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What do I need to know to carry out a redundancy?

Although it is a situation all businesses want to avoid, there may be occasions where you need to make changes to your workforce.  This will usually be for one of the...

Although it is a situation all businesses want to avoid, there may be occasions where you need to make changes to your workforce.  This will usually be for one of the following reasons – cost savings, a decrease in workload or need for employees in a role, or the closure or relocation of the business.

Many things can drive the need to make changes including changes in workload, or new systems or technologies.  Recently the COVID-19 situation has led to the possibility of redundancies across many sectors; current estimations predict as many as half of employers are still anticipating redundancies when the furlough scheme ends.

Redundancies should always be a last resort, and there may be other ways in which the situation can be addressed, including amending duties and responsibilities, or staff changing their hours to address the requirements.

Where it is necessary to start a redundancy process, you first need to identify how many people are likely to be affected.  This determines whether the redundancies will be termed as “individual” or “collective”.  Although largely similar, there are some differences in your responsibilities for either process.

  • Individual – this is where less than 20 employees are dismissed in one establishment, within a period of 90 days or less
  • Collective – this is where more than 20 employees are dismissed in one establishment, within a period of 90 days or less. In this case you need to complete an HR1 form prior to starting your process

The periods of time you need to consult are different depending on whether the redundancy is collective or individual.

In order to receive redundancy pay, employees need to have at least 2 years’ service. The amount of redundancy pay is based on a calculation which considers the employees pay and age.  Weekly redundancy pay is capped, the current level is £538.  This figure is updated every April.  It is important to remember that any contractual element of the pay is taxable (including holiday, notice etc).  The actual redundancy payment is tax free up to a limit of £30,000.

The Process

When you commence a redundancy process, it is essential that you document the reasons and ensure your actions are fair and transparent.  Once the roles that are affected have been identified, you need to consult and undertake a process of consultation and communication.

In some occasions you will need to complete a decision matrix in order to score employees against set criteria and decide who is made redundant. If you are applying a selection matrix, examples of the things you might want to include are performance, disciplinary records, skills, qualifications and experience.

As with other statutory processes, employees have the right to be accompanied at formal meetings, and they have the right of appeal.  Your decisions and actions must be confirmed in writing, and there are certain things which you must include in your letters.

There are some staff who have protected rights during redundancy processes, including those on maternity or other types of family leave.  It is always best to seek advice and make sure you follow correct process regarding any such staff.

 The Risks

Failure to follow a fair process can result in any redundancies you make being deemed unfair.  In order to avoid claims of discrimination you must ensure that decisions are not based on individuals protected characteristics.

Making your Selection

Compulsory redundancy is where employees are chosen for redundancy based on a fair selection process.  In some cases, you may have individuals who take voluntary redundancy.  This is where employees are informed of the need for redundancies and apply to take redundancy.  The fact they have applied does not guarantee they will be selected, but you do need to consider their request.

Support throughout the Process

It is really important to remember that redundancies can be a difficult time for employees. Staff may be feeling anxious about the future, worried about how they will find another job or fearful of other implications including paying their bills, affect on family etc.   Managers might find the process difficult, and need support delivering the messages and chairing meetings.

The best advice throughout the process is to remain empathetic and sympathetic; the more open and transparent your communication can be, the easier the process for all parties.   You may want to provide training or support for managers and encourage them to discuss any difficulties or challenges they face.  If you are dealing with the process yourself, make sure you have a support network available.

If you need expert advice on managing a redundancy situation please contact us at info@hrelite.co.uk or call 01206 700690.  For our detailed guide on Managing Small Scale Redundancies click here.  We can take the stress of managing these situations away from you whilst we all move through these challenging and difficult times.