How to Make an Employee Redundant Fairly

Dealing with redundancy can be daunting for both employers and employees. Employers need to ensure that they follow correct procedures and apply them fairly. Employees have a number of rights in a redundancy situation and both parties need to understand what these are.

Employers Need to Know

  • What "redundancy" means in law.
  • When they must inform and consult. Please note that when there are over 20 employees due to be dismissed within a 90-day period then collective consultation is also required which involves election of employee representatives.
  • How to deal fairly with individuals being considered for redundancy so as to minimise claims for unfair dismissal. This, in practice, means that you will need to consult with individuals who are at risk as soon as redundancies are proposed; for example, before any firm decision has been made.
  • What the alternatives to redundancy are, including lay offs and short-time working.
  • How to determine an employee’s entitlement to a statutory or contractual redundancy pay.

The Definition of Redundancy
The statutory definition of "redundancy" encompasses three types of situation:

  • business closure,
  • workplace closure, and
  • reduction of workforce.

The dismissal of an employee will be by reason of redundancy if it is "wholly or mainly attributable to" the employer:

  • Ceasing or intending to cease to carry on the business for the purposes of which the employee was employed by it (business closure).
  • Ceasing or intending to cease to carry on that business in the place where the employee was so employed (workplace closure).
  • Having a reduced requirement for employees to carry out work of a particular kind or to do so at the place where the employee was employed to work (reduction of workforce).

Redundancy and Unfair Dismissal
Redundancy is a potentially fair reason for dismissal. Added to this, the employer needs to show that it has acted reasonably in dismissing the employee in all the circumstances.

The employer needs to show that it has acted reasonably in dismissing the employee in all the circumstances. Therefore it needs to fairly:

  • Identify an appropriate pool for selection (i.e.) which employees should be placed in the pool at risk.
  • Consult with individuals in the pool by means of at least one face to face meeting.
  • Apply objective selection criteria to those in the pool.
  • Considers suitable alternative employment where appropriate, subject to a trial period.

Meetings with Employees
If there are less than 20 employees to be dismissed in a 90-day period you need to plan for the following process:

  • General announcement - meet the “affected employees” to explain what the proposal is. Follow up the meeting with an email or written confirmation that an announcement has been made.
  • Meet each affected employee to describe the process and timetable. Provide a selection matrix where appropriate.
  • Send a letter to any “provisionally selected” employees.
  • Have two managers complete the scoring matrix based on objective data.
  • Have a further meeting and inform lowest scorers that they are “at risk”.
  • At a meeting provide the at risk employee the opportunity to suggest alternatives to redundancy and explain what would happen if they are redundant (notice monies, statutory calculation). Consider alternatives and impact on redundancy.
  • Final meeting to declare redundancy and explain about the right of appeal.

Disclaimer: This article does not contain a full statement of the law and it does not constitute legal advice. Please contact the Employment Law Team on 020 3743 0600 if you have any questions about the information set out above.

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