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The Sentient guide to making redundancies

It’s an unfortunate fact of working life that we all have to sometimes take actions we would rather not. But as the world, and businesses, change, sometimes this is unavoidable.

10/12/2021

It’s an unfortunate fact of working life that we all have to sometimes take actions we would rather not. But as the world, and businesses, change, sometimes this is unavoidable.

It’s an unfortunate fact of working life that we all have to sometimes take actions we would rather not. But as the world, and businesses, change, sometimes this is unavoidable. One of the most upsetting things that any business owner has to do comes when redundancies may need to be made. There’s no easy way of doing this and it will undoubtedly have a major effect on the employee, or employees, concerned. But by following the correct procedure at least you can ensure that it’s being done in a fair and legal way.

Fortunately, it’s not something that many businesses have to do very often. So, when the time does come, it can help to get professional advice on making redundancies from HR consultants like Sentient.

Before you ever find yourself needing to do this, however, this guide aims to give you some key background information.

What is redundancy?

The first question to answer is exactly how redundancy is defined.

The answer is that it will apply when a particular role ceases to exist. Among the most common reasons for this are:

  • The business is closing down.
  • The role carried out by each affected employee is no longer needed
  • There’s a need to cut the running costs of a business
  • The business is moving to another part of the country, or even abroad.

Getting to grips with the redundancy process

Employment Law lays out a defined process that must be followed for redundancy to be carried out legally. This covers how the people to be made redundant are chosen as well as the amount of pay and length of notice period you must give them.

Choosing who will be made redundant

Once you have established that it’s a genuine redundancy situation it’s essential that the selection process is fair and objective.

When a single person’s role is being made redundant or a business is ceasing trading no selection process is needed. But when there are a number of roles that are set to disappear then one of these methods is generally used.

  • Last in, first out – this is when the shortest-serving employees are selected first.
  • Disciplinary record - employees who may have received warnings in the past are chosen.
  • Staff appraisals - these take into account performance, skills, qualifications and relevant experience

There are many factors that can’t be used in the selection process. These include:

  • Gender
  • Marital status
  • Sexual orientation
  • Race
  • Disability
  • Religion
  • Age
  • Membership or non-membership of a trade union
  • Being pregnant or on maternity or paternity leave

Other responsibilities as an employer

As well as having to make the selection process transparent all employers also have a number of responsibilities that they need to follow.

Consultation

Anyone who is at risk of being made redundant has the automatic right to a consultation. Usually run by an HR department or external provider like Sentient, this gives each affected employee the chance to ask why the redundancy is taking place, what selection process is being used and whether redundancy is the only option...

If 20 or more redundancies are being planned then a collective consultation is obligatory. In this case, employees are represented by a union rep or an employee chosen for the role.

There are minimum time periods for a collective consultation. For 20 to 99 redundancies, it’s 30 days before they are due. For 100 or more employees it must be 45 days.

The offer of alternative employment

You must also be able to show that there has been a real attempt to find "suitable alternative employment" within the business. 

This should:

  • Be similar to the current role.
  • Suit the employee’s skills.
  • Offer similar pay, status, hours and location.

If any other role fits these criteria, then an employer is obliged to offer them that job. If it is refused without good grounds, the employee may lose their right to statutory redundancy pay.

If accepted, there is usually a four week trial period, plus more time for any additional training. If the employee discovers that the job is not right for them, they can give notice and still receive any statutory redundancy pay.

Statutory redundancy pay

This is only payable to employees who have been with a business for at least two years before the date of their redundancy. Individual agreements can be made to pay more, but these are the amounts that are due by law.

  • Half a week’s pay for each full year an employee was under 22 while working for the business.
  • One week’s pay for each full year they were 22 or older, but under 41
  • One and half week’s pay for each full year they were 41 or older

There is a maximum of 20 years’ service and weekly pay is calculated as the average amount earned over the 12 weeks leading up to redundancy, with a cap of £544 per week. This means that the most statutory redundancy pay anyone can receive is £16,320.

Notice periods

It is also the law that a notice period must be given between being informed of possible redundancy and it actually happening. Everyone has the right to the relevant notice period based on their years of service.

  • One week for employees who have been employed for between one month and two years.
  • One week for each year of employment between two and twelve years.
  • A capped level of 12 weeks’ notice for any periods longer than this.

You can offer payment "in lieu of notice". This is often what an HR advisor will recommend as it resolves the situation immediately.

Giving time off to seek new employment

For employees who have worked for at least two years, employers have to give a reasonable amount of paid time off to look for another job or receive training. There’s a maximum limit of 40% of a week’s pay for the time spent doing this - even if more than 40% of the working week is taken.

The risk of unfair dismissal

It’s important to follow all the procedures outlined here. Failing to do this can possibly lead to employees being able to claim unfair dismissal.

Sometimes, employees can feel they have been singled out for redundancy based on subjective grounds or victimization. If there seem to be grounds for a claim, it is up to an employment tribunal to examine the facts in line with employment law as it stands and to decide whether or not the redundancy has been fair.

Generally, tribunals will only consider cases in which the claimant has been continuously employed for two or more years, but there are exceptions. These include instances in which redundancies are possibly "automatically unfair" such as when the employee is pregnant or has been a whistleblower of any kind.

When claims do occur, they can be lengthy and costly to defend, as well as resulting in considerable reputational damage.

So, while most responsible employers will automatically follow the proper process and make a difficult time as stress-free as possible for employees anyway, this is a very compelling reason for getting it right.

At Sentient, we are able to offer expert HR and employment law advice if you do ever find yourself in the difficult situation of having to reduce your workforce - something that both you and affected employees may find very useful at a difficult time.

Just contact us to find out more.

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