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As an employer, you may end up in a situation where you need to make an employee redundant. This is often difficult for both you and your employee, where redundancy may not be a welcome option for either party. It is, therefore, essential that you are fully aware of the process to make an employee redundant. Getting it right can help the process run smoothly and help you to avoid unwanted situations, for example, your employee bringing a claim against you in an employment tribunal.
This article will explain how to make an employee redundant. It will outline the rules associated with redundancy and guide you through the process.
What is Redundancy?
If you no longer need an employee to work for you, you may dismiss them. This process is called redundancy.
There are many scenarios in which you may need to make an employee redundant. These include when:
- your business is shutting down or moving to a different area;
- the nature of what your business does has changed; or
- your business is taking a different approach to how it carries out its function.
It is essential that, as an employer, you make every effort to avoid making your employees redundant. This includes finding your employee a different job within the business. Redundancy should be a final option.
How Do I Make an Employee Redundant?
If you need to make your employee redundant, you must show that the redundancy is genuine. This means that you must be able to demonstrate that the employee’s job is no longer in existence.
Where an employee has worked for at least two years before the potential redundancy date, you must ensure you carry out a fair redundancy process with them, which should include at least one meeting to discuss the redundancy.
There are several steps you should take as an employer, which are detailed below.
1. Consult With Employees
Before going ahead and finalising the decision that you will be making redundancies, you must consult with employees. If you do not, your employee may deem their redundancy unfair, and you could find yourself faced with an employment tribunal.
You must conduct a consultation to identify ways to avoid redundancy, but there are no rules to say that it must reach such a result.
There are no rules about carrying out a consultation if you make less than 20 redundancies. If you are making 20 or more redundancies, you must follow a set procedure termed the ‘collective consultation’ rules.
2. Decide the Redundancy Pay
Unless your employment contracts state a higher amount or you wish to pay more, you must pay employees who have worked for you at least two years the minimum statutory pay. This is based upon:
- the age of an employee; and
- the length of time they have worked for you – but not counting anything over 20 years.
Statutory redundancy pay is capped at a maximum amount of £544 per week and a total of £16,320.
The simplest way to work out your employee’s redundancy pay is to use the government calculator.
3. Confirm if the Redundancy Is Compulsory or Non-Compulsory
Compulsory redundancy is where an employer has decided that employees will be made redundant, and so they will need to decide which employees will be affected. You must choose fairly, so as not to discriminate during this process.
Fair criteria for selection might include taking into account:
- skills and abilities;
- attendance and discipline records;
- how well an employee is performing; and
- the length of time with your business. When including this, be cautious that it does not negatively affect one group of people as this could be indirect discrimination. Make sure it is used with other criteria, as if used on a stand-alone basis, it could be seen as age discrimination.
Unfair criteria for selection could be, for example, taking into account:
- a disability;
- a pregnancy or pregnancy-related reason;
- being part-time; or
- a role as a trade union representative.
Non-compulsory redundancy can be either voluntary or early retirement.
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Voluntary Redundancy |
This is where an employer asks which employees would like to take redundancy and then carries out a fair and transparent selection process when making the final decisions. |
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Early Retirement |
Where an employer offers every employee this option. |
4. Give Employees Notice and Notice Pay
After the consultation period, regardless of which type of redundancy you select, you must give those employees being made redundant statutory notice of their dismissal. This means giving them:
- a minimum of one week where an employee has worked between one month and two years;
- one week per year of employment where an employee has worked between two years and 12 years; and
- 12 weeks where an employee has worked for 12 years or more.
You are required to give your employees notice pay where they are not giving payment in lieu of notice. This will be based on the employee’s average earnings over the 12 weeks before you give them their notice.
Redundancy Appeals Process
You are not required by law to offer your employees a redundancy appeals process, but it is good practice to have this available. If you do choose to have one, this should be set out in any redundancy policy you may have.
An appeals process should have:
- a timescale for an employee to submit an appeal;
- a meeting to discuss the redundancy – they may bring a representative, and a senior member of your staff who was not part of the redundancy process should be present; and
- a swift decision at the end.
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What Are My Employee’s Rights When I Make Them Redundant?
By law, your employees will have certain rights if you make them redundant. Under these, an employee:
- may be entitled to redundancy pay;
- should be given a chance to look for new work through reasonable time off their current job where they are under notice of redundancy;
- should not be selected for redundancy unfairly where they are under notice of redundancy; and
- should have any time on furlough included as though they are earning as usual when working out their notice period.
Key Takeaways
As an employer faced with making employees redundant, you must ensure that you carry out a fair redundancy process. You must carry out specific processes such as giving the proper redundancy notice and pay and carrying out a specified consultation process where you are making 20 or more redundancies. You should also have processes in place for good practice, such as an appeals process.
If you need help understanding how to make an employee redundant, our experienced employment lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents for a low monthly fee. Call us today on 0808 196 8584 or visit our membership page.
Frequently Asked Questions
An employer can make compulsory or non-compulsory redundancies. The former is where a certain amount of employees are made redundant, and the employer needs to select them fairly. The latter could be voluntary redundancy where employees volunteer, and then the employer fairly selects, or early retirement which an employer must make available to all staff.
An employer does not have to carry out an appeals process when making redundancies, but it is good practice to do so.
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