure you signpost employees to further support networks, whether it’s your internal HR department or independent advisory organisations who can help.