Table of Contents
In Short
- Explore alternative measures such as voluntary redundancy, reduced hours, salary cuts, or remote working before considering redundancies.
- If redundancies are unavoidable, document all alternatives considered and engage in a meaningful consultation process with affected employees.
- Follow employment contracts, policies, and collective agreements to ensure compliance and reduce risks of disputes.
Tips for Businesses
Before implementing redundancies, exhaust all alternatives to avoid unnecessary dismissals. Document your decision-making process to demonstrate compliance and fairness. Engage with employees through a meaningful consultation period, maintaining clear communication to protect your business from disputes and ensure transparency. Legal advice can support navigating this process effectively.
In today’s ever-changing business landscape, companies sometimes find themselves needing to restructure or streamline their operations. Whether this arises as a consequence of a major client winding back their need to utilise your services or your sector’s changing demands, this is ultimately where the concept of redundancy comes into play. In this article, we will explore when you can consider making redundancies, the legal framework surrounding this process in the UK, and some key factors to keep in mind.
What is Redundancy?
Redundancy is a form of dismissal from employment that usually occurs when an employer needs to reduce their workforce, or a job position is no longer required within the business.
However, other situations which may lead a company to consider the need for redundancy include the following:
- the business is closing down as a consequence of a diminishing workload;
- the business is changing the number of roles required for a particular job or changing the roles as the business/ sector’s needs change; or
- the business is looking to relocate.
The key consideration is that redundancies should only be considered if part or all of the business is considering the above and not for other performance-related reasons such as poor conduct or capability. These issues must be dealt with separately using disciplinary or capability procedures.
As an employer, it is crucial to stay compliant with ever-evolving employment law. This factsheet outlines key changes in 2024 that will affect how you manage your workforce.
Considering Redundancy
The most important point to consider when considering redundancy is that it must be used as a last resort, and you should attempt to find alternative solutions in the first instance. This is because the general notion is that businesses must avoid or reduce (insofar as is possible) the need to make their staff redundant.
In the first instance, businesses should seek to consider alternative options such as:
- offering voluntary redundancy;
- reducing or varying working days and hours;
- considering salary decreases or areas to reduce spending;
- moving staff into other similar roles if their role would otherwise be redundant;
- reducing the availability of overtime or use of temporary or contract workers; and
- offering remote working where possible if utilising an office may be an expensive overhead or to prevent the need for a larger office.
In addition, you may consider reducing your staff’s working hours or temporarily laying them off until business picks up again or the business resolves any financial problems if you have the contractual right to do so. Short-time working or temporary layoffs can be a useful tool in your arsenal as a suitable alternative to redundancy.
Example
| Case example: |
| Mark is the managing director at a large distribution company. Unfortunately, there has been a downturn in clients, which has meant that there has not been enough work for his employees and that there will not be enough money in the business to sustain paying all of the employees with the reduced clientele. As such, Mark begins looking for ways to reduce his business costs and considers moving to smaller premises and making the admin staff work remotely; placing some of the distribution staff on shorter hours; and implementing a salary reduction for the senior leadership team and reducing employee benefits. After Mark considered the above, he concluded that enough savings could be made to avoid compulsory redundancies. |
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What if There is No Alternative to Redundancy?
Unfortunately, in some circumstances, cost-cutting measures such as those detailed above are not enough to ensure a business’s financial viability, and there may be no alternative to making redundancies.
If this is the case, the best practice that any business can implement is to document its thinking, the actions it has considered and decided (or not decided to implement), and the reason for coming to such a conclusion.
In the first instance, it will be essential that you refer to your staff’s employment contracts and any company policies that are in place so that you understand any relevant procedures that you must follow in addition to the redundancy process. You must consider any applicable collective agreements if your business has recognised trade unions.
Once you have considered the above, you will need to consider the formal process and procedure for redundancy.
Example
| Case example: |
| Jenny is the owner of a bakery and employs five members of staff. Unfortunately, sales have been slowly declining over the last year. Jenny has tried implementing several cost-cutting measures, such as placing some of her staff on shorter working hours, bringing her marketing in-house and doing this herself rather than using a consultant. Jenny has considered further cost-cutting methods, such as moving the bakery’s location to reduce the rent and reducing the offerings to lower operating costs. However, this would not be feasible for the business and would not make the required savings. As such, Jenny feels that she has no alternative but to reduce the headcount to reflect the lower volume of work and reduce business costs. |
Key Takeaways
- Redundancy should be a last resort option, and you should find alternative cost-cutting measures in the first instance.
- If there are no alternatives to redundancy, it is best practice to record all of your considerations and explain why they will not achieve the desired result. After that, the business should enter a meaningful consultation period with the affected staff members. Having evidence to substantiate your thought trail and having a meaningful consultation period will be essential should a dispute arise.
- You can consider redundancies if there is a reduced workload, a change in the company’s structure which no longer requires particular roles, or if you are relocating. Your business should address other issues, such as performance concerns, using the relevant processes.
Navigating the complexities of redundancies requires a delicate balance of legal compliance and commercial consideration. Careful planning, clear communication, and a genuine commitment to supporting affected employees are crucial. Each business has unique circumstances, and the suitability of this approach may vary.
If you are considering redundancies, 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. Call us today on 0808 196 8584 or visit our membership page.
Frequently Asked Questions
Employees are usually entitled to statutory redundancy pay when they have worked for their current employer for at least 2 years.
Redundancies typically occur when the employer ceases to trade, intends to close a particular site, or has a reduced requirement to carry out work of a particular kind.
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