Redundancy
Any sort of change can be disruptive, none more so than the threat of redundancies. However, good communications between management and employees can often help an organisation get through the process with the minimum of pain.
The right to be collectively consulted applies when an employer proposes to make 20 or more employees redundant at one establishment over a period of 90 days or less. Employers should also consult individual employees. Case law has shown that dismissals have been found to be unfair where a union has been consulted but not the individual. In this case, the law defines redundancy as:
'dismissal for a reason not related to the individual concerned or for a number of reasons all of which are not so related.' This definition might include, for example, a situation where dismissals aren't related to the conduct or capability of the individuals.
Employees are entitled to redundancy payments if they are dismissed due to one of the following:
- the employer has ceased, or intends to cease, to carry on the business for the purposes of which the employee was so employed
- the employer has ceased, or intends to cease, to carry on the business in the place where the employee was so employed
- the requirements of the business for employees to carry out work of a particular kind has ceased or diminished or are expected to cease or diminish
- the requirements of the business for the employees to carry out work of a particular kind, in the place where they were so employed, has ceased or diminished or are expected to cease or diminish
For further information see Acas' recent case studies on redundancy.
 How should my employer be selecting employees for redundancy?
Ideally, your employer should consult affected employees over this issue. The redundancy selection criteria arrived at should be objective wherever possible, precisely defined and capable of being applied in an independent way. This is to ensure that the process is conducted fairly. The chosen criteria should be consistently applied by all employers, irrespective of size. There should also be an appeals procedure.
Examples of such criteria:
- attendance record (if this is fully accurate and reasons for and extent of absence are known)
- disciplinary record (if this is fully accurate)
- skills or experience
- standard of work performance
- aptitude for work
Formal qualifications and advanced skills should be considered, but not in isolation.
When are redundancies 'unfair'?
You will be found to have been unfairly dismissed if you were unfairly selected for redundancy:
- for asserting a statutory employment right
- on parental leave (see Working parents) or maternity-related grounds
- because you work part-time (Part-time work)
- because you are a fixed-term worker (Employment contracts)
- for exercising or seeking to exercise the right to be accompanied at a disciplinary (Discipline) or grievance hearing (Grievances)
- requesting flexible working arrangements
- for a reason relating to rights under the Working Time Regulations 1998
- for a reason relating to rights under the National Minimum Wage Act 1998
- for a reason relating to the Tax Credits Act 2002
- for Whistle-blowing
- for participation in trade union activities, for membership or non-membership of a trade union and in respect of trade union recognition or derecognition
- for carrying out duties as an employee representative or candidate for election for purposes of consultation on redundancies or business transfers
- for taking part in an election of an employee representative for collective redundancy purposes
- for taking action on health and safety grounds as a designated or recognised health and safety representative, or as an employee in particular circumstances
- for taking part (or proposing to take part) in consultation on specified health and safety matters or taking part in elections for representatives of employee safety
- for taking lawfully organised industrial action lasting twelve weeks or less (or more than twelve weeks in certain circumstances)
- for refusing or proposing to refuse to do shop work or betting work on Sundays (England and Wales only)
- for performing or proposing to perform the duties of a occupational pension scheme trustee
- for performing or proposing to perform the duties of a workforce representative for the purposes of the Transnational Information and Consultation of Employees Regulations 1999
or if the selection criteria employed were deemed to be discriminatory under any of those grounds prohibited by law.
Should my employer help me to find other work?
In addition to allowing time off to look for new work or for training (Time off), it's good practice for employers to give redundant employees as much information as possible to help them at this difficult period of their working lives. Such information may include:
- the financial effects of redundancy on the individual (redundancy pay, pension payments and state benefits)
- how to complete application forms and present themselves at job interviews
- the importance of discussing the implications of redundancy with their family as early as possible
- how to search for appropriate vacancies in the press and follow up opportunities
- the importance of being prepared to consider a wide range of alternative jobs
In addition, where resources permit, your employer may offer with individual counselling, ideally before redundancies take effect. This would ideally be with a trained counsellor or welfare officer to carry out the interviews, but where that is not practicable, HR managers may be given appropriate training for the task. Where possible, some support and advice should remain available to redundant employees after their dismissals.
What information must my employer disclose about proposed redundancies?
To ensure employee representatives can play a useful part in the consultation process over proposed redundancies your employer must disclose certain information in writing including:
- reasons for the proposed redundancies
- numbers and descriptions of employees affected
- proposed method of selecting the employees who may be dismissed
- proposed method of carrying out the dismissals, taking account of any agreed procedure, including the period over which the dismissals are to take effect
- how redundancy payments, other than the legal minimum, will be calculated
What if my employer fails to consult about proposed redundancies?
In cases where employers have failed to consult with employee representatives over proposed redundancies an employment tribunal can make a 'protective award'. The employer is required to pay employees covered by a protective award their normal week's pay for each week of a specified period, known as the protected period, regardless of whether or not they are still working. To be covered by an award, you must:
- belong to a group specified in the award
- be someone your employer plans to dismiss or has already dismissed as redundant
- be someone for whom your employer has failed to comply with the information and consultation requirements
What is redundancy pay?
You have the right to a lump sum 'redundancy payment' if you are dismissed because of redundancy. The amount is related to your age, length of continuous service with the employer, and weekly pay up to a maximum. The employer must also provide you with a written statement showing how the payment has been calculated at or before the time it is paid.
Any dispute about whether a redundancy payment is due, or about its size, should be resolved within the organisation, if at all possible. Failing this, and as a last resort, it can be determined by an employment tribunal. If your employer has cash-flow problems so serious that making the redundancy payment would put the future of the business at serious risk, the Redundancy Payments Service (RPS) can arrange to pay you direct from the National Insurance Fund. If your employer is insolvent, the RPS makes the payment and the debt is recovered from the assets of the business.
How do I avoid redundancies?
Your organisation should develop a strategy for managing human resources, which will minimise disruption, reduce or avoid job losses and make any organisational change easier. If you plan ahead properly you can decide on what your current and future staff needs should be, avoiding short-term solutions and mistakes. If you still find yourself in a position where you are considering making compulsory redundancies, you should consider:
- natural wastage
- restrictions on recruitment
- retraining and redeployment to other parts of the organisation
- reduction or elimination of overtime
- introduction of short-time working or temporary lay off (where this is provided for in the contract of employment or by an agreed variation of its terms)
- seeking applicants for early retirement or voluntary redundancy
- termination of the employment of temporary or contract staff.
What is a redundancy procedure?A formal redundancy procedure should be negotiated and agreed with trade union or employee representatives.
A formal redundancy procedure should be negotiated and agreed with trade union or employee representatives. Full consultation will do much to allay unjustified fears and suspicions, avoid the suspicion that redundancies are imminent and allow representatives to contribute their views and ideas.
Depending on the size and nature of the company, the contents of a formal procedure on redundancy would normally contain the following elements:
- an introductory statement of intent towards maintaining job security, wherever practicable
- details of the Consultation arrangements with any trade union or employee representatives
- the measures for minimising or avoiding compulsory redundancies
- general guidance on the selection criteria to be used where redundancy is unavoidable
- details of the severance terms
- details of any relocation expenses, details of any hardship or appeals procedures and
- the policy on helping redundant employees obtain training or search for alternative work.
How do I select employees for redundancy?
Ideally, you should consult affected employees over this issue. You should try wherever possible to use objective criteria, precisely defined and capable of being applied in an independent way, when selecting employees for redundancy. This is to ensure that they are not selected unfairly. The chosen criteria must be consistently applied and be objective, fair and consistent. Basing your selection on skills or qualification will help you to keep a balanced workforce appropriate to your organisation's future needs. You should also establish an appeals procedure.
Examples of such criteria:
- attendance record (you should ensure this is fully accurate and that reasons for and extent of absence are known)
- disciplinary record (you should ensure this is fully accurate)
- skills or experience
- standard of work performance
- aptitude for work
Formal qualifications and advance skills should be considered, but not in isolation.
What are unfair selection criteria for redundancy?
Employees who are made redundant will be found to have been unfairly dismissed if they were unfairly selected for redundancy:
- for asserting a statutory employment right
- on parental leave (see Working parents) or maternity-related grounds
- because they work part-time (Part-time work)
- because they are fixed-term workers (Employment contracts)
- for exercising or seeking to exercise the right to be accompanied at a disciplinary (Discipline)or grievance hearing (Grievances)
- requesting flexible working arrangements (Flexible work)
- for a reason relating to rights under the Working Time Regulations 1998
- for a reason relating to rights under the National Minimum Wage Act 1998
- for a reason relating to the Tax Credits Act 2002
- for Whistle-blowing
- for participation in trade union activities, for membership or non-membership of a trade union and in respect of trade union recognition or derecognition
- for carrying out duties as an employee representative or candidate for election for purposes of consultation on redundancies or business transfers
- for taking part in an election of an employee representative for collective redundancy purposes
- for taking action on health and safety grounds as a designated or recognised health and safety representative, or as an employee in particular circumstances
- for taking part (or proposing to take part) in consultation on specified health and safety matters or taking part in elections for representatives of employee safety
- for taking lawfully organised industrial action lasting eight weeks or less (or more than eight weeks in certain circumstances)
- for refusing or proposing to refuse to do shop work or betting work on Sundays (England and Wales only)
- for performing or proposing to perform the duties of a occupational pension scheme trustee
- for performing or proposing to perform the duties of a workforce representative for the purposes of the Transnational Information and Consultation of Employees Regulations 1999
or if the selection criteria employed were deemed to be discriminatory under any of those grounds prohibited by law
How do I help my employees find other work?
In addition to allowing time off to look for new work or for training (see Time off), it's good practice to give redundant employees as much information as possible to help them at this difficult period of their working lives. Such information may include:
- the financial effects of redundancy on the individual (redundancy pay, pension payments and state benefits)
- how to complete application forms and present themselves at job interviews
- the importance of discussing the implications of redundancy with their family as early as possible
- how to search for appropriate vacancies in the press and follow up opportunities
- the importance of being prepared to consider a wide range of alternative jobs
In addition, where resources permit, you may consider whether to help redundant employees with individual counselling. Counselling is a skilled task and it is sensible to use a trained counsellor or welfare officer to carry out the interviews, ideally before redundancies take effect. Where it is not practicable to employ a trained counsellor, HR managers may be given appropriate training for the task. Where possible, some support and advice should remain available to redundant employees after their dismissals.
What is redundancy pay?
Employees have the right to a lump sum 'redundancy payment' if they are dismissed because of redundancy. The amount is related to the employee's age, length of continuous service with the employer, and weekly pay up to a maximum. You must also provide a written statement showing how you have calculated the payment at or before the time it is paid.
Any dispute about whether a redundancy payment is due, or about its size, can be determined by an employment tribunal. If you have cash-flow problems so serious that making the redundancy payment would put the future of your business at serious risk, the Redundancy Payments Service (RPS) can arrange to pay the employee direct from the National Insurance Fund. If you are insolvent, the RPS makes the payment and the debt is recovered from the assets of your business.
You can read more about redundancy entitlements and payment limits at the BERR website. (links open in new windows)
What information must I disclose about proposed redundancies?
You should ensure that employees are made aware of the contents of any agreed procedure and of the opportunities available for consultation and for making representations. Case law has shown that dismissals have been found to be unfair where a union has been consulted but not the individual. It is therefore best practice that individuals who are to be made redundant are consulted - irrespective of the size of the company or the length of service of the employee. They are more likely to react in a constructive way following consultation and may be able to suggest alternatives to redundancy.
To ensure employee representatives can play a useful part in the consultation process over proposed redundancies you must disclose certain information in writing including:
- reasons for the proposed redundancies
- numbers and descriptions of employees affected
- proposed method of selecting the employees who may be dismissed
- proposed method of carrying out the dismissals, taking account of any agreed procedure, including the period over which the dismissals are to take effect
- how redundancy payments, other than the legal minimum, will be calculated
What's a protective award?
In cases where employers have failed to consult with employee representatives over proposed redundancies an employment tribunal can make a 'protective award'. You would be required to pay employees covered by a protective award their normal week's pay for each week of a specified period, known as the protected period, regardless of whether or not they are still working. To be covered by an award, employees must:
- belong to a group specified in the award
- be employees whom you plan to dismiss or have already dismissed as redundant
- be employees in whose case you have failed to comply with the information and consultation requirements
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