- A redundancy situation can exist where business, or part of it, is shut down completely, shut down at a specific location (even if moving to a new location) or the requirement for employees to do work of a particular kind has reduced or come to an end.
- There are numerous legal claims employees might bring in relation to redundancy, which is why it is important to plan all redundancy exercises carefully.
- There is a duty to consider if there are alternative measures to redundancies that could be implemented.
- If you propose to dismiss between 20 and 99 employees within 90 days or less, the obligation to notify the Redundancy Payments Service on Form HR1 is triggered. Whether this has to be done 30 days or 45 days before dismissals take effect will depend on how many employees are involved.
- Employers are required by legislation to inform and consult with 'appropriate representatives' of any employees who may be affected, where it is proposed to dismiss at least 20 employees at any 'one establishment' within a period of 90 days or less.
- Where fewer than 20 redundancies are proposed, you are not required by statute to consult collectively, but it is worth considering doing this to assist in showing a fair procedure has been followed for the purposes of the unfair dismissal regime.
- 'Appropriate representatives' are either recognised trade union representatives (where a union is recognised) or representatives elected by the potentially affected employees in an election.
- There are minimum periods for collective consultation. When it is proposed to make between 20 and 99 redundancies consultation must begin at least 30 days before notice of dismissal is given. Where 100 or more employees are affected this is increased to 45 days.
- The consultation clock doesn't start ticking until certain information has been given to the appropriate representatives in writing.
- Consultation needs to take place when the plans are at a sufficiently formative stage that the employees can influence the process. It should include discussions about ways to avoid dismissals; ways to reduce the number of employees being dismissed; and ways to mitigate the consequences of dismissal on the affected employees.
- Avoid telling any employees they are 'safe' unless their category of employee is completely unaffected.
- You will need to define the method of selection, unit for selection and selection criteria you intend to use. You have considerable freedom to frame the redundancy process in the manner which works for you provided that it falls within the 'range of reasonable responses of an employer'' and you can justify why you have chosen a particular methodology.
- Individual consultation should take place in all cases.
- Avoid issuing notice of dismissal before both the collective and individual consultation periods have closed. All redundant employees will need to be given appropriate contractual or statutory notice to bring their contract of employment to an end.
- Throughout the redundancy process, and during any period employees at risk of redundancy are working out their notice, an employer has a duty to consider alternative employment opportunities for them.
- Once notice has been issued, the employee has the right to reasonable paid time off to look for work or undertake training.
- All selected employees have the right of appeal against selection.
- Any employee with two years' service at the date of termination of their employment by reason of redundancy will be entitled to a statutory redundancy payment. This is calculated with reference to their length of service, age and weekly pay, in line with a statutory formula.
- Employers often make payments in excess of the statutory redundancy pay scheme. These enhanced schemes may be contractual or become contractual as a matter of custom and practice.
- Redundancy payments are tax free up to £30,000.
- Draft regulations capping public sector exit payments at £95,000 were published in November 2015 but have not yet come into force.
Following a consultation, the government has confirmed that redundancy protection for new parents will be extended. Currently, those on maternity leave who are at risk of redundancy must be offered suitable alternative roles in advance of others. This protection ends once the employee returns to work.
Furture changes will mean that this protection starts from the date the employee informs her employers that she is pregnant, whether verbally or in writing, and will last for a further six month period once the employee returns to work.
The extended protection will also be available to those on adoption leave and shared parental leave, although further guidance will be released on how this works due to the differences in the shared parental leave scheme.
The date these changes take effect has not yet been confirmed. More information can be found in our news article.
In a recent case, Newcastle NHS Trust v Haywood, the Supreme Court ruled that where there is no express contractual provision outlining when written notice becomes effective, there is an implied contractual term which states written notice runs from the date it is received and read by the employee, or the date there has been a reasonable opportunity to read this.
To ensure certainty in the date written notice of redundancy takes effect, employers may consider amending contracts of employment, giving notice verbally and confirming this in writing, or hand delivering written letters of dismissal.
Many organisations may need to implement a temporary redundancy, or lay-off situation, as a result of the coronavirus outbreak. They should remember that eligible employees who are laid off for a period of four continuous weeks, or six weeks in total in a 13-week period, will be entitled to claim statutory redundancy pay.
On Friday 20 March, the government announced its plans for financial assistance to help organisations retain employees for an extended period of time, despite offering no work, and avoid lay-offs. Organisations are able to obtain a grant from the Government to cover 80 per cent of furloughed employees’ wages, to a maximum of £2,500 per employee per month.
It is called the Job Retention Scheme and more information can be found in our FAQs.
8 July 2020 update
On 8 July, Chancellor Rishi Sunak announced a Job Retention bonus available to employers who retain furloughed staff until January 2021. This is to prevent redundancies as the furlough scheme is wound down towards the end of October. Staff must be brought back to do 'proper work' and earn at least £520 per month.
- You shut down a business or part of it completely
- You shut down at a specific location (even if you are moving to a new location); or
- Your requirement for employees to do work of a particular kind has reduced or come to an end.
- a 'protective award' where the employer has failed to consult collectively with employee representatives: this award starts at 13 weeks pay (actual pay not the statutory capped sum of a week's pay) per affected employee and a Tribunal will only reduce that figure where it believes there is a good reason to do so. Such claims can be brought by the employee representatives until three months after the last dismissal.
- unfair dismissal: any employee with two year's service can bring a claim. Those with less the appropriate length of continuous service can bring a claim where they believe the reason for their selection for redundancy was unlawful (perhaps on the grounds of discrimination or because they were pregnant or on maternity leave or because they acted as an employee representative). Claims can result in a basic award which is calculated in the same way as statutory redundancy pay and a compensatory award which is based on the employee's financial losses up to a maximum of £86,444 from 6 April 2019 (increasing to £88,519 from 6 April 2020).
- discrimination on the grounds of sex, sexual orientation, race, ethnic origin or nationality, religion or belief, age, disability or on the grounds of being a part-time worker or employee on a fixed-term contract: In the redundancy context, it is unlawful to select candidates for redundancy on these grounds or to treat them differently on these grounds. In particular, care needs to be taken to ensure that any selection criterion used do not have the effect of treating a particular group less favourably.
- an injunction to prevent you from breaching a collective agreement: trade unions are most likely to bring such a claim, arguing that there is a binding agreement dictating how a redundancy situation should be dealt with that you should honour. Such an action would be brought through the courts.
- statutory redundancy pay: Employees with two years' service are entitled to a redundancy payment based on their age, length of service and their weekly pay (up to a maximum of £525 from 6 April 2019, increasing to £538 from 6 April 2020). Such claims can be made for 6 months following the dismissal. The maximum payment is currently £15,750 from 6 April 2019, increasing to £16,140 from 6 April 2020 (for historic rates, please see our ‘Statutory rates’ page).
- contractual redundancy pay: If you have promised to pay an enhanced payment to employees, this contractual entitlement can become binding as a matter of custom and practice.
- careful initial planning and preparation
- considering if there are alternatives to redundancies
- notification to the Department of Business Innovation and Skills on form HR1 if there are to be more than 19 employees affected
- collective consultation will be required in all cases where more than 19 employees are affected, but should be considered even in smaller exercises
- statutory duties to consult and inform appropriate representatives of affected employees
- the method and unit to be used for selection along with the selection process
- individual consultation will be required in all cases
- ending the contract of employment through the proper use of notice or payment in lieu of notice
- the payments that will be due to any employees who are made redundant
- offering a right of appeal to anyone who is selected for redundancy.
The planning stage in a redundancy exercise is crucial. You should consider all the issues dealt with in this topic and give particular consideration to:
- defining why redundancies are necessary
- preparing a timetable for the steps that will need to be taken, when they will be taken and by whom
- preparing in advance the draft documentation you will need at each of these stages and ensuring at all times that such documentation is securely stored and kept confidential
- checking in advance all affected employees' contracts of employment and other details, for example as regards length of service, notice periods, whether you have the right to make a payment in lieu of notice, the employee's age and their salary and benefits packages
- explaining to managers the legal timescales involved. For example a large scale (more than 100) exercise will involve a 45-day consultation period and a notice period of up to 12 weeks depending on the terms of the contracts of employment, plus time needed for elections of staff representatives. The process can take around 5 months in total and even a single redundancy involving just one post will take a few weeks to handle fairly
- lining up your team, for example payroll, lawyers, accountants, outplacement consultants, job centre and so on (you may have to wait until after the initial announcement is made for reasons of confidentiality)
- whether you have got employee representatives in place to consult with in the case of collective consultation or you need to build in an election process
- managing the human element. Redundancies invoke many emotions and you must be prepared that even the most skilled can find it hard to make the announcement or sound genuinely concerned when what they have been told to say is scripted. They will go 'off script' and you will have to be prepared to clarify things. A 'frequently asked questions' document for managers may help to keep them 'on message'
- the strategies to be put in place for those who are left who will need clear leadership and direction; and who at a senior level you will keep free for the appeal stage so there can be no allegation of prior involvement.
- introducing a freeze on recruitment
- reducing overtime
- reducing the use of temporary workers
- re-training employees into other areas (redeployment)
- reducing sub-contracting
- temporary lay-offs or short-working (more information can be found on our employment law pages)
- changing terms and conditions such as a wage freeze, wage cut, reduction in bonus or pension contributions.
It is the representatives of 'affected employees' who must be consulted. 'Affected employees' are not limited to those individuals whose jobs are directly affected. They could also be those who remain in the retained parts of the organisation who will be indirectly affected if the proposed redundancies occur. This may be because their duties will inevitably change or they will report to different people or work alongside different people. It is, therefore, crucial to look at a proposed redundancy situation in context and to look beyond the jobs which are to be lost. If a management position may be redundant, consultation with a whole team may be necessary in order to be fair to all concerned.
- where you are proposing to dismiss 100 or more employees within a period of 90 days or less, at least 45 days before issuing notice; and
- where between 20 and 99 redundancies are proposed, consultation must begin at least 30 days before issuing notice. However, these periods are a minimum. The statute states that 'consultation shall begin in good time'.
- The reason for the proposed redundancies
- The number and description of employees proposed for redundancy
- The total number of employees of any such description employed at the establishment(s) in question
- The proposed method of selecting the employees who may be dismissed
- The proposed method for carrying out the dismissal; and
- The proposed method of calculating any redundancy payments i.e. a statement that statutory payments will be made or that a contractual scheme will apply.
- The number of agency workers you have under your supervision and control, where they are working and the type of roles they are performing for you.
- ways to avoid dismissals
- ways to reduce the number of employees being dismissed; and
- ways to mitigate the consequences of dismissal on the affected employees.
If you do not have trade union representatives or other employee representatives in place, it is essential that staff have the opportunity to elect employee representatives to discuss proposals to make redundancies following these guidelines:
- all employees, at all levels, in the affected groups must be given the opportunity to stand for election
- all employees who indicate that they wish to be candidates in an election should be included on a ballot paper to be forwarded to all affected employees
- you can choose the total number of employee representatives to be elected but need to ensure that the interests of the employees can be properly voiced. At least one representative from each affected department or part of the organisation should be included but you may need to increase the number to ensure an adequate cross-section of staff are covered
- you can choose if the employee representatives will represent just their particular class of employee or all employees. You should choose a length of time for which the employee representatives will be 'in office'. This period needs to be long enough to cover the consultation period
- the election process must be by way of a secret ballot. For this reason, although ballot papers can be faxed or emailed to each individual, employees should place their ballot paper (and nothing else) either in a ballot box or in an envelope addressed to a particular person. Each individual ballot paper can be numbered, although no record should be taken as to which number was sent to which employee
- you need to take steps to ensure that those who are on holiday, off sick, or on other forms of leave can participate, stand for election and vote
- the counting of ballot papers must be accurate. It may be wise to arrange for one of the affected employees to join you to open and count the ballot papers to ensure a fair process is followed
- each employee is entitled to vote for as many candidates as there are spaces to be filled (or for as many spaces as are applicable to their part of the business). For example, if there will be five employee representatives the employee will either get five votes or alternatively, one vote for the representative of their department
- you should write to the employees to announce the outcome of the election.
- All employee representatives are entitled to be provided with such accommodation and facilities as are appropriate to ensure that proper consultation can take place. This might mean access to space for meetings or to photocopiers.
- All employee representatives are entitled to reasonable paid time off to perform their functions or canvass support. What is reasonable will depend on the size of organisation, the redundancy exercise, and the maintenance of security and safety. Clearly, at times the process can be time-consuming. There is no obligation to pay any additional sums for duties carried out outside working hours.
- Employee representatives are entitled not to be detrimentally treated or dismissed because they have acted as an employee representative. Such a dismissal is automatically unfair and does not require the normal two years' continuity of employment for a claim to be brought. Furthermore, the employee will receive an enhanced basic award if they are successful.
- You may like to consider training for employee representatives to encourage them to take an active and positive role in the information and consultation exercise.
- ensure that anyone absent on holiday, sick leave or forms of leave is equally informed about the announcement and has a full opportunity to participate in consultation
- ensure someone is present at all meetings to take notes including noting any manager who communicates something 'off message' so that the position can be easily retrieved; and
- prepare frequently asked questions for managers so that they are well briefed for questions they are likely to face.
- tell any employees they are 'safe' unless their category of employee is completely unaffected
- issue any notices or agree anyone can leave yet, or
- start putting the reorganisation into effect.
The next stage is to arrange an election of employee representatives to engage in consultation about proposed redundancies (if applicable).
- whether there are any alternatives to redundancies (see Alternative solutions)
- the proposed redundancy process
- whether volunteers for redundancy might be accepted
- the proposed method of selection
- defining the proposed units of selection
- proposed selection criterion
- alternative employment opportunities
- proposed redundancy payments
- ways to mitigate the consequences of dismissal on the affected employees.
It can be useful for an employer to reduce compulsory redundancies by accepting volunteers. This can have the advantage of allowing those who want to leave to do so, it can be more palatable to staff and can shorten the inevitable period of instability. However, you should:
- Avoid committing to accepting them as you risk losing those with skills you want to retain.
- Define how you will choose between them if you have more people come forward than required. This may need to be considered carefully as merely selecting the cheapest redundancies to make could be discriminatory in its effect.
- Avoid having a policy of not re-hiring anyone who takes voluntary redundancy (as this can also be indirectly discriminatory).
- consult about the criteria you propose to apply so the employees can influence the process
- check whether you have an existing collective agreement or contractual procedure governing selection criteria. You would only be able to deviate from such agreed procedure where it is justified (perhaps because the procedure uses criteria that would now be viewed as discriminatory)
- as far as possible, choose objective criteria which you can verify by reference to data such as appraisals or training records
- avoid, as far as possible, subjective criteria which could come down to personal opinion
- avoid directly or indirectly discriminatory criteria (such as age or the selection of part-timers or those on fixed-term contracts first). Selection of anyone taking leave for parental reasons, who is pregnant or has undertaken duties as a trade union or employee representative should also be avoided. You may need to adjust your scoring as regards absence levels or productivity for those with disabilities, those taking different forms of parental leave or those who have had time off for trade union or employee representation duties
- ensure that more than one person conducts the assessment, or the original markers scores are moderated by someone else, to remove suggestion of personal bias and to double check all calculations, and make sure your score sheet or redundancy matrix has guidance notes indicating what competencies are necessary for each particular score to be attained
- ensure any test you use for assessment purposes (for example to test speed and efficiency) is capable of adjustment for those with disabilities; and
- weight the skills or qualities you are grading in order of importance to you.
Regardless of the collective consultation you have been engaged in, you will need to consult with the individuals who are selected before any notice of dismissal is given. This is critical to avoid a finding of unfair dismissal. There are two stages to individual consultation.
- Reiterate the reasons for the redundancy
- Explain the process followed so far
- Explain why the individual has been selected according to the selection criteria and is at risk of redundancy (checking facts and assumptions made are correct and being prepared to adjust the scores according to representations made)
- Discuss alternative employment and whether the individual has ideas on how to avoid the redundancy
- Confirm likely timescales and whether they be asked to work out their notice or will be paid in lieu of working out their notice
- Explain any financial package on offer; and
- Explain any support, such as outplacement, that is on offer.
The following recommendations are made as regards alternative employment:
- Do not assume someone wouldn't be interested in alternatives that are available, even if they are lower paid, lower status roles
- Different departments must communicate with each other about vacancies
- All those who are potentially redundant should be allowed to put themselves forward for potential alternative employment before any external advertisement takes place
- If someone can do the majority of an alternative role they should be offered the position with appropriate support and training for the part of the role they have no experience in
- All offers of alternative employment should be made in writing, spelling out the financial prospects of the role.
- One and a half weeks' pay for each complete year of service after reaching the age of 41
- One week´s pay for each complete year of service between the ages of 22 and 40 inclusive; and
- Half a week´s pay for each complete year of service under the age of 22.
- whether a policy was drawn to the attention of staff
- whether it was followed without exception for a substantial period
- whether payments were automatically and consistently applied
- whether the employees had a reasonable expectation that an enhanced payment would be made
Draft regulations capping public sector exit payments at £95,000 were published in November 2015 but have not yet come into force.
The cap will apply to lump sums (including redundancy payments), the cost to the employer of funding early access to unreduced pensions, and other non-financial benefits such as additional paid leave. They won't apply to pay in lieu of holidays, bonuses, or payments following a Tupe transfer.
There are also separate proposals to to 'claw back' termination payments to public sector executives returning to the same area of work within 12 months. The measure is in the Small Business, Enterprise and Employment Act 2015 and the details are also in the draft exit payment regulations. The claw-back provisions were due to be in force by 1 April 2016, but have been delayed and there is no fixed date as yet for their implementation.
Anna-Denton Jones is a director and solicitor at Refreshing Law Ltd.
We have recently undergone a redundancy programme. We have been able to find suitable alternative employment for one of the employees to whom we had given notice of redundancy. However, she says that she does not want to do the job and would prefer to be made redundant. Her argument is that the job is working in a department where she has never worked, and where she does not want to work. Can she refuse?
We need to cut costs in our sales department. In this department we have administrators, sales representatives and account managers. Our plan is to reduce the staff of 18 to 10. The new department will be smaller, and all staff will need to do a bit of everything, rather than specialise. On that basis, can we just put everyone in a redundancy selection pool, keep those who score highest and retrain them if necessary?
It looks very likely that my organisation will become insolvent. Inevitably, this will mean that all of our employees will be made redundant. There are over 100 employees. Will we need to consult for the full 45 days? We probably cannot trade for that long.
We are currently managing a redundancy situation. We have identified a selection pool for one of the redundant positions. This is a pool of four marketing officers. One of the marketing officers is currently on maternity leave - she has now been away for 10 months. In our selection matrix we have a number of criteria that relate to performance in the job (as well as other criteria such as attendance). Our company policy has always been to focus on the last nine months when assessing performance. For the marketing officer that is on maternity leave can we focus on her last nine months at work?
We understand that we are required to collectively consult with employees if there are to be more than 20 redundancies in a 90-day period. We have two sites but each site has fewer than 20 redundancies. At one we are going to have 15 redundancies and at the other 10 redundancies. Is collective consultation required?
We are facing a downturn in work and need to reduce headcount. We have decided to start by asking for volunteers for redundancy, hoping to avoid any compulsory redundancies. We have decided to exclude part-time employees and those on career breaks from applying for voluntary redundancy. Is that acceptable?
We have recently completed a redundancy selection process. The trade union is arguing that we did not consult adequately because we did not provide them with all the information they required. Specifically, they are saying that we did not provide information about agency workers. We did not realise this information was a requirement, and so did not provide it when requested. The union says it is going to seek a protective award for all those affected by the redundancy. Will this be granted when we made a genuine error?
- reason for the proposed redundancies
- type and number of jobs that are proposed to be made redundant
- total number of employees at the workplace where the redundancies are to take place
- method used to calculate redundancy pay, if the employer plans to pay more than the statutory minimum
- number of agency workers working under the supervision and direction of the employer
- type of work the agency workers do and which partsof the organisation the agency workers are engaged in.
We have a well-established assessment centre that we use for the recruitment of sales representatives. We need to reduce the headcount of the sales force by 10 per cent. Can we use the recruitment assessment centre to select employees for redundancy?
Is it possible to have a redundancy selection pool of just one person? We are currently in the collective consultation process relating to a redundancy of 57 jobs. We have been identifying the jobs that are to be made redundant and one is the job of Maintenance Manager. We have smaller premises than we used to have, and there is not enough maintenance work for a full time person to do. Hence, we have decided to make this job redundant and just seek support from an appropriate tradesperson as and when it is required. Our Maintenance Manager is the only person in the maintenance department. No-one else is involved in maintenance at all. By deciding that the job is redundant have we also selected the person?
- If appropriate, it is acceptable to have a selection pool of one.
- Management are entitled to determine a selection pool.
- If the decision about the selection pool is a reasonable management decision, then it would be a rare situation when the Employment Tribunal could argue with it.
- Whether other groups of employees are doing similar work to the group from which the selections are being made
- Whether employee's jobs are interchangeable
- Whether the inclusion of the employee in the selection pool is consistent with his job role
- Whether the selection pool has been agreed with the trade union or employee representatives
We have an employee who works on a part-time basis. It has now been identified that the job requires more time, and hence it needs to be carried out on a full-time basis. The employee does not want to work longer hours. Can we make him redundant and then advertise the new role?
We have experienced a downturn in business. We are hopeful that this is not permanent, and hence we do not want to make employees that have valuable knowledge and experience redundant. So, we have decided that we will ask all employees to reduce their hours. We know that this is a variation of contract, and hence we know that we need to seek agreement. However, what we want to know is if employees can insist that they are made redundant instead of taking a reduction of hours?
We have recently announced a redundancy and five employees have indicated that they would like to volunteer for redundancy. We are prepared to accept them as volunteers, and hence we have asked them to write to us formally and resign from the organisation. However, one of the employees has said that he is not prepared to do that, because he is concerned that this would mean that he was not entitled to a redundancy payment. Should he resign?
I used to work for an organisation which started to struggle financially and most of the employees, including me, were made redundant. I received a letter explaining that I would be paid a statutory redundancy payment and notice pay of six weeks (I had worked for the organisation for six years), but before I received the money the company was dissolved. I then received a letter saying that I now had to claim the money from the state, and was sent a form to complete. I asked an ex-colleague of mine from our old HR department who was also made redundant at the same time, and they told me that I can only claim the statutory redundancy payment and not the notice pay. Why?!
- their statutory redundancy payment
- wages - up to a maximum of eight weeks
- holiday pay - up to a maximum of six weeks
- compensatory notice pay - one week after one calendar month's service rising to one week per year of service up to a maximum of 12 weeks (the statutory maximum for a week’s pay applies).
- Employers must give notice to the trade union as soon as a strategic decision is made that causes the local employer or subsidiary to consider mass redundancies.
- The duty to consult does not depend on whether the subsidiary has all the information that it must submit to unions under the requirements of the Directive. The employer can supply information as it becomes available.
- The subsidiary must complete the consultation before any terminations take place regardless of whether the terminations come as the result of a direct instruction from the parent company.