How to ensure a fair redundancy
Genuine redundancy situations
Redundancy is one of the five potentially fair reasons for dismissal set out in s.98 Employment Rights Act 1996(ERA) . The definition of redundancy is found in s.139 ERA . This provides that an employee who’s dismissed is taken to have been dismissed by reason of redundancy if their dismissal is wholly or mainly due to one of the following:
- you’ve ceased or intend to cease to carry on the business for the purposes of which the employee was employed, i.e. the business is closing down
- you’ve ceased or intend to cease to carry on that business in the place where the employee was employed, i.e. the employee’s workplace is closing down
- the requirements of the business for employees to carry out work of a particular kind (or work of a particular kind in the place where the employee was employed) have ceased or diminished or are expected to cease or diminish, i.e. the business needs fewer staff to do particular kinds of work.
Pro advice. Redundancy should never be used as an excuse to get rid of a poor performer.
Fair redundancy procedure
Whether a redundancy is then a fair dismissal is determined in accordance with s.98(4) ERA . This depends on whether you acted reasonably in treating it as a sufficient reason for dismissing the employee. There must be: (1) meaningful individual consultation with affected employees; (2) a fair selection process; and (3) due consideration of alternative employment ( yr.1, iss.7, pg.8 , see Follow up ). In this first of two articles on fair redundancy, we explore how individual consultation should be done. Our second article will consider fair selection. Finally, those dismissed should be given their correct redundancy pay - this may be statutory redundancy pay (see Follow up ), or payment under an enhanced redundancy pay scheme.
Pro advice 1. If you’re making 20 or more employees redundant at one establishment over a period of 90 days or less, you must also undertake collective consultation with appropriate representatives. This isn’t discussed further here.
Pro advice 2. Check the terms of your redundancy policy before you start the process (see Follow up ).
Individual consultation
Individual consultation is crucial to a fair redundancy and must take place in all cases. It involves holding a series of meetings with affected employees, the purpose of which is to explain your proposals, and the reasons for them, to employees and to give them a fair opportunity to discuss your proposals, ask questions and have their say. There is no mandatory consultation procedure set down in law, but a fair procedure will usually include the following steps:
1. General staff meeting. This should announce the possibility of redundancy at the earliest opportunity. Depending on the circumstances, it might involve all employees or just those in the specific departments/workplaces that are potentially affected. At the meeting, you should set out the background to the current position, discuss what options you’ve explored so far to avoid redundancy, explain what your broad redundancy proposals are at this stage and outline the process to be followed, including the pool and method for proposed redundancy selection. This meeting should take place when the proposals are still at a formative stage.
Pro advice 1. Give staff a reasonable opportunity to put forward their own suggestions to make cost cuts and avoid redundancies. Also, if possible, ask for volunteers for redundancy. There’s no legal obligation to do this but it’s best practice as it may avoid or reduce the need for compulsory redundancies.
Pro advice 2. If someone volunteers for redundancy, you don’t have to accept their application as you’re entitled to make the final selection according to your future business needs, but do ensure you can justify your decision to reject a volunteer (see Follow up ).
Pro advice 3. If you provisionally accept a volunteer, they’re still in the same legal position as employees selected compulsorily, so continue to involve them in your consultation procedure (see Follow up ).
Pro advice 4. Don’t forget to consult with absent employees, e.g. those on maternity leave, long-term sick leave, etc. They should receive the same information as other staff.
2. Individual consultation meetings. These should be held with each affected “at risk” employee to discuss matters as they progress. A first meeting should discuss in more detail your reasons for the proposed redundancy programme, suggestions to avoid redundancies, the possibility of voluntary redundancy and your proposed objective selection criteria if compulsory redundancies are required (this first meeting might be two meetings if there are outstanding matters still to discuss, such as the employee’s ideas to avoid redundancies - always respond to any suggestions they make) (see Follow up ). A second consultation meeting should subsequently take place once the selection criteria have been applied and an employee has been advised in writing that they’ve been provisionally selected for redundancy (see Follow up ). This meeting should discuss the pool for selection, the selection criteria you applied, how you marked the employee according to those criteria, potential alternative employment options and further suggestions to avoid the employee’s redundancy. It could also outline the potential financial package if redundancy can’t be avoided.
3. Further individual consultation meetings. These can be held with the provisionally selected employees as necessary. The number of meetings required will depend on how the redundancy proposal progresses, what options are put forward, what alternative employment is available and whether the employee applies for any vacancies. Ideally, hold at least a third meeting to confirm final selection for redundancy and to answer any final queries.
Pro advice 1. Always write to set up the meetings in advance, giving the employee adequate time and information to prepare properly. Take meeting minutes and send a copy of these to the employee with a follow up letter.
Pro advice 2. There’s no statutory right for an employee to be accompanied by a work colleague or trade union official at consultation meetings, but ideally allow this as part of overall fairness.
Pro advice 3. Provide the employee with a copy of their redundancy selection assessment and give them the opportunity to challenge their provisional selection if they think they’ve been unfairly marked or any factual matters you relied on are inaccurate.
Pro advice 4. During the consultation process, clearly express any redundancy selection to be provisional only, i.e. never give the impression that the employee will definitely be made redundant. No decisions should be made until the end of the process.
Pro advice 5. The consultation process will probably last at least a couple of weeks, possibly longer. Consultation must be a meaningful, two-way discussion and give the employee an opportunity to understand what’s happening, make representations and potentially influence the outcome.
Termination
If, after consultation, final decisions are taken and an employee is to be made redundant, confirm this in writing (see Follow up ). This includes voluntary redundancy too (see Follow up ). Set out the reason for dismissal, the employee’s notice period (and whether this is to be worked or paid in lieu), the date on which employment will terminate, how any redundancy payment has been calculated and any other relevant matters, e.g. outstanding holiday and return of company property.
Pro advice. Allow the employee a right of appeal against the redundancy decision.
Previous article on the duty to search for alternative employment
Redundancy payments ready reckoner
Redundancy policy
Rejection of volunteer for redundancy
Acceptance of volunteer for redundancy
First redundancy consultation letter
Second redundancy consultation letter
Redundancy termination notice
Voluntary redundancy termination notice
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