Step by step guide: how to manage a redundancy process

This step by step guide from the Shepherd and Wedderburn employment team explains the consultation process for collective and individual redundancies. 

5 June 2020

When does a redundancy situation arise?

A redundancy situation will arise where there is no longer a need (or there is a reduced need) for employees to carry out a particular kind of work, or work in a particular location. This can affect an entire business, a business unit or team, or even a single role. This can be temporary or permanent.

Individual Redundancy Consultation

What steps are involved in a redundancy process?

A redundancy process will usually include the following steps:

  • identification of roles which are affected and consideration of selection pools;
  • communication about potential redundancies to each affected pool;
  • identification of selection criteria (e.g. skills, qualifications, disciplinary record, service, timekeeping);
  • provisional selection of employees at risk of redundancy by assessment against the chosen criteria;
  • individual consultation meetings (before and after the assessment exercise);
  • consideration of redeployment to alternative employment;
  • dismissal, if the consultation does not result in redundancy being avoided and if no suitable alternative employment is found for the employee; and
  • an appeal, if requested by employee.

What points should be discussed in individual redundancy consultation meetings?

Typically, at least two individual redundancy consultation meetings should be held:

  • Meeting One – the employer will explain: that the employee is at risk of redundancy; the business reasons for the proposed redundancy; the purpose and proposed length of the consultation; and what steps have been taken to avoid redundancy. The employee should be given an opportunity to make general representations and comment on the selection pool and criteria (either at the meeting or over the following days);
  • Meeting Two – the employer should: respond to any representations made by the employee; if the employee has been assessed against selection criteria, share the outcome of the assessment; be prepared to listen to further representations; and explain what additional attempts have been or could be made to avoid redundancy, for example, by looking for alternative employment.

Adequate time should be allowed for consultation to take place. The length of the consultation will depend on the circumstances of the case.

It is good practice to allow an employee to be accompanied to a redundancy consultation meeting by a work colleague or a trade union representative, but there is no statutory right to be accompanied. It is also good practice to send a letter or email to the employee following each consultation meeting, confirming what was discussed and outlining the next step in the process.

What duties is an employer under to identify alternative roles?

The employer has a duty to look for alternative employment for potentially redundant employees. In practice, it is advisable to notify potentially redundant employees of all current group vacancies. Employees absent on maternity, shared parental, or adoption leave have additional rights and have the right to be offered any suitable alternative position ahead of other potentially redundant employees.

Do I have to offer an alternative role subject to a trial period?

If suitable alternative employment is offered, an employee will have the right to a statutory trial period of up to four weeks in which to try the alternative role. If the employee decides during the trial to reject the role, they will still be considered redundant and, provided their rejection is reasonable, will still be eligible to receive a statutory redundancy payment. The trial period can be extended, but only for the purposes of retraining the employee.

How do I confirm the redundancy, if no alternatives are identified?

If an alternative to redundancy is not identified during consultation, the employer may confirm the redundancy. This should be done in writing and it is good practice for the employee to be offered an opportunity to appeal the decision.

The redundancy confirmation letter is formal notice of the dismissal and should confirm:

  • the date upon which the redundancy will take effect;
  • the payments which will be made to the employee upon termination;
  • whether the employee will be required to work their notice or will be paid in lieu of notice; and
  • how the employee may exercise their right of appeal.

What statutory redundancy payments apply?

In addition to an employee's entitlement to notice monies, employees with at least two years' continuous employment are entitled to a statutory redundancy payment calculated as follows:

  • 1.5 weeks’ pay for each year of employment during which they were aged 41 and over;
  • 1 week’s pay for each year during which they were between ages 22 and 40; and
  • 0.5 week’s pay for each year during the whole of which they were under age 22.

There is a statutory cap on a week’s pay (which increases each year) for redundancy calculation purposes, and a maximum of 20 years' service is counted. It can be helpful to use the UK Government’s website which has a calculator available.

When can an employee claim unfair dismissal?

If an employee believes they have been dismissed unfairly, because their role was not genuinely redundant or because a fair redundancy process was not followed, they may bring a claim to an employment tribunal within three months of the date of termination of employment.

To bring a claim, an employee must have at least two years’ service with the employer, unless the alleged unfairness lies in the selection for redundancy on certain prescribed grounds (including selection for trade union membership, part-time or fixed-term status and flexible working), in which case there is no qualifying service requirement.

If successful, the tribunal can award compensation comprising a basic award (calculated in the same way as the statutory redundancy payment) and a compensatory award of up to one year’s salary, subject to a statutory cap.

Collective Redundancy Consultation

When will collective redundancy consultation requirements apply?

If it is proposed that 20 or more employees may be made redundant at one establishment within a period of up to 90 days, then collective consultation will be required. This means consultation with employee representatives on behalf of the employees generally, before the stage of individual consultation.

What are the minimum consultation periods?

The length of minimum collective consultation will depend on the number of proposed redundancies. Where an employer proposes:

  • 20 to 99 employee redundancies, consultation must begin at least 30 days before the first dismissal; and
  • 100 or more employee redundancies, consultation must begin at least 45 days before the first dismissal.

Where employers are making redundancies across multiple sites or offices, they will need to consider whether each site or office is a separate establishment or whether a group of sites or all sites is in fact “one establishment” in order to determine whether the threshold for collective redundancy consultation is met.

These minimum periods start to run when certain statutory information is provided to employee representatives to commence the formal redundancy consultation process.

When should collective consultation start?

Consultation must start at least 30 days or 45 days (depending on the number of proposed redundancies) prior to when the first redundancy dismissal takes place.

There is a tension between UK law and EU law in relation to when this duty to consult collectively arises. Under UK law consultation should begin when a “proposal” for redundancies is formed by the employer. Under EU law consultation must commence when redundancies are “contemplated”. This is thought to be earlier in the decision-making process. UK law in this area is expected to comply with EU law. Case law tells us that collective redundancy consultation must commence before a final decision on the need for redundancies is taken and this would include a situation where a business proposal to close an entire branch or workplace would inevitably result in redundancies.

Is there a duty to notify the Secretary of State?

Where a duty to collectively consult is triggered, the employer must notify the Secretary of State using an HR1 form. Where 20 to 99 dismissals are proposed, notification must be given at least 30 days before the first dismissal takes effect. Where 100 or more dismissals are proposed, notification must be given at least 45 days before the first dismissal takes effect.

Which employee representatives should be consulted?

Where there is a recognised trade union which represents affected employees, consultation must take place with those trade union representatives.

If there is a trade union, but it is not recognised in respect of all affected employees, the employer must consult the trade union in relation to the affected employees in the part of the business for which the trade union is recognised and other appropriate representatives (i.e. those whose appointment covers collective redundancy consultation) in respect of employees outside the part of the business represented by the trade union. If there are no appropriate representatives for some or all of the affected employees, the employer must invite the (unrepresented) affected employees to elect representatives with whom the employer would inform and consult about the redundancy proposal.

What information needs to be provided to employee representatives?

An employer must provide certain information to employee representatives:

  • the reasons for the proposals;
  • the numbers and descriptions of employees it is proposed to dismiss as redundant;
  • the total number of employees employed by the employer at the establishment;
  • the proposed selection criteria;
  • the proposed method of carrying out the dismissals, taking account of any agreed procedure, including the period over which the dismissals are to take effect; and
  • the proposed method of calculating any enhanced redundancy payments.

Employers must consult with representatives about ways of avoiding the redundancies, reducing the number of dismissals involved, and mitigating the effects of any unavoidable dismissals. Consultation should be with a view to reaching agreement with the employees’ representatives, although there is no obligation to agree.

When can notices of dismissal be issued?

Notices of dismissal must not take effect before the end of the statutory minimum period, but if consultation on all points is complete then it may be possible to issue these at an earlier stage.

What happens if an employer fails to consult properly?

If an employer fails to consult collectively, or breaches any of the statutory requirements, an employment tribunal can award each affected employee a protective award of up to 90 days' gross pay. The maximum amount is likely to be awarded, unless the employer can show mitigating circumstances.

There may be special circumstances in which it is not reasonably practicable for an employer to fully meet the requirements for minimum consultation periods or disclosure of information. Such cases will be rare, and even where “special circumstances” do apply the employer is obliged to comply with such of its obligations as it reasonably can.

Failure to comply with an employer’s collective consultation obligations may also render any redundancy dismissals unfair (see “When can employee claim unfair dismissal” above).

For tailored advice on these or related matters, please contact our employment team or your usual Shepherd and Wedderburn contact.