We highlight the key issues businesses should be aware of when considering making redundancies to help manage legal risk.
The key risks for employers to be aware of are:
To minimise the risk of facing a claim, before making redundancies employers should:
Broadly, there is a genuine redundancy situation if the reason that the employee is being dismissed is because:
Employees must be given appropriate warning of the risk of redundancy. This is to allow genuine consultation to take place before a decision is made to dismiss them. Consultation should take place with individual employees which will typically include discussing matters such as:
Note that in a collective consultation situation, in addition to this individual consultation the employer will also need to consult with employee representatives.
The minimum consultation period is 30 days (45 days if you propose dismissing 100 or more employees) and consultation should start without delay as soon as the proposal is made. Before consulting you will need to allow time to prepare certain statutory information and to elect representatives if you do not already have representatives in place.
Employers should identify an appropriate ‘pool’ of employees who are at risk of redundancy and a fair way to select employees for redundancy. This will typically be done using selection criteria which should be appropriate, fair and objective. It is important to beware of the risk of unlawfully discriminating against certain staff. For example, this could occur by using attendance and attendance records as a criteria without making adjustments for disability or maternity leave.
Employers must search for suitable alternative vacancies and discuss these with the ‘at risk’ employees. Where an employee is offered a role which is materially different to their original role, they may be entitled to a statutory four-week trial period. Beware that employees on maternity (and certain other types of family leave) must be given a suitable alternative role if it is vacant, in priority over others, otherwise their dismissal will be automatically unfair.
Aside from any contractual redundancy payments the business may offer, employees who have two years or more continuous service are entitled to receive a statutory redundancy payment. This is calculated based on a statutory formula based on age and length of service.
This will include consultation meetings with the employee prior to making them redundant.
Typically, following the decision to make an employee redundant, employers will also offer a right of appeal. This is not a legal right, but ACAS (a quasi-government body that publishes best practice) considers it is good practice as it allows an opportunity for disputes to be resolved internally, gives employers a chance to address concerns or potentially unfair parts of the process and helps show a Tribunal that the employer has followed a fair process.
Given the issues involved, good pre-planning is essential to help minimise legal and practical risks.
This note is for information only and is not legal advice. It reflects the position as of 3 September 2021.