An employers guide to redundancy

Redundancy is when you dismiss an employee because you no longer need anyone to do that job, or you can make do with less people. This could be because new machines have been brought in, because your company is changing what it does, where it operates from or because the business is closing. Either way, that job is no longer needed and will no longer exist.

What are the first steps?

Redundancy should be a last resort. You should consider all other options before deciding on redundancy:

  • Could short time working be more appropriate?
  • Would any of your staff voluntarily reduce their hours?
  • Have you considered all other means of cutting costs?

Having a thorough understanding of the current business position means that the reasons behing the redundancy remain clear and focused; which role is no longer needed, rather than which person is no longer needed.

Orchestrating a redundancy situation to remove a poor performing or ‘troublesome’ employee is not a true redundancy and puts you at risk of a potentially costly unfair dismissal or even discrimination claim.

Select fairly

Skills, qualifications, disciplinary records and length of service can all be considered when you have a selection of employees whom you have identified as being at risk of redundancy. Avoid criteria which can nit be measured, such as: ‘commitment’, ‘team player’, ‘enthusiastic’, ‘flexible’- these can often open to accusations of bias.

Well-being audits and employee focus groups are a great way to discover what may be making people feel less than engaged with their jobs.

Consultation is required prior to making an employee redundant.

Consultation

You should make sure the employee/s know why redundancies are being considered. Give them an opportunity to make suggestions for avoiding redundancies and, if a selection criteria is being used, make sure they know what the criteria are and how they will be used. It is also an opportunity to ensure any alternative employment options are considered.

Alternative employment

There may be an alternative position available within the business that would be suitable for these employees and, if so, they should be offered it. Failing to do so could result in unfair dismissal.

Time to find a new job

Employee are allowed a reasonable amount of time off work to look for a new job, so long as they have been in continuous employment for two years by the time their notice period ends.

If you have been selected for redundancy then you must be given a notice period. The minimum amount of notice you are legally entitled to receive depends on your length of service.

Redundancy pay and notice

Statutory redundancy pay is the minimum redundancy pay entitlement required by law and is only payable to those who have worked for you for 2 years or more.

It is based on age and complete years’ service (capped at 20 years):

  • half a week’s pay* for each full year worked under age 22
  • one week’s pay* for each full year worked age 22 and over
  • one and half week’s pay* for each full year worked aged 41 and over

* The current rate of statutory redu

When calculating redundancy and notice pay, you must consider statutory notice. Notice pay will be due to an employee who is made redundant, how much they are owed will depend on their contract or their statutory notice entitlement: whichever is greater.

Legally an employee is entitled to one weeks pay for each complete year of service up to a maximum of 12 years.

Notice pay is not affected by age and is not capped- it is taxable.

It is vital that advice is sought prior to and throughout a redundancy process. We can give you advice at every stage to make sure you are fully aware of the correct process and proceedure.

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