Redundancy Procedures

Redundancy Procedures

Understanding the correct procedures for redundancy is essential to ensure compliance with legal requirements and avoid claims of unfair dismissal. AHACCOUNTANTS provides detailed guidance on these procedures, particularly for employers in the Nottingham area, to help them navigate redundancy situations effectively.

Recent changes to employment law have significantly impacted employers’ ability to make redundancies. If redundancy is not handled fairly, an Employment Tribunal may find the employer guilty of unfair dismissal. Below is a summary of the key principles involved in redundancy and the legal steps to follow.

What is Redundancy?

Under the Employment Rights Act 1996, redundancy arises when employees are dismissed due to:

• The employer ceasing or intending to cease business activities.
• The employer ceasing or intending to cease operations at the location where the employee worked.
• A reduction or expected reduction in the need for employees to perform certain types of work.
• A shift in business needs that leads to an employee being “bumped” from their position due to a more senior person taking over their role.

In other words, redundancy is based on the business’s needs, not the individual employee.

Consultation – Legal Requirements

Employers must follow strict rules when making multiple employees redundant:

• For 20–99 employees: Consultation with employee representatives must begin at least 30 days before the first dismissal.
• For 100+ employees: Consultation must start at least 45 days before the first dismissal.

If the consultation process is not followed correctly, employers may face protective awards of up to 90 days’ pay per affected employee.

Employers must also notify the Department for Business, Energy and Industrial Strategy (BEIS) when proposing 20 or more redundancies within a 90-day period.

Good Practice in Consultation

Regardless of the size of the business or number of redundancies, early consultation with employees or their representatives is advisable. Employers should ensure that the redundancy process is transparent, and they should allow employees to make representations. Even though it is not mandatory to follow disciplinary and dismissal procedures, it is best practice to include steps such as:

• A letter outlining the reasons for redundancy.
• A meeting to discuss the redundancy.
• An appeals process.

Disclosure of Information

Employers must disclose specific information in writing to employee representatives during consultation. This includes:

• Reasons for the redundancy proposals.
• Number and descriptions of employees to be dismissed.
• Total number of employees in the relevant roles.
• Selection criteria.
• Timeline for dismissals.
• How redundancy payments (beyond statutory minimum) will be calculated.

This helps ensure transparency and fairness during the redundancy process.

Selection Criteria

The selection criteria for redundancy should be objective, fair, and consistently applied. Common criteria include:

• Attendance records.
• Disciplinary records.
• Skills, experience, and capability.

Voluntary redundancy and early retirement can also be considered, but the employer reserves the right to accept or reject such applications.

Offering Alternative Work

Employers must explore whether suitable alternative work is available within the organization. Special protection is extended to employees on maternity, adoption, or shared parental leave, as well as to pregnant employees. Starting April 2024, this protection will extend to cover 18 months from the child’s birth date.

Employees under redundancy notice with at least two years of continuous service are entitled to reasonable paid time off to search for other jobs or undertake training.

Unfair Selection for Redundancy

Selection for redundancy based on the following reasons is automatically deemed unfair:

• Participation in trade union activities.
• Serving as an employee representative in redundancy consultations.
• Exercising health and safety responsibilities.
• Asserting statutory employment rights.
• Discrimination (e.g., race, gender, disability).
• Maternity-related reasons.

Right to a Redundancy Payment

Employees with two or more years of continuous service are entitled to a statutory redundancy payment. The amount is calculated based on:

• Half a week’s pay for each year of service up to age 21.
• One week’s pay for each year of service between ages 22 and 40.
• One and a half weeks’ pay for each year of service over age 41.

From 6 April 2024, the maximum statutory weekly pay will be capped at £700, with a maximum of 20 years’ service taken into account. This results in a maximum redundancy payment of £21,000 (30 weeks’ pay).

In addition to redundancy pay, employees are also entitled to notice or payment in lieu of notice as per their contract and statutory requirements.

By following these procedures, employers can ensure they comply with legal obligations and avoid potential claims. For tailored advice or additional support, AHACCOUNTANTS is here to help employers navigate redundancy issues with confidence.