The Redundancy Process
What is the redundancy process?
Redundancy is a business procedure to lay off employees when the business is facing financial difficulties or restricting its business. Companies must be able to prove that it’s the job being made redundant rather than the employee. Employers mustn’t use redundancy as a method to fire an underperforming employee.
The redundancy process should identify which employees will be impacted by the redundancy exercise and follow the necessary steps to ensure a fair and reasonable decision is made.
Statistics from the Office for National Statistics (ONS) indicated that in 2020, there were 135,000 redundancies made in the UK between July and September 2020. This is the highest level of redundancies within the UK since 2009 following the housing crash. Businesses were forced to restructure following the pandemic leading to higher levels of redundancies.
We are currently within a cost-of-living crisis, which is impacting individuals and businesses and we may see an increase in redundancies between 2023 and 2024.
*IMPORTANT* businesses must complete the redundancy process by complying with the legal employment laws set in the UK. The process should be transparent, employees are entitled to appeal any decision made and employers should be consulting with employees/employee representatives.
Redundancy should be a last resort, all other options should be considered prior to beginning the redundancy process, for example, job sharing or reducing hours.
We highly recommend speaking with HR consultants prior to carrying out the redundancy process, ensuring the business is following legal requirements.
How our HR consultants help with the redundancy process
- Discuss the business case for redundancies and consider alternative options
- Consider roles impacted and the pool of employees
- Advise on initial consultation meetings with employees
- Help establish the selection criteria and scoring matrix
- Help prepare documentation in relation to the full redundancy process (i.e. announcement, invite to a consultation meeting, outcome letters etc)
- Attend, advise, and prepare documentation in relation to redundancy consultation meetings.
- Attend, advise, and prepare documentation in relation to the appeal process
The 6 stages of redundancy
Redundancy has specific stages to follow, we have provided a summary of these stages including a timeline for the process below.
Stage 1: Identify Areas and Rationale
Before you start any process, you need to ensure that you are in a situation that meets one of the definitions of redundancy i.e. you have a genuine redundancy situation.
Stage 2: Group Consultation Meeting
Meet with all employees that are in the affected department/job title and explain the situation FOR EXAMPLE as a result of a significant decrease in business demand due to the cost-of-living crisis and the forecasts that the recovery will take a long time, it is proposed that XXX out of XXX driver positions are at risk of redundancy.
Stage 3: Evaluation / Selection Process
If there are no (or insufficient numbers) volunteers or ideas/ suggestions to mitigate the need for the proposed redundancy, then you would complete an evaluation to pick the individuals who would be selected for the proposed redundancy. The key thing about the criteria is that it needs to be as objective as possible so that if any of the scores are queried, they can be easily justified.
Stage 4: Individual Consultation
Once the evaluation has been done, you should invite the selected employees to separate individual consultation meetings to discuss the situation – our team of HR consultants can draft these invite letters for you.
Stage 5: Decision
Following the individual consultation meeting depending on what is said i.e. any ideas put forward; if things remain unchanged then the redundancy can be confirmed in writing (our HR consultants can draft a confirmation letter for you) and the individual would have the right to appeal the decision.
Stage 6: Appeal (if applicable)
The appeal will be to someone who hasn’t been involved in the redundancy process to date. If any appeals are received, then appeal hearings will need to be held with the individuals, and a decision taken thereafter.
We highly recommend not to complete stages 1 to 5 prior within 2 weeks, as this is an important aspect to ensuring the process is seen to be fair, and reasonable and the consultation is meaningful.
Tribunal finds Airport employees were wrongfully made redundant
Menzies Aviation Ltd (MAL) failed to follow a fair selection process when making redundancies in 2020, leading to Mr. Dub and Mr. Mann being wrongfully made redundant. The Bury St Edmunds tribunal found the selection criteria used by MAL weren’t “objective and measurable” creating an unfair procedure. Their redundancy process failed to include a marking timetable and model answer.
MAL was making redundancies due to the slowdown in aviation following the pandemic and people unable to travel.
The tribunal stated both employees were long-standing loyal employees, and both have been successful in completing their roles.
A union representative Kevin Hall attended all 3 of the consultations with MAL and employees including the 30th June, 7th, and 10th July. During the second meeting, MAL presented its potential selection process;
- If the employee held a full airside pass
- Absence records
- Disciplinary record
MAL also included a final tiebreaker of the employee’s length of service. The union rep Mr. Hall highlighted his concerns regarding the skills criteria and pushed for more subjective selection criteria, further to this, Mr. Hall made it very clear managers mustn’t be involved during the selection process as of being potentially biased.
MAL stopped the collective consultation process as by the 24th August no agreement had been reached with the union. The pool of employees being made redundant was from terminal 2 (a total of 7 being made redundant), keeping terminal 3 allocators out of the selection process.
3 ramp allocators took voluntary redundancy, leaving 10 employees to be interviewed and scored against the selection criteria. These interviews took place between the 20th to 24th August, and those employees scoring the lowest would be made redundant.
Mr. Mann scored 48 and Mr. Dub scored 49, leaving them the second worst and worst-scoring employees against the criteria.
MAL wrote to Mr. Dub inviting him to a meeting on the 15th September, this letter was sent on the 9th September and Mr. Dub submitted a grievance claiming that Harrison’s evaluation was biased due to an interviewer and Mr. Dub having previous disagreements. Mr. Dub feels this interviewer held a grudge toward him, furthermore, MAL failed to have an HR manager/consultant in attendance.
The grievance meeting occurred on 2 October for Mr. Dub; however, the redundancy was confirmed on the 24th November. Mr. Dub appealed the decision, and the appeal hearing occurred on 18th December.
Whereas, Mr. Mann had some technical issues with a broken link on Microsoft teams ultimately putting him at a disadvantage alongside adding stress to an already stressful situation. MAL failed to factor in the disturbance when scoring Mr. Mann.
Tribunal found that it was highly likely Mr. Mann was not offered a postponement, or it had not been made clear to Mr. Mann as the interview continued over the phone, which had a “detrimental effect” on his performance.
Mr. Mann was notified on the 10th September he would be made redundant and had the right to appeal this outcome, 4 days later, Mr. Mann communicated to MAL his intent to appeal the decision. Mr. Mann had been placed in a pool with super allocators, which he had never formally trained to be highlighting the unfair process alongside not including terminal 3 employees.
Ultimately, MAL failed in multiple areas, including the interview process documentation deeming it untrustworthy, the selection criteria weren’t objective or measurable and the process lacking transparency and clarity.
Furthermore, the tribunal found the employees successful in their claim. However, their award was deducted by 100% due to Mr. Mann and Mr. Dub scoring significantly lower compared to other employees and dismissal would have occurred in any event.
The best practices for the redundancy process
Plan and prepare
Companies should plan and prepare prior to beginning the redundancy process, establishing the reasons behind needing to make redundancies and the potential impact on the workforce i.e. morale or job security of those not being made redundant. During the planning stages, employers should look for alternatives rather than jumping to redundancy right away.
Throughout the whole process, employers should have clear and transparent communication, keeping employees informed at all stages. This includes why the company is making redundancies and what the next steps are.
The selection process must be fair
Companies should develop selection criteria for redundancies, the criteria must be objective and not discriminate against employees on the grounds of a protected characteristic such as gender, disability, race, or any of the 9 protected characteristics Top of Form
Provide notice and statutory redundancy payments
Companies are required by law to provide statutory notice periods and redundancy payments to employees.
Offering support and guidance
Offering support and guidance to redundant employees can help them feel less stressed or uncertain; this can include helping them to find new employment or outplacement services.
Communicate with employee representatives
Are you making 20 or more employees redundant? You will need to consult with an employee representative.
Fair appeal process
If an employee feels their redundancy is unfair or wants to query the decision, they have the right to appeal. Employers must implement a fair and transparent appeal procedure.
Abide by legal obligations
Employment laws detail the legal obligations and guidelines for the redundancy process, such as notice periods, consulting with employees, fair selection process and statutory redundancy payments.
Document the full process
Keeping accurate recording of the full process is recommended, as this can be used as evidence if an employee feels the process was not fair and reasonable.
Seek HR/Legal Guidance
Seeking HR and legal advice is a critical step to ensuring the redundancy process is carried out correctly and fairly with employment laws front of mind.
The redundancy process when closing a business
Have you decided to close your business? The redundancy process is a critical aspect of navigating the business closure, including identifying which employees are impacted by the closure and giving each employee notice, and confirming if the employee is eligible for a statutory redundancy payment.
If a business is closing, there are still legal requirements that must be followed, to ensure the redundancy process is completed fairly for everyone involved. Employers should be aware, not following the correct procedure can lead to serious consequences for employers.
In quarter two of the 2022/23 financial year, 18,000 tribunal cases occurred throughout the UK. When compared to Q2 2021/22, there was a 19% decrease in claims. Furthermore, by the end of September 2022, 630 claims received rewards for unfair dismissal.
Highlighting the importance for employers to seek advice from HR consultants.
When does redundancy apply?
Redundancy applies when an employee’s job is no longer required for business needs, or if the employer needs to reduce their workforce. This can occur due to several reasons such as
- The business is closing down or ceasing operations, either entirely or at the specific location where the employee works.
- The business is restructuring or reorganising due to financial difficulties, changes in the nature of the industry, technological changes, or internal repositioning of the business’s focus.
- The business is moving its location, which can make the current jobs redundant if the employees cannot or are not offered a role at the new location.
- There is a diminished need for employees to do work of a particular kind.
Employees made redundant may be eligible for certain rights, including, a consultation with the employee, the option to move into a different job, or time off to find a new job and redundancy pay, and a notice period.
Can you make an employee on maternity leave redundant?
Following all aspects of UK employment law is critical when dealing with redundancies. it’s crucial to understand that redundancy, while a legitimate business process, can be a delicate subject, particularly when it involves an employee on maternity leave.
Under UK employment law, an employee on maternity leave can technically be made redundant. Employees on maternity leave do have greater protections than other employees and companies must be extremely careful when considering making an employee redundant whilst they are on maternity leave.
The redundancy must not be connected to the employee’s maternity leave or any issues related to it, as this would be considered discriminatory and may expose the employer to legal risk. Furthermore, employees on maternity leave who are at risk of redundancy have additional rights.
The employer must offer any suitable alternative position that exists to the employee on maternity leave before it’s offered to other employees. It is not required to follow the usual interview or application process for the alternative role. This right to be offered suitable alternative employment applies even if there are other employees who are more suitable for the role.
Proper and careful handling of such situations is essential to maintain trust and to ensure compliance with all legal obligations. We highly recommend speaking with HR consultants before making a decision on redundancy, especially if it involves an employee on maternity leave.
Check out our blog on supporting new mothers returning to work after maternity leave.
How redundancy pay is calculated
Redundancy pay is calculated based on the employee’s age, weekly pay, and length of service. Specifically:
- Employees who are under 22 years old receive half a week’s pay for each full year they have worked.
- Employees between the ages of 22 and 41 receive a full week’s pay for each full year they have worked.
- Employees who are 41 years old and above receive one and a half week’s pay for each full year they have worked.
The maximum service length to be taken into consideration is 20 years, and the weekly pay is capped at a statutory maximum amount. This amount can change annually, so checking the current rate with HR consultants is important. Do note that these calculations apply to statutory redundancy pay; companies may offer a more generous redundancy package, but they cannot offer less.
Redundancy pay under £30,000 is tax-free. Balancing these factors effectively can ensure a fair and equitable outcome in the event of a redundancy situation.
Considering making employees redundant?
We are here to help your business through redundancy processes, this isn’t an easy process, and we can assist you through each step.
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