In the wake of a number of well-known companies and charities announcing plans to cut jobs over the past few weeks, and the Guardian newspaper reporting that UK employers are preparing for the biggest redundancy round in a decade amid declining business confidence and tax increases coming into force in April 2025, it seems that redundancy is a topic that is firmly back in the spotlight for many employers.
It is crucial that any employer considering making redundancies takes time to plan the process carefully in advance, to ensure that it is fair and lawful, and to therefore avoid the potentially costly consequences of getting things wrong.
We set out below our top tips for organisations to bear in mind.
1. Make sure there is a genuine redundancy situation
The statutory definition of “redundancy” encompasses three types of potential redundancy situation.
The first, is where an employer ceases, or intends to cease, to carry on the business for the purposes of which the employee was employed by it (known as “business closure”).
The second, is where an employer ceases, or intends to cease, to carry on their business in the place where the employee was so employed (known as “workplace closure”).
The third, is where an employer has a reduced requirement for employees to carry out work of a particular kind or to do so at the place where the employee was employed to work (known as “reduction of workforce”).
To be genuine, a redundancy situation must fall into one of the three categories above.
Business closures and workplace closures are relatively rare; reduction of workforce redundancies are much more common, and can arise in a variety of ways.
2. Be aware of employee rights and protections
It is crucial that any redundancy process is considered carefully in advance, for a number of reasons.
Firstly, all employees with two or more years’ service, will be protected from unfair dismissal. This means that any redundancy dismissal will have to be both substantively and procedurally fair. A fair process will usually involve warning affected staff of redundancies, consulting with them before any decision is reached, having objective selection criteria / processes (if necessary), and considering suitable alternative employment (where available).
Secondly, all employees, irrespective of length of service, will be protected from discrimination. This means that any redundancy dismissal must not be discriminatory (i.e. because of or related to an individual’s “protected characteristic” of age, disability, gender reassignment, marriage or civil partnership, pregnancy and maternity, race, religion or belief, sex and sexual orientation). To avoid discrimination, any process should be objective and avoid any discriminatory factors. Staff who are on long-term sick leave, or family related leave, must be treated fairly.
Failure to carry out a fair process, or comply with any broader legal obligations, can have costly consequences.
For example, in cases where a dismissal is procedurally and/or substantively unfair, an employee can claim compensation (in addition to any statutory redundancy pay owed) of up to whichever is the lower of a year’s salary or the statutory cap (currently £115,115 until 5 April 2025, after which it will be increased in line with inflation, as it is each year).
Additional compensation can be claimed in the event that a dismissal is discriminatory (the current range for which is between £500 to £25,000). Discrimination will also lift the statutory cap on any compensatory award for unfair dismissal, if applicable.
3. Consider appropriate pools and selection criteria (if applicable)
If selection is necessary, consider the appropriate pool(s) of employees and the applicable selection criteria and/or processes.
Each pool of employees to be placed at risk of redundancy should include the specific roles at risk, plus any roles which are the same, substantially similar and/or interchangeable with those roles.
A pool of one may be appropriate, but this will depend on the circumstances. Typically, a role will be stand-alone if it is unique or can be genuinely differentiated from all others.
Defining a pool too narrowly can affect the fairness of the rest of the redundancy process, to care needs to be given to ensuring that the proposed pools are well defined. The focus should be on the roles being placed at risk, rather than individuals.
Selection criteria should be fair, reasonable and objectively verifiable. Selection processes may include scoring staff against selection matrices or requiring them to apply for new roles in a new structure; the question of which process will be more appropriate will depend on the type of redundancy situation and the particular circumstances in play.
4. Consult with staff, ensuring that consultation is genuine and the outcome is not predetermined
Consultation with staff who are affected by the proposed redundancies must be genuine, must be carried out at a formative stage before any formal decisions have been made, and must include consultation in relation to pools, selection criteria and avoiding, reducing and/or mitigating against any dismissals. Staff must be given sufficient information about the proposals to allow them to respond, and sufficient time in which to respond.
Remember to include absent employees (for example, those on long-term sick leave or family related leave) in the redundancy consultation process.
Where the collective consultation obligations have been triggered, there will be prescriptive statutory procedures to follow.
It is crucial that the outcome of the consultation process is not, and does not appear to be, predetermined. If it is, this will increase the risk of any subsequent dismissals being unfair. It is therefore important that staff feedback is taken into consideration and responded to before a final decision is made, and that the consultation process is clearly and carefully documented.
Also bear in mind that any documents created during the redundancy process – no matter how “unofficial” – will be disclosable in any subsequent Employment Tribunal proceedings.
5. Collective consultation will be required for larger redundancy exercises
Where 20 or more redundancies are proposed within a 90-day period, there are additional statutory requirements around collective consultation, staff representatives, issuing a statutory notice and informing the Secretary of State of the proposed redundancies.
Collective consultations can consequently be particularly challenging, and require careful planning and sequencing.
6. Consider voluntary redundancy
Consideration should be given to whether offering staff the opportunity to take voluntary redundancy may be appropriate in the circumstances.
If so, it should be made clear to staff that the right not to accept all applications is reserved; particularly where there is a risk that more applications will be received than there are roles at risk of redundancy. In the latter case, thought will also need to be given to what criteria will be used to decide which applications will be accepted.
7. Apply fair selection criteria
Selection criteria should be consulted about, with any feedback taken into consideration, before being finalised.
The criteria should be as fair, reasonable and objective as possible. This can include, by way of example, skills and qualifications, standards of performance, attendance records, disciplinary records, length of service, etc.
Each employee’s score for each criterion should be recorded. Where criteria may include a subjective element – like, for example, in relation to performance – it is important that they are assessed by at least two managers, to minimise any subjectivity as far as possible.
It is important that the application of criteria should not be discriminatory in any way – for example, staff should not be penalised for being on long-term sick leave or maternity leave.
8. Employees who are pregnant, on maternity leave or recently returned are entitled to be offered suitable alternative employment in preference to colleagues in some circumstances
Where an employee who is pregnant, on maternity leave or has recently returned from maternity leave is at risk of redundancy, they are afforded additional protection from redundancy. This protection effectively lasts from when an employee notifies their employer that they are pregnant up until 18 months after they give birth.
The additional protections afforded to employees who are pregnant, on maternity leave or recently returned, are that they are legally entitled (in some situations) to be offered any suitable alternative employment available in preference to their colleagues in the same role.
If an employer fails to comply with this requirement, the employee’s dismissal will be automatically unfair, and may also be discriminatory.
Similar provisions apply to employees on adoption leave and shared parental leave.
9. Consider suitable alternative employment and offer it where available
Throughout the redundancy process, but particularly towards the end, consideration must be given to whether there is any suitable alternative employment available within the organisation for staff who are at risk of redundancy. The duty to look for alternative employment continues after notice to terminate has been given, up until the termination date.
To be suitable, alternative employment will generally have to be in a similar type of role, at a similar level of pay and seniority. However, roles with lower pay and levels of seniority, or which might require some minor retraining, should nonetheless be discussed with those at risk of redundancy.
New roles can be subject to an initial trial period.
If an employee unreasonably refuses an offer of suitable alternative employment, they may lose their entitlement to a redundancy payment.
Employees have the right to take time off to seek alternative employment elsewhere if it is not available within the organisation.
10. If redundancies are to be made, ensure that meetings are held to confirm outcome and that notice is given in accordance with contracts
Where a decision has been made to make an employee redundant, they should be invited to a meeting to confirm this. They should be given the right to be accompanied by a trade union representative or work colleague.
If the employee has two or more years’ service, they will be entitled to a statutory redundancy payment. Any contractual redundancy policy should also be adhered to, if applicable. Where enhanced redundancy pay is being given, consideration should be given to requiring the employee to enter into a settlement agreement.
Employees being dismissed should ordinarily be given a right to appeal against that decision.
Any dismissal by reason of redundancy should be carried out in accordance with the termination and notice provisions in the employee’s contract of employment, to avoid any potential breach of contract.
The meeting should be followed up in writing, confirming the decision and setting out the terms of any redundancy pay, notice period, right of appeal, etc.
Redundancy processes often involve tricky or unusual circumstances, and can be daunting for even the most experienced of managers and HR practitioners. If your organisation needs any assistance with planning, checklists, procedural requirements and/or key documents, please don’t hesitate to get in touch.
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The material in this article is provided for guidance and general information only and is not intended to constitute legal or other professional advice upon which you should rely. In particular, the information should not be used as a substitute for a full and proper consultation with a suitably qualified professional. Please do contact the Bates Wells team if you require further information.