Redundancies and Restructuring
Redundancy is a lawful reason for dismissal where your workforce requirement for work of a particular kind has ceased or diminished.
However, redundancy can give rise to serious legal claims if the correct redundancy process, consultation obligations, and selection criteria are not applied fairly and consistently.
What Should Employers Do in Redundancy Scenarios?
Employers must:
-
establish a genuine redundancy situation
-
conduct meaningful consultation with affected employees
-
apply objective and non-discriminatory selection criteria
-
consider suitable alternative employment
-
calculate statutory redundancy pay and notice correctly
-
keep robust records of consultation and decision-making processes
These steps help manage legal risk and avoid claims for unfair dismissal, discrimination or failure to consult.
What Is Redundancy?
Redundancy can arise where:
-
you have ceased, or intend to cease, to carry on the business in the place where the employee worked
-
your need for employees to carry out work of a particular kind has reduced or ceased
-
your need for employees to carry out work of a particular kind has changed.
In each case, the focus in on your genuine need for labour rather than the individual employee's performance.
When is Consultation Required?
Consultation should be undertaken whether or not employees have sufficient service to bring unfair dismissal claims, because consultation duties arise under employment law and may also involve collective consultation obligations.
You should begin consultation with all affected employees as soon as possible once redundancy is considered and before any final decisions are made.
A meaningful consultation process should:
-
explain why redundancies are proposed
-
consider ways to avoid or reduce redundancies
-
explain the basis for selection
-
explore alternative roles or redeployment
-
allow employees, or their representatives, to provide feedback
What is a Selection Criteria?
Where more than one employee is at risk, you must apply objective and transparent selection criteria. Common lawful criteria include:
-
skills, qualifications or experience
-
performance records
-
attendance (excluding absences protected by law, e.g. arising from a disability)
-
disciplinary record
The chosen criteria must be work-related, non-discriminatory (e.g. on grounds of age, sex, disability, race. pregnancy, religion, or sexual orientation), consistently applied, and objectively measured.
You should avoid criteria that directly or indirectly discriminate unless objectively justified.
What is Suitable Alternative Employment?
You should consider whether there is any suitable alternative employment within the organisation that could retain the employee.
If a suitable alternative role exists, you should offer it in writing, explain how the terms differ (if at all), allow the employee time to consider, and provide a trial period (if appropriate).
If an employee refuses a suitable alternative role, this may affect their entitlement to redundancy pay.
What Pay and Notice are Employees Entitled To?
Statutory Redundancy Pay
Redundant employees with sufficient qualifying service (two years) are generally entitled to statutory redundancy pay which is calculated using a set formula based on the employee's age. length of service and weekly pay (subject to statutory limits). Employees are entitled to:
-
One and a half week's pay for each complete year of service after age 41;
-
One week's pay for each complete year of service between ages 22 and 40;
-
Half a week's pay for each complete year of service under the age of 22.
Redundancy payments are usually tax-free up to the statutory threshold of £30,000.
Notice Period
You must provide the greater of the statutory notice period, or the period set out in the employee's contract of employment.
Pay in lieu of notice (PILON) may be considered, where permitted.
You should ensure that holiday pay, notice pay and statutory redundancy pay calculations comply with current UK law.
How We Can Help
If you are considering restructuring and/or making redundancies, our team can help you through any and all stages of the process.
It is important to follow ACAS guidance which can be found here.
Making the cost of expert employment law advice predictable, affordable and essential to your business.
ENHANCE is our unique, industry-leading employment law service just for employers. Employment law is fast-paced and constantly changing. We have created ENHANCE to protect your business from the risks of employee disputes and litigation, and to help you successfully navigate your business through the minefield of employment law.
CONTACT US
For enquiries, legal advice, or case evaluations, feel free to reach out to us anytime. Fill out the form below and a member of the team will be in touch as soon as possible.