Managing staff redundancies: step by step

Step 1: Decide whether redundancies are needed

You should make a redundancy plan to help you manage each stage of the redundancy process. It should show how you’ll:

  • avoid redundancies
  • consult staff
  • select staff for redundancy
  • give staff notice
  • work out redundancy pay
  • support staff and plan for the future

If you’re planning to make 20 or more employees redundant at the same workplace within 90 days (large-scale or 'collective' redundancies), you must work with any recognised trade union or employee representatives to develop your plan.

An agreed plan allows you to easily share information with all your staff and help them understand what’s happening. It’s particularly useful when you explain your proposed changes during the consultation phase.

Avoid redundancies

You should 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

Avoiding redundancies during coronavirus

You might need to put some or all of your employees on temporary leave ('furlough') during the coronavirus (COVID-19) pandemic.

Furlough is where an employee or worker agrees with their employer to stop work temporarily but stay employed. Furlough must be agreed in writing.

You can claim financial support from HMRC for up to 80% or £2,500 of furloughed employees' or workers' wages, whichever is lower.

Find out more about:

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

Agreeing with employees to temporarily stop working or reduce hours

If it's included in employment contracts you can agree with employees that they will:

  • 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.

Find out more about lay-offs and short-time working.

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.

To change an employment contract you usually need to agree the changes with the employee.

You should be careful if changing a contract of employment when there's been a business transfer (TUPE).

Find out more about changing an employment contract.

Move employees into other jobs

You should try and move employees who would otherwise be made redundant into other jobs within your organisation (provide 'suitable alternative employment').

Providing suitable alternative employment

You must identify any available jobs in your organisation and talk to the affected employees to see if they agree they're suitable.

If a role is suitable for an 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 more than one employee is interested in the same role, you must offer the role to employees on maternity leave first. For all other employees, you must follow a fair process, for example interview for the role.

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.

Trial periods

Employees have the right to a 4-week trial period if they accept a new role. If they need more time to train for the role, you can agree to a longer trial period. It must be agreed in writing and have a clear end date.

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 an employee turns down a suitable alternative job

If an employee refuses your offer for a suitable alternative job, or turns it down after the trial period, they need to have a good reason why the job is not suitable.

Reasons could include:

  • the job is on lower pay
  • health issues stop them from doing the job
  • they have difficulty getting there, for example because of a longer journey, higher cost or lack of public transport
  • it would cause disruption to their family life

If the employee has a good reason to turn down the job, they'll be entitled to redundancy pay. But if the employee unreasonably turns down the job, you could refuse to pay their redundancy pay. You'll need to be able to prove the employee's decision was unreasonable if they make a claim to an employment tribunal.

Manage staff redundancies