What is redundancy?
Redundancy is a form of dismissal which happens when an employer needs to reduce the size of its workforce. In the UK, an employee is dismissed for redundancy if:
- The employer has ceased, or intends to cease, trading or
- The requirements for an employee to perform work of a specific type, or to conduct it at the location in which they are employed, has ceased or diminished, or is expected to do so.
If there’s a genuine redundancy, as an employer you must follow a correct procedure and make redundancy and notice period payments in line with the law and the employees’ contract of employment.
What is the right procedure for making redundancies?
Before you decide whether redundancy applies and whether it is the right approach you need to consider a number of factors:
- can you avoid making redundancies?
- can you make savings in other ways?
- can you achieve the desired outcome in other ways?
- what is the impact going to be on ‘survivors’?
- how is it going to impact staff morale and the business?
- are there any risks, if so, have you factored in the potential costs. These could be financial, delivery or reputational damage. How are you going to manage the risks?
- is there a genuine business reason or are you using redundancy as a way of avoiding a difficult performance or conduct issue? If so, can you consider having a without prejudice conversation with a view of settling and letting the employee go with some money and dignity.
Making the business case for redundancies
There needs to be a genuine business reason for proposing redundancies, if there isn’t, your business case will not be strong enough and you will potentially get lots of backlash from employees, employee representatives and/or unions (if the employee is a member). If you are trying to exit a difficult employee or employees and you have avoided difficult conversations and / or didn’t take the necessary action regarding their conduct / performance, you shouldn’t use the redundancy process to exit them.
If after going through these scenario’s you decide that redundancy is the right approach, the next step is to write a compelling and robust business case outlining the proposal for change. The business case needs to include information about:
- company background
- company financial position
- the staffing proposal
- organisational chart (current and post consultation)
- selection criteria
The business case is your tool to explain why redundancies are being proposed. Employees should be given as much supporting information as is available to help them understand why it is proposed to remove roles from the organisation.
The word ‘proposed’ is very important when it comes to redundancies. You should never use final language (e.g. your role ‘will’ be made redundant) until the consultation has concluded. Until that point the dismissal remains ‘proposed’ and the employee(s) are ‘at risk’ and the business must remain open to suggestions and counter-proposals.
We would advise that you include background information, why is the Company in this position, what steps have you taken to avoid redundancies such as cost savings by freezing recruitment, cutting other business/premises costs, pay cuts or freezes. If you can include some information about the financial position of the company as this will also strengthen your business case.
It is essential that your business case is clear and transparent. This is so that employees understand your rationale, it will also help you to defend yourself in a tribunal should an employee claim they were unfairly selected or dismissed unfairly.
Your business case should include the reasons you are having to consider making redundancies. It should also include employment details for the affected employees and how making these redundancies will impact the remaining workforce. Depending on the numbers you may also need to do an Equality Impact Assessment and notify the Secretary of State for Business, Energy & Industrial Strategy.
As with any termination, you need to ensure that the correct procedures and processes are followed, if you are ever in doubt, seek advice.
