How employers can make redundancies

Employers can make redundancies if changes occur in how their business operates or there is a reduction in the levels of business. But if this happens to your business and you need to make some of your staff redundant, then you must follow the correct redundancy procedures.

Redundancy is a potentially fair reason for dismissal, but it will only be fair if you, as an employer, have carried out a fair procedure in selecting your staff for redundancy. You must consult your staff about the redundancy, and there are two reasons why you must be making the dismissal.

Firstly, you're closing down the business (or intend to), or you're relocating the business. Secondly, the business's need for work for which the staff was taken on has, or is expected to, cease or diminish (and therefore a reduction in the number of employees is required).

The job must disappear before you can make an employee redundant - by law, employers cannot replace them.

Informing employees of redundancy

If you want to make 20 or more employees redundant within 90 days, you must consult the employees' trade union or other elected representatives and speak to the employees as individuals. If your staff doesn't have any representatives, they can elect new ones specifically for the consultation.

If you're making redundant less than 20 employees in number, then the statutory dismissal and disciplinary procedures apply, and you don't have to consult with representatives. But you must write to each individual outlining why you want to make them redundant and invite them to attend a meeting to discuss the issue. The employee has the right to appeal against any subsequent dismissal to make them redundant. If you fail to follow the procedure correctly, this will make any dismissal automatically unfair.

Regardless of the number of redundancies, you must still provide information to the employees stating the reasons for the redundancies, the numbers of staff involved, how you plan to select employees for redundancy and how you will work out redundancy payments.

Rights of employees being made redundant

Once you've told your staff that they may be at risk of redundancy, employees can take reasonable paid time off to look for a new job or to arrange training for a new job.

If there is the possibility that you can provide them with alternative employment, then you must offer it. Employees can claim for unfair dismissal if you don’t bother to take reasonable steps to look for other work in the company, or if you and the employee cannot agree on a "reasonable alternative". Whether other types of employment will be deemed suitable depends on lots of factors (e.g. pay, job status, location, working environment and hours of work). If you want to offer them a trial period in another job, they can take it without losing their right to redundancy payment.

Employees cannot be unfairly dismissed (except employees with less than one year's service, unless they are selected for redundancy on grounds which are regarded as automatically unfair).

An employee can claim unfair dismissal due to unfair selection, lack of consultation or notice, or the fact that you’ve failed to offer suitable alternative employment. Selection will be automatically deemed as unfair if you’ve given the main reason for dismissal as redundancy, but the circumstances apply equally to other employees who haven't been dismissed, and the employee you chose for dismissal was selected for an automatically unfair reason.

Also, if you select an employee for redundancy based on their poor performance or attendance, but you're not able to provide comparative information for everyone in the same area, this may be seen as unfair.

Expert guidance on the dismissal process and unfair dismissal can be found in our book, Employment Law Made Easy.

Redundancy pay

Employees qualify for redundancy pay if they've worked for you continuously for at least two years up to the date of dismissal. There are some people who don't qualify for redundancy payments, unless their contract contains special provisions (e.g. partners, self-employed workers and some directors).

Redundancy pay is based on the age of the employee, the amount of continuous service (up to a maximum of 20 years); and their weekly pay (weekly pay - up to a limit of currently £330). The current overall maximum redundancy payment is £9,900.

Employees are not entitled to redundancy pay if, before the existing job ends, you offer them (verbally or in writing) employment on the same terms or suitable alternative work, beginning within four weeks of the ending of the original employment. If they unreasonably refuse such an offer, or during a trial period for the new job they unreasonably terminate such employment ('unreasonably' in both these instances being judged subjectively as to what is reasonable in your particular circumstances), they lose the right to redundancy pay.

Further information

  • Get expert advice on making redundancies with Lawpack's Guide Employment Law Made Easy
  • Create a redundancy policy for your business with Lawpack's Redundancy Procedure template
  • Getting made redundant? Find out your employee rights with Lawpack's Redundancy - An Essential Legal Guide

Published on: December 7, 2009

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