Keeping redundancies fair: rules & advice for employers

When redundancies are unavoidable, it is vital that employers follow a fair procedure

Unfortunately, many business will at one time or another find themselves needing to make redundancies. When redundancies are unavoidable, it is vital that employers follow a fair procedure, both for the benefit of the affected employees, and to avoid possible Employment Tribunal claims.

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What is a fair redundancy process?

A fair redundancy process is one which follows all the requirements set out by law, and which supports the staff affecting. A fair process will always involve consultation, no matter how many employees are at risk of redundancy. If any employee has a redundancy policy, then that policy should be followed.

What are the steps employers must take during the redundancy process?

The first step should always be to consider whether redundancies are really necessary. Are there other ways to cut costs? Every alternative should be explored before employees are put at risk.

If redundancies cannot be avoided, the employer must then consult with the affected employees. The form that consultation takes, and how long the consultation period is, will depend upon how many employees are at risk of redundancy, and whether those employees are Trade Union members.

Consultation involves keeping employees informed about the planned redundancies, considering whether there is any suitable alternative employment for those employees, and informing employees about their entitlement to a redundancy payment.

A fair process must be used to select employees for redundancy. Employees must be given the right amount of notice, and any employees selected must be given the opportunity to appeal against their selection.

What reasons are considered to be fair when making someone redundant?

Under the Employment Rights Act 1996, an employee is dismissed by reason of redundancy if their dismissal is wholly or mainly attributable to:

  • the employer ceasing or intending to cease carrying on the business for the purpose of which the employee was employed by the employer
  • the employer ceasing or intending to cease carrying on that business in the place where the employee was so employed
  • the requirements of the business for employees to carry out work of a particular kind, either generally or in the place where the employee was employed, ceasing or diminishing, or being expected to cease or diminish

Dismissal for these reasons will generally be considered a fair reason. However the way in which employees are selected for redundancy can affect fairness. It is vital to ensure a fair selection process is used.

How much notice do employers need to give when making employees redundant?

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Once an employee has been selected for redundancy, and any appeal procedure has been exhausted, that employee must be given notice of the date upon which their employment will terminate by reason of redundancy.

The minimum notice periods are set out in the Employment Rights Act 1996, as follows:

  • 1 month to 2 years – statutory notice is 1 week
  • 2 to 12 years – statutory notice is 1 week for each full year they have worked
  • 12 years or more – statutory notice is 12 weeks

If the employee’s contract provides for a notice period longer than the statutory minimum, then the longer notice period should be given.

What legal claims could employers face if the correct process is not followed?

The most common claim in these circumstances would be a claim for Unfair Dismissal. This could be the case if redundancy was not the real reason for termination, if a fair procedure was not followed, or if the employee’s selection for redundancy was flawed.

Claims can also arise if the proper amount of notice is not given, or if the employee’s full redundancy entitlement is not paid.

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