Understanding the redundancy process

Employment | 1st October 2018

Many people are facing job uncertainty and could be facing redundancy.  There is a set of procedures that a company needs to adhere to when it comes to redundancy, to avoid the risk of a costly employment tribunal claim. But redundancy doesn’t always have to be a negative outcome, with some individuals benefiting from accepting a voluntary package to leave their company.

Redundancy Procedure

Employers are expected to establish why there is a potential need to make positions in the company redundant and give as much advance warning of the impending redundancies as is reasonably possible in the circumstances.  A key part of a redundancy process is to consider whether there are suitable alternative vacancies within the business and offer any suitable available vacancies to the otherwise redundant employees.

Selection

In a redundancy exercise, often employers need to identify the pool of potential staff to be put at risk of redundancy.  This is usually based on those doing similar work, or those who work at similar levels.  Employers are generally free to specify criteria in the selection process.  The pool of staff must be fair and objective selection criteria adopted. There must be good reasons in justifying a departure from the criteria.

Consultation meetings

It is important part of the process to consult with the employees and conduct redundancy consultation meetings with the staff affected especially if there are a number of staff in the pool.

Alternatives to Redundancies

An employer needs to look at alternatives to redundancy and suggested examples of alternative measures that should be considered include; natural wastage, recruitment freeze, non-renewal of temporary contract staff, short time working and redeployment.  Also an employer may wish to consider offering an enhanced voluntary redundancy package which may have tax advantages to staff accepting these types of packages. Voluntary redundancy is when an employer asks a member of staff to agree to terminate their contract, in return for an enhanced sum.

Compensation

Redundancy exercises should be carefully planned and it is an important factor to determine what an employee may be entitled to on redundancy – statutory or enhanced redundancy pay, pension entitlements, outplacement help, share options and a payment in lieu of notice. A voluntary package may include an employee signing a settlement agreement which waives their general employment rights for a financial incentive.

Employers who fail to follow a fair process are at risk of creating the possibility of employment tribunal claims and this can be financially costly for a business.  However a fair redundancy process may offer some employees thinking of retiring early or moving on an opportunity to accept a package which gives them the freedom to choose the next step in their working life. Above all communication is the key to any successful process but especially relevant to a stressful situation such as a redundancy process.

This is not legal advice; it is intended to provide information of general interest about current legal issues.

Jane Crosby

Partner, Dispute Resolution

Jane specialises in commercial litigation and employment law acting for both employers and employees in both contentious and non-contentious matters. ...