The redundancy process: eight steps employers need to take
Coodes Solicitors employment specialist Philip Sayers outlines the eight key steps employers need to take when going through a redundancy process.
The furlough scheme, which was launched through the Coronavirus Act 2020, achieved its goal of enabling employers to hold onto staff while dealing with an immediate loss of income as a result of the crisis. However, with the scheme being tapered down before coming to an end on 31 October and some businesses still suffering financial losses, sadly many are now forced to consider redundancies.
From 1 August employers will need to pay employer national insurance contributions together with employer pension contributions and from 1 September they will start to need to contribute towards salary costs.
Here at Coodes, we are receiving enquiries from many employers who need to go through the redundancy process for the first time. This will always be a difficult situation, but understanding the process and getting good advice from the outset will at least alleviate some of the stress.
These are the key steps employers must take.
1. Set out your business case for redundancies
It is essential to have a solid business reason for making anyone redundant. It is also important to know that an employee who has worked for you for more than two years has the right to make a claim for unfair dismissal if a fair process is not followed.
The key is to focus on the role, rather than the individual employee. Valid reasons for making a position redundant could be that the business needs to cut costs or that the role is no longer required as a result of changing processes or new technology.
Getting legal advice at this initial stage will give you the best chance of avoiding disputes and claims further down the line.
2. Decide which roles may need to be made redundant
Depending on the size of the business and the reasons for you starting the redundancy process, you may be looking to make just one or a number of positions redundant.
There are potential pitfalls if your business employs several people to perform the same, or a similar, role. In this situation, you would need to include everyone who has a similar role in the pool of people at risk of redundancy.
Employers sometimes get into a difficult position when they fail to acknowledge that people have roles in different areas of the business that could be considered similar. When you are considering a positon that is at risk of redundancy, ensure you look for any parallel roles in different teams.
3. Establish whether or not you need to follow a collective redundancy process
If you are making more than 20 employees redundant within a 90-day period, you will need to follow a collective redundancy process. This is a similar process, but with some additional requirements which your lawyer can advise you on. These include the need to notify the Secretary of State and for representatives, often from a trade union, to be involved. There are additional legal obligations for larger companies planning redundancies of more than 100 positions.
4. Consult with employees
An employer is legally required to start the internal consultation process as soon as possible, while the redundancies are still proposals rather than decisions taken. This is likely to initially involve a group meeting involving staff whose roles are at risk of redundancy. You will need to explain the issues facing the business and your initial thoughts and plans.
This meeting should give employees the opportunity to ask questions and feed into the process. It is important that you explain that no decisions have yet been made and this is the start of the redundancy consultation.
An employment lawyer can advise you on how you continue to communicate with your teams throughout the process.
5. Establish your selection criteria
Once you have established a pool of potential redundancies, you can then decide on which criteria you will use to produce the final list. This can involve reviewing individual staff members on objective criteria, such as performance, disciplinary record and skillset.
Under the Equality Act 2020, it is illegal to select staff for redundancy based on protected characteristics. Employers can easily find themselves at risk of indirect discrimination claims so it is vital to get specialist legal advice to ensure your selection criteria are appropriate.
6. Communicate with individual employees and offer alternatives
Once you have used your selection criteria to score individual staff members, you will need to carry out further consultation with those affected. This should involve a series of meetings with individual employees.
It is important to treat this as part of the consultancy process, by giving them the opportunity to suggest any alternatives that you may not have considered.
Those at risk of redundancy should be offered another position in the organisation, if at all possible. That means that the job should be one which they are qualified to carry out, even if it is more junior than their existing role. If the individual declines the opportunity to take a ‘suitable role’ then they may not be eligible for a statutory redundancy payment. It is important to get legal advice on what constitutes a ‘suitable role’, which is generally assessed from the employee’s perspective.
7. Complete the final consultation
In your final meeting with each affected employee, you will decide whether or not to issue them with a redundancy notice. However, it is important to give each member of staff the opportunity to ask any questions or raise any points before you make a final decision.
If you are going ahead with the redundancy, you will need to follow up the meeting with a letter confirming this and outlining their terms and right to appeal. Your employment lawyer can advise you on the correct wording to use.
8. Be prepared for appeals
If you have followed the correct legal advice you will have minimised the risk of a tribunal claim. However, a fair redundancy process generally includes the right for every employee to appeal the decision. In larger businesses, another member of the senior management team often steps in to hear the appeal. Of course this is often not possible in smaller, owner-managed businesses.
If, following the appeals process, the individual still feels the decision is unfair, they may decide to pursue a claim through an employment tribunal.
Following the redundancy process and getting specialist advice throughout will help ensure you fulfill all the legal requirements as an employer.
For a limited time only, we are offering employers a no commitment consultation with our employment expert Philip Sayers, including advice on redundancy and restructuring. Please email firstname.lastname@example.org or telephone 0800 328 3282 to book your no commitment appointment.