Unfortunately, during these difficult economic times you may have to make a member of staff redundant. Read our essential guide below for the steps to ensure that any redundancies you make don’t fall foul of the law.
Redundancy exists when an employee’s dismissal is attributable mainly to the fact that:
- The employer has stopped, or intends to stop, carrying out the business that the employee is employed for or that the company intends to relocate;
- The need for the employee’s work has stopped or diminished, or is expected to (i.e. a reduction in the number of employees is required).
As an employer, you need to show that an employee’s redundancy is genuine. Therefore, you have to show that the employee’s job no longer exists. It’s also important to try to avoid redundancies before dismissing staff.
Step 1: Find alternative employment
Firstly, you must try and find alternative employment for the redundant employee within your organisation. If you offer your employee alternative employment, then it must be offered in writing and should be unconditional.
It must start within four weeks of the old job ending and the employee should be given a four-week trial period in which to try out the job.
If the employee doesn’t like it, then they don’t have to accept the job and will still be entitled to redundancy pay.
If the job is suitable but the employee refuses to take it, then they won’t be able to claim redundancy pay.
Step 2: Ask for voluntary redundancies
If you can’t offer alternative employment, then you can avoid compulsory redundancies by, for example:
- Asking staff to apply for voluntary redundancies;
- Asking staff to work flexibly;
- Short-time working or lay offs.
If you ask your employees to volunteer for redundancy, you have to have a fair process for redundancy and just because an employee has volunteered for redundancy, it doesn’t mean that they will be selected.
Step 3: Offer shorter hours
It’s possible to ask staff to do short-time working if their employment contract allows it. Short-time working is when staff have no paid hours for a number of days a week
Step 4: Lay off your employees
You could also lay off your staff, which means that you ask them to stay at home or take unpaid leave. It’s a way to avoid redundancies, but you need to agree it with your staff first.
Step 5: Select people fairly
If voluntary redundancy isn’t possible, then you should select people for compulsory redundancy and make sure that you follow a fair procedure. Fair reasons for making staff redundant are their:
- Skills, qualifications, aptitude;
- Standard of work/performance;
- Attendance record;
- Disciplinary record.
You can also select employees on the basis of length of service which is ‘last in, first out’. However, don’t make this the only reason for selection as you must be careful that this isn’t age discrimination.
If you use the reasons below as the reason for making someone redundant, then the redundancy will be unfair. The reasons that are unfair are:
- Family reasons, including parental leave or adoption leave or time off for dependants;
- Acting as a trade union representative;
- Being a part-time worker;
- Age, disability, gender reassignment, marriage, civil partnership, pregnancy and maternity, race, religion or belief, sex and sexual orientation.
Step 6: Consult your employees
It’s very important to consult your employees about redundancy. If you don’t, it will almost certainly be considered unfair. There are no set rules about the consultation process if you’re making less than 20 people redundant.
Step 7: Give notice
After you’ve consulted your staff about redundancies, you have to give those employees selected for redundancy the statutory amount of notice. The amount of notice depends on how long your staff have worked for you.
- 1 month to 2 years: At least a week’s notice
- 2 years to 12 years: A week’s notice for every year worked
- 12 or more years: 12 weeks’ notice
If you want your staff to leave earlier than the end of the statutory notice period, then you should pay them in lieu of notice.
Step 8: Look into redundancy pay
Your employees may be entitled to redundancy pay. To qualify the employee must have been working under an employment contract; have two years’ continuous service; have been dismissed, laid off or put on short-time working. You should give your employee a written statement of how their redundancy pay was worked out.
There is a formula to work out redundancy pay:
- 1.5 weeks’ pay for each year of employment after the employee’s 41st birthday;
- A week’s pay for each year of employment after their 22nd birthday;
- Half a week’s pay for each year of employment up to their 22nd birthday.
Length of service is capped at 20 years and a week’s pay is capped at £464. The maximum amount of statutory redundancy pay is £13,500.
If you do have to make some employees redundant, you can get practical help from JobCentre Plus and their Rapid Response Service.