Manage staff redundancies

You can avoid job losses by planning ahead and looking at other options.

Before making employees redundant you should see if you can:

• offer voluntary redundancy or early retirement
• agree to flexible working
• temporarily reduce working hours
• ask employees to stop working for a short time 
• retrain employees to do other jobs in your business
• let go of temporary or contract workers
• limit or stop overtime
• not hire any new employees

2. Offer voluntary redundancy or early retirement

Your offer needs to cover the whole workforce and it must always be the employee’s choice to volunteer. Make sure you do not pressure anyone or single a person out.

For example, you could be accused of age discrimination if you only offer early retirement to your older employees.

You do not have to select an employee just because they volunteered. For example, if your most experienced employee volunteers, you can explain that you’re not selecting them.

It’s a good idea to make clear to employees early on that voluntary redundancy or early retirement is not automatically given.  

You must have a fair way of selecting employees who do get voluntary redundancy or early retirement.

You can offer extra redundancy pay if you want to encourage employees to volunteer.

Agree to flexible working

You can agree to update employment contracts to allow more flexible working.

This could include offering your employees:

• to work fewer hours
• homeworking
• job shares
• to work compressed hours

Ask employees to temporarily stop working or reduce hours 

If it’s included in employment contracts you can ask employees to:

• stop working for a while (known as a ‘temporary lay-off’)
• work fewer hours (known as ‘short-time’ working)

It must be a temporary solution and not a permanent change to agreed working hours. 

If it's not included in employment contracts

You can ask to update an employee's contract to include these options. They do not have to accept. 

Download the Acas guide to lay-offs and short-time working (PDF, 142KB, 12 pages).

Move employees into other jobs

You should try and move employees into other jobs within your organisation (provide ‘suitable alternative employment’) before you start the redundancy process.

Once you’ve made an employee redundant

If you're looking to fill another role that is suitable for the employee you're making redundant, you should offer it to them instead of redundancy. The redundancy could be judged an 'unfair dismissal' if you do not.  

If you do offer an employee another job it needs to be:

• in writing
• made before their contract ends   
• a different job to the one they’re doing – you’ll need to explain how it’s different

They should not have to apply for the job. The new job must start within 4 weeks of their previous job ending.

Employees have the right to a 4-week trial period if they accept a new role. The trial period should start after they’ve worked their notice period and their previous contract has ended.

This avoids any confusion or disputes over dates if the trial does not work out. It’s a good idea to set out the dates for the trial in writing.

If you both agree it's not working out, your employee can still claim redundancy pay. You can agree to a longer trial period but it must be agreed in writing.

Consultation is when you sit down with employees to explain your planned changes and get their feedback and input.

Your plans must not be finalised at this stage and you should aim to include any employees' suggestions or ideas you agree with.

3. Who you must consult

You must discuss your planned changes with each employee who could be affected. This can include employees who are not actually losing their jobs.

You must sit down with each employee individually to explain changes and get their ideas and feedback. The meeting can take place over the phone if you both agree to it and there is a clear need, for example if someone works remotely.

When you must consult elected representatives

You must also consult trade unions or employee representatives during large-scale ('collective') redundancies. A collective redundancy is when you're making 20 or more redundancies within 90 days in a single establishment.

This means you must discuss redundancy changes with both elected representatives and individual employees in collective redundancies.

How to consult

There are set rules for collective redundancies which you must follow. There are no set rules for consultations with fewer than 20 redundancies but it's good practice to follow the same process.

Download the Acas guide to handling large-scale redundancies (PDF, 522KB, 64 pages).

An employment tribunal could accept a claim for unfair dismissal if you cannot show you've consulted an employee or employee representatives.

Prepare for the consultation

You should get the information ready that you're going to share.

During the consultation period you must let employees know in writing:

• why you need to make redundancies
• the number of employees and which jobs are at risk
• how you will select employees for redundancy
• how you plan to carry out the redundancies, including timeframes
• how you will calculate redundancy pay
• details of any agency workers you're using

You should also have:

• a trained person to lead the consultation
• a clear way of presenting your redundancy plan
• a questions and answers document

You can get Acas training on managing redundancies.

When to begin your consultation

It's important you do not present a finalised redundancy plan to your employees. You must leave enough time to include any suggestions you agree to.

You must include in your total:

• voluntary redundancies
• employees you’re moving into other roles

You only need to include employees who are on fixed-term contracts if you're making them redundant before the end of their contracts.

Notify the Redundancy Payment Service (RPS)

For collective redundancies you must let the RPS know your plans before the consultation starts.

Fill in form HR1 on GOV.UK and send it to the RPS address on the form.

How long the consultation lasts

There are no rules for how long the consultation should last. It can last longer than the minimum periods listed above if it's a large or complex redundancy situation.

You do not need to reach agreement for the consultation to come to an end. You simply need to show that the consultation was genuine and that you aimed to reach agreement.

You must be able to show that you've listened to your employees and that you responded to questions and suggestions.

What to discuss at the consultation

Consultations allow you to explain why you're planning on making redundancies.

In return it allows employees to discuss:

• ways to avoid or reduce redundancies
• how to reduce the impact of redundancies
• how the organisation can restructure or plan for the future
• how employees are selected for redundancy

You must consider and respond to any suggestions made by employees. You can reject any ideas you do not think are reasonable but you should explain why. It's important to document all discussions and the reasons for your decisions.

You might not always be able to avoid redundancies but by working with employees you'll often be able to save jobs and come away with a better idea of how your business can plan for the future.

Information that should be shared

You should be as open as possible with unions and employee representatives. This will allow employees to feel part of the conversation.

Not providing enough information often leads to frustration and mistrust and can sometimes mean the consultation is invalid.

You should aim to provide the right level of detail for staff to understand your proposals. The information should not be so long or complex that a specialist is needed.

Consult employees individually

You would normally consult your employees after you've completed consultation with employee representatives. You can choose to overlap with individual consultations if needed.

You must select employees for redundancy in a fair way and not discriminate against any individuals or groups.

It’s a good idea to use selection criteria to help you choose which employees to make redundant.

You should base the criteria on:

• standard of work
• skills, qualifications or experience  
• attendance record (do not include absence relating to disability or maternity)
• disciplinary record

You must not select employees because of their:

• age
• disability
• gender reassignment
• marriage or civil partnership status
• pregnancy or maternity leave – see the Acas guide to redundancy for employees who are pregnant or on maternity leave (PDF, 299KB, 13 pages)
• race
• religion or belief
• sex
• sexual orientation
• family related leave – for example parental, paternity or adoption leave
• role as an employee or trade union representative
• membership of a trade union
• part-time or fixed-term employee status
• pay and working hours, including the Working Time Regulations, annual leave and the National Minimum Wage

Make sure your criteria does not indirectly discriminate against any of these groups. For example, if you use flexible working as a criteria, you could be discriminating against women. You would need to show that flexible working is no longer possible after your business has changed.

Agree criteria with employees

You should consult employees to identify and agree selection criteria. For example, you could sit with employees to work out the skills and experience needed for your business in the future.

The more open and collaborative your selection process is, the more your employees will trust that it's fair.

Select employees in a fair way 

It’s a good idea to score employees against all the agreed selection criteria. This will help you avoid relying on one particular criteria and can lower the risk of discriminating against employees.

It will also help you:

• be objective when selecting employees
• easily share with staff how the selection process works
• explain your decisions at employment tribunals

Ask employees to reapply for their jobs

You can ask employees to reapply for their jobs to help you decide who to select. You should still use criteria when you interview to make sure you’re selecting people in a fair way.

How to score employees

You can decide how much you want to score each criteria. You should also provide written evidence to support your score. 

You do not have to use the points system used in this guide, it’s just an example. The ‘standard of work’ criteria could look like:

Decide which criteria are most important

You can adjust the points you give for each criteria. For example if it’s agreed that ‘attendance record’ is less important you can allocate fewer points. This creates a ‘weighting’ which allows you to be more flexible in how you score employees. 

Apply the selection criteria to the group of employees at risk of redundancy. This is sometimes known as the ‘pool of selection’.

Set up an appeals process

You should set up an appeals process for employees who feel they have been unfairly selected. This can reduce the chances of someone making a claim against you to an employment tribunal.

You should explain in your redundancy plans how someone can appeal. You might meet with employees face-to-face to listen to their concerns or ask them to write a letter or email explaining why they do not agree with your decision.

You can only make an employee redundant once you’ve finished consulting everyone.

It’s best to tell an employee face-to-face that you’re making them redundant. You should also let them know in writing.

You should include in the letter:

• their notice period
• leaving date
• how much redundancy pay they’re due
• how you calculated the redundancy pay
• any other pay you owe them (for example holiday pay)
• when and how you’ll pay them
• how they can appeal

You must give employees at least the statutory notice period. This is based on how long they’ve worked for you.  

You should also check your employment contracts – they might include a longer notice period.   

5. When the notice period starts

It’s a good idea to first check if your contracts say when notice periods take effect.

It might depend on how you give employees notice for redundancy.

For example:

• if you tell the employee while they’re at work, their notice should start from the next day
• if you send the employee a letter or email, they must have a reasonable amount of time to read it before their notice starts

For example, if you give them notice in a letter sent by registered post, their notice period should start the day after they’ve received it and had time to read it.

You should make sure you know when the employee has received their notice. For example you could:

• add a read receipt, if you send it by email
• post it by delivery that has to be signed for, if you send it in a letter

You should make sure your employee understands how long their notice period is.

You must pay redundancy to employees who have:

• an employment contract
• worked for 2 full years 

6. How to calculate redundancy pay

You must pay at least the statutory amount to your employees.

• 1.5 weeks pay for each year of work after their 41st birthday
• 1 week pay for each year of work after their 22nd birthday
• half a week for each year of work before their 22nd birthday

The limit for weekly pay is £525. The maximum total amount of statutory redundancy pay is £15,750.

You should check your employment contracts as you might need to pay more than the statutory amount.

You can choose to pay higher amounts if you want to encourage voluntary redundancies. 

If your employee’s pay changes from week to week

Calculate the average weekly pay for the previous 12 weeks from the date you made them redundant.

If they did not work for a whole week during that time – for example they were on holiday or off sick – replace it with an earlier week.

You must share in writing with employees how you’ve calculated redundancy payments.

When you must pay redundancy

You should pay redundancy no later than an employee’s final pay day. You can pay later than this if you both agree another date in writing.

You should clearly communicate when and how the payment will be made. For example, let employees know if payments will be included in their monthly pay or as separate payments.

If you do not pay an employee on time, they might be able to make a claim to an employment tribunal.

If you cannot afford to pay redundancy

If making redundancy payments puts your business at risk you can ask the Redundancy Payments Service (RPS) for financial help.  

If you’re insolvent you can get RPS to make your redundancy payments and recover the debt from your assets.

Call the RPS helpline to discuss your options.  

Redundancy can create difficult situations and conversations in your organisation.

You should think about how to support: 

• employees at risk of redundancy
• managers who are breaking the news
• the people leading the consultation
• employee representatives
• staff that are staying on

It’s often forgotten that those staying on experience stress from seeing colleagues and friends being made redundant. They will also be part of a changing organisation and might feel uncertain about what the business and their roles will look like in future.

You can support staff by providing:

• counselling
• additional face-to-face meetings
• help getting financial advice
• clear plans for the future of your organisation
• help finding work for another company

7. Help staff find another job or training

You must allow staff a reasonable amount of time off to look for another job or training if:

• you’re making them redundant
• they’ve worked for 2 full years (including the notice period)

Paying staff who take time off to look for another job

You must pay employees who take time off to look for new work. The most you need to pay for the whole notice period is 40% of one week’s pay. This is the total amount and not the amount per week.   

For example if an employee gets paid £500 a week for a 5 day working week, the most you would have to pay them for their time off is £200 (40% of their weekly pay). This stays the same even if they take more than 2 days off.

Contact Jobcentre Plus

Jobcentre Plus offers a ‘Rapid Response Service’ to help people get straight back into work. They can also help employees write or update CVs.

To get help using the Rapid Response Service email: rrs.enquiries@dwp.gov.uk

You need to include in the email:

• your contact details
• the town and postcode your business is based in
• the location of the redundancies

They can also give you useful information about finding work to pass on to your staff.  

Support the people breaking the bad news

You should make sure that anyone breaking the news to staff:

• understands in detail the organisation’s plans
• knows why redundancies are being made
• is trained (at least in how to hold difficult conversations)
• is not over-worked (their role often involves long hours)
• has a group of colleagues they can turn to for support
• understands the support they can get from trade unions      

Staff will have lots of questions about what’s happening – it’s important the person telling them they’re being made redundant understands the changes and plans in detail.

Line managers often have to break the news to staff about redundancies. You should give line managers training and support to help them manage these difficult conversations.  

They can then offer support and help to staff who are being made redundant. This in turn helps staff who are staying on believe that the organisation has dealt with the situation fairly and will be a good place to work in the future.  

If the situation is handled in the right way it can make a big difference to:

• how staff react and cope with being made redundant
• the morale of staff who are staying on
• the success of the planned changes and future of the organisation