Essential guide to the redundancy process

It goes without saying that redundancy can be a complex and sensitive issue. It’s a process that needs to be handled carefully and in line with legal requirements. Tina Homer, a Senior Business Partner at Moore Kingston Smith, regularly consults with businesses at various stages of their redundancy processes. Here, she explains the steps to follow to ensure that your organisation’s redundancy procedures are fair, transparent and legal.

What is redundancy?

For a redundancy to be fair, it must fall under the definition of redundancy in the Employment Rights Act 1996, Section 139.

Essentially, the Act states that a role can be made redundant if a company closes down in its entirety; the job disappears in its entirety; or fewer people are required to do the same job.

Generally, if a position is made redundant, you’re unable to recruit for the same position for a period of three to six months.

Stages of the redundancy process

The different stages of the redundancy process:

Planning

The planning stage is about identifying the need for redundancy and considering alternatives. To reduce the number of compulsory redundancies, you should consider any alternatives —including the possibility of other employment for those affected.

Where the overall reason for redundancies is to reduce labour costs, you should think about offering reducing working hours, voluntary redundancies or early retirement.

Consultation

The consultation stage is a vital opportunity to engage in meaningful conversation with impacted employees and their representatives. The consultation process should include:

• Informing employees about the proposed redundancies
• Considering alternative employment
• Considering any suggestions employees may have as alternatives to redundancy.

Where 20 or more redundancies are proposed within a 90-day period, further procedures are required: you’ll need to inform the Department for Business, Innovation and Skills (BIS) and enter into a process known as collective consultation.

Where there are less than 20 redundancies, there are no set rules to follow — but it’s a good idea to consult with each person individually in the interest of fairness. There is no defined period of consultation, but we recommend a minimum period of two weeks.

Selection

It’s essential to use fair and objective criteria to select employees for redundancy. You need to be prepared to demonstrate how the individuals were chosen for redundancy – in other words, what the selection criteria is.

The selection criteria should not be discriminatory based on age, gender, disability, or other protected characteristics. It must be as objective as possible — based on things like skills, experience, qualifications, time keeping and disciplinary record — and use factual data where possible. Bear in mind that subjective comments about flexibility, teamwork or general conduct may not be acceptable to an employment tribunal if they cannot be justified.

Where there are a number of people carrying out similar job functions or with the same job title, you’ll have to justify why you selected the employee who is made redundant using a scoring process. Generally, scoring should be carried out by appropriate personnel to remove any favouritism.

Notice

You must provide appropriate notice to affected employees. Statutory notice period is based on the length of service and can range from one week (for employees with one month to two years of service) to 12 weeks (for those with 12 years or more of service).

Support

Offer support such as outplacement services, counselling and help with finding a new job. Employees under notice of redundancy have the right to reasonable time off to look for a new job or arrange training.

Redundancy pay

Employees who are made redundant must receive the payments due to them under statute, along with any payment due under their employment contract. You can use the Government redundancy pay calculator for a precise calculation based on specific details.

There is a maximum limit for statutory redundancy pay in the UK. As of 6 April 2024, the weekly pay used to calculate redundancy pay is capped at £700, and the maximum statutory redundancy pay employees can receive is £21,000.

If an employee’s weekly pay exceeds £700, the statutory redundancy pay calculation will still use the capped amount of £700 per week. This means that even if the employee earns more than £700 per week, the redundancy pay will be calculated as if their weekly pay is £700.

This cap ensures that the maximum statutory redundancy pay does not exceed the legal limit. Your organisation might offer, or want to offer, enhanced redundancy packages that go beyond the statutory requirements.

Documentation

It’s important to keep detailed records of the process and decisions that are made. Ensure that documents like announcements, colleague assessment forms, meeting invite letters and individual consultation meeting notes are held onto and easy to access.

How Moore Kingston Smith can help

The Moore Kingston Smith HR Consultancy team is here to help guide you through the redundancy process. Some of our most popular services include providing information and advice on best practices, designing appropriate selection criteria and helping develop redundancy pay packages. Whatever your query about redundancy processes, drop us a message and one of the team will get back to you.