Employer’s guide to UK redundancies
This guide is intended for general information only and is not intended to constitute legal advice, which should always be sought by employers contemplating making redundancy terminations.
No employer wants to make staff redundant, but sometimes there genuinely isn’t an alternative.
In this employer’s guide we’ll look at the do’s and don’ts of managing redundancies, click on the link in the box above if you would rather watch the video version.
What is a ‘redundancy’
Currently (March ‘24) there are 5 ‘potentially’ fair reasons for dismissal. We say ‘potentially’ because in each case the employer must follow a fair procedure.
Redundancy is one of those 5 potentially fair reasons, and an employee is potentially redundant if:
- The employer stops or intends to stop carrying out the business for which that employee is employed by them; or
- The employer stops or intends to stop carrying out that business at or near the location where the employee is employed; or
- In either ‘1’ or ‘2’ above the requirement for the work diminishes rather than ceases altogether.
If jobs are lost through a restructure, is that always a ‘redundancy’?
Restructuring all or part of an organisation can cause jobs to be lost, but these will only count as redundancy dismissals if the other criteria for redundancy are met (1, 2 and 3 above). Where they aren’t met it is possible that the job reductions will come under a different category of dismissal, though it’s not uncommon for employers to offer termination payments in these circumstances.
What does a redundancy process look like?
A redundancy consultation process generally follows these steps
- Employer makes proposal
- (If a ‘collective’ redundancy, employee representatives are elected and trained)
- Consultation takes place with employees and/or their reps
- Consultation concludes & employees selected for redundancy are given notice
What are ‘collective redundancies’?
Collective redundancies occur where 20 or more staff are to be dismissed from the same entity.
Collective redundancies must follow strict consultation rules and minimum consultation periods – it is essential that the employer is able to show that it consulted fairly with the employees dismissed.
An essential feature of collective redundancies is the need to notify the government at an early stage in the process – a failure to do this can lead to hefty fines and even criminal sanctions.
Aside from this, penalties of 90 days pay (uncapped) per employee can be levied for a failure to consult meaningfully, and ‘sham’ consultations are often caught out by employment tribunals.
What are the ‘minimum consultation periods’ in collective and non-collective redundancies?
Starting with non-collective redundancies (i.e. less than 20 in a single establishment in a 90 day period), there is no minimum period for the consultations to run.
Employers must however allow sufficient time for meaningful consultation to take place, and as a rule of thumb we generally recommend allowing at least 2 weeks.
When collective consultations are engaged (20+) the minimum period is 30 days, increasing to 45 days for 100+ proposed redundancies. Employers must not issue dismissal notices during the consultation period.
Pragmatism and the law sometimes collide head on, and where an employer is insolvent employees will generally want to find new paid employment as quickly as possible, rather than engage in a lengthy & unpaid consultation period.
In insolvency, or pre-insolvency rationalisations, JCHR recommend the services of insolvency practitioners who are part of the wider James Cowper Kreston group.
What does an employer consult about?
The consultation process should involve dialogue with employees, or their representatives in collective redundancy situations. The consultation should i) discuss ways to avoid or minimise the redundancies; ii) if they can’t be avoided, mitigate their impact.
Early-stage consultation should cover:
- The reasons for the proposed redundancies
- The ‘pool’ from which individuals will be selected and the proposed number of redundancies
- The proposed selection methods
- Possible alternatives to redundancy
- Ways to mitigate the impact of redundancy
- The proposed consultation process and timescales
Only after consultation has been completed should employees be served with redundancy notice letters, normally after at least two 1:1 meetings.
Who qualifies for a statutory redundancy payment (SRP)?
At the time of writing (March 24) to qualify for a statutory redundancy payment, an employee must have at least 2 years continuous service at the time of dismissal. The payments then are dependent upon age and length of service.
How much is a statutory redundancy payment?
The SRP is based on age, earnings and length of service. Earnings are capped at a rate set by government – this is currently (until Feb ‘25) £643 per week. SRP is calculated at one half, one week or one & a half week’s pay per year of service, depending on the age of the employee when that service occurred. The maximum payout is for 20 years of service: 20 X 1.5 X £643 = £19,290.
Can employers enhance statutory redundancy pay?
Yes, and when JCHR designs redundancy processes for employers we sometimes discuss additional payments to facilitate earlier exits, settlement agreements or indeed to retain key staff until a particular date. SRP and discretionary pay can be tax free to a combined maximum of £30K, anything above that level is taxable.
Special protection for women on maternity leave
Should a redundancy situation arise which places a woman on maternity leave ‘at risk’ of redundancy, she must be offered a suitable available position (if there is one) even if she is not the preferred candidate. From April 2024, this period of special protection will extend to pregnancy and 6 months following her return to work after maternity leave.
HR support from JCHR
We have a lot of experience designing and managing redundancy campaigns, collective and non-collective, unionised and non-unionised.
If a client chooses, we can (and regularly do) attend and manage consultation meetings, appeal meetings etc. We will also provide all paperwork, scripts and letters to accompany the process, and advise employers on mechanisms for voluntary exits and retention arrangements if these are needed.
If you’re thinking of outsourcing your HR, payroll or employment law needs, why not contact JCHR? Call us on 01635 553 299, email us at info@jCHR.uk, or contact us via our website and we’ll call you back.
