Guidance for Employers
A Detailed Guide for Employers
The purpose of this guide is to provide detailed insight into the standard redundancy process that you need to follow as well as sharing some of our real-life experiences with you.
Redundancy: A Detailed Guide for Employers
1 September, 2020
by Lianne Lambert
Redundancy is one of the hardest things any business owner or manager can have to do. The legal process that you need to follow has been designed to provide a structured, fair and transparent way of managing the redundancies but there are many unexpected challenges and complications that can crop up along the way.
As an HR Consultancy, we spend a great deal of time managing both small and large-scale redundancy processes, and the purposes of this guide is to not only cover the standard process that you need to follow, but also share some of our experiences with you. Simply ticking the right process boxes is not enough. There are many twists and turns that can come up along the way and the aim of this guide is to make you aware of some of the unexpected things you should expect!
It’s important to note that this guide does not constitute professional advice and it does not cover everything that you could encounter during a redundancy process. Redundancy is complicated and, what we are finding at the moment, is that many employees are very challenging throughout the process. The job market is tough which is meaning that employees are fighting to keep the jobs they have. We really do advise you to seek guidance, preferably from us, before embarking on a redundancy process of any size.
The sections in this guide are:
We strongly advise you get in-touch with us on 0203 319 1649 to get expert, tailored guidance before you take any actions.
1. How Do I Make Someone Redundant?
The most important point to make here is that you don’t! You don’t make “someone” redundant; you make a role that someone is performing redundant.
Whilst this may seem like we’re being pedantic, this is a crucial point and adjusting your mindset will help you avoid falling into the trap of saying something that makes an employee feel that the decision is personal and pre-determined. Throughout your entire process, think about roles rather than people.
We’ve lost count of the number of conversations that we’ve had with people that start along the lines of “we have an employee who is underperforming so we’re thinking of making him/her redundant”.
Whilst redundancy can seem like an easier option than performance management, we really do advise people to avoid using redundancy to deal with what is a performance issue. Firstly, it’s not legal. Secondly, redundancy really isn’t easy, and it should only be used when a genuine redundancy situation arises.
2. What Constitutes a Genuine Redundancy Situation?
Redundancy has a specific legal definition which is:
- The employer has ceased, or intends to cease, continuing the business, or
- The requirements for employees to perform work of a specific type, or to conduct it at the location in which they are employed, has ceased, diminished or is expected to do so.
Unless you’re closing the business then it’s likely that your redundancy situation will fall into the second category. For most of our clients, the reason that they need to consider redundancy is because revenues fall and therefore there is a need to decrease costs in line with the decreased income. The other common reason is that there’s a need to change the skillset within the business due to a change in direction.
3. I’m Satisfied That There’s Genuine Redundancy Situation, Where Do I Start?
Step one in any redundancy process, whether it’s large or small, is planning. The first thing that you need to do is document why you need to make changes and how you think the changes that you’re proposing achieve your business goal.
This planning will be the basis of your business case when it comes to justifying your redundancy programme and it’s important that you document your thinking. We should suggest that you create a consultation document at the very outset that you would share with the employees who are potentially impacted. This document should cover:
- The change that you need to make (we’ll come on to what triggers a redundancy situation shortly) and why you need to make it.
- The alternatives to redundancy that you have considered.
Don’t try to short-cut this important first step. The process alone will make sure that you have done the necessary thinking before you move to action and the document you produce will be invaluable as you move through the consultation process.
We aren’t naïve and know that this may seem like an awful lot of unnecessary work. In a small to medium sized organisation you know your employees; you know who adds value and who doesn’t, and you’ll know who you want to retain and who you could do without. The thing is, you really need to forget all of this knowledge during a redundancy process. You need to step back, think about roles and approach the entire situation with an open mind with the focus being on achieving the business goal (decreasing cost, changing skills etc.)
4. What is the Overall Redundancy Process?
The scale of the headcount reduction that you’re considering plays a vital role in determining your process. If you are considering a headcount reduction of 20 or more employees in a single location in a 30-day period then this is large scale redundancy and there’s a specific process that you’ll need to follow and defined timeframes to which you will need to work.
For more detail on this, refer to our Guide on Redundancy of 20 or More Employees.
If you are considering making 19 or fewer employees redundant in a single location in a 30-day period, there are fewer rules to follow. You would think that this would make it easier but actually, because the rules aren’t as clear, you run increased risk of making a decision on process that an employment tribunal judge later determines to have been inappropriate.
For the purposes of this guide, we’re going to focus on the process for when you are making 19 or fewer employees redundant. If we try to cover the process for large scale redundancies as well this guide will quickly become a book! If you are considering large-scale redundancies, then do reach out to us and we can provide you with guidance on that process.
The overall process that you need to follow when considering making redundancies is:
- Pooling – this is the determination of which employees are at risk of redundancy. It’s a key stage and something we’ll cover in more detail below.
- Informing – this is when you inform all of the employees in the pool that they are at risk of redundancy.
- Consulting – this is the process through which you explain what you are considering and give employees an opportunity to comment on and challenge your proposals.
- Selecting – this is the process by which you determine whose employment will end on the grounds of redundancy if you do move ahead with the redundancy proposal.
- Concluding – this is the final step where you inform individuals of the outcome of the redundancy process and confirm whether or not their employment is ending.
5. What is “Redundancy Pooling”?
Pooling is the process by which you determine which employees are at risk of redundancy. In some cases, this will be obvious. As an example, if you currently have 8 project managers and are proposing to reduce that to 6 project managers then all 8 project managers are in your pool for redundancy. All 8 project managers are at risk of redundancy, and you’ll then go through a selection process to determine who is retained within the business and whose employment ends.
There are times, however, when roles aren’t quite as clearly defined and there is a lot of overlap between one role and another. As an example, perhaps you have 1 office manager and 1 facilities manager. You only have budget for one role as you move forward. The role of office manager could be expanded to include the tasks of the facilities manager and the role of facilities manager could be expanded to include the tasks of the office manager. In this scenario, your pool will consist of both the office manager and the facilities manager even though they have different titles.
Getting pooling right can be quite challenging and it’s worth making sure that you have given this due attention and that you have documented how you have reached your decision as to who is in the pool.
For more information, refer to our post on Redundancy Pooling.
6. You Can Put It Off No Longer, You Need to Tell People What’s Happening
We tend to stick to fact rather than opinion in all that we write but I’m going to express an opinion here: I think this is the hardest part of the entire process. This is the point where you need to explain to the individual what is happening and the impact it could have on their role and, ultimately, their employment. This is the most challenging conversation that you’ll have throughout the entire process as this will be the first time the employee hears that their employment may be ending.
Here are some tips and a suggest structure:
- Sit everyone who is in the pool down together so that they all hear exactly the same messaging at exactly the same time. Whilst it’s best practice to undertake all meetings face-to-face, Acas have confirmed that, in Covid world, it is acceptable to use video conferencing.
- In this initial meeting explain what the business is considering and why. Don’t over explain. Keep the messaging brief and clear.
- Then, immediately conduct a one-to-one meeting with each individual. This is the opening of their individual consultation process and this is a legal requirement so this meeting cannot be skipped.
- When we work with clients, we will have prepared an “open consultation” letter for them which can act as a script for this conversation. In this meeting you need to confirm:
- The overall proposal that you’re making
- What you are consulting with the individuals about (typically you’re consulting about the overall proposal and initially you’re also consulting about how you plan to conduct selection where multiple people are in the pool)
- How long you are proposing to consult for
- Any deadlines that the employee needs to adhere to (i.e. if you are asking people to submit a CV as part of the selection process, when do they need to do this by?)
- What the redundancy terms will be (typically you’ll provide the individual with their redundancy pay amount, confirmation of their notice period, confirmation of what will happen with their holiday)
- What will happen next
SUPER IMPORTANT – your choice of language is incredibly important. You cannot do or say anything that implies that you have already made a decision regarding the overall proposal or a decision about who will be selected for redundancy. Again, in small and medium sized businesses this can feel artificial. If there was a viable alternative to redundancy, then the chances are that you would be doing that rather than going through a redundancy process. However, engage with the consultation with an open mind and remember, something might have been missed. The purpose of consultation is to make sure that all avenues are explored before a final decision is made regarding the need for redundancy. I can’t stress the importance of this point enough. If you indicate that you have already made a decision before consultation has been concluded, you risk your redundancy process and any resulting dismissal being deemed to be unfair by an employment tribunal judge.
7. What Happens During Redundancy Consultation?
Having told people what you’re considering, you are now officially in the consultation phase. How your consultation phase is structured will vary significantly based on the situation and the selection process that you’re following. As a minimum, you need to have the open consultation meeting, a mid-point consultation meeting and a close consultation meeting. This really is the minimum and you should have as many meetings as necessary to ensure a meaningful consultation.
You are likely to need additional meetings regarding your selection process. It could be that you’ll conduct an interview, or you’ll have decided to select based on a set of agreed criteria and a scoring system in which case there will be an additional meeting to discuss the scores that individual employees have been awarded.
There is no defined timeframe for how long individual consultation should last and trying to get the balance right between it being long enough to be meaningful but not so long that it feels like you’re placing your employees under unnecessary stress is challenging. We generally suggest a two-week consultation as a minimum, but this will depend entirely on the complexity of the situation.
Consultation is also the individual’s opportunity to make suggestions as to how the proposed redundancies could be avoided. Many of our clients fear that they will be criticised if they reasonably reject alternatives that are proposed, but this isn’t the case. The purpose of the consultation is that employees get to make their suggestions, you don’t have to agree to them. You do, however, have to consider and respond to them, and we’d suggest this is always done in writing.
8. How Do I Select Who Stays and Who Goes?
Part of your planning will see you determine how you are going to decide who stays and who goes. The more transparent you can be with individuals regarding your decision making the processes the better.
There are options when it comes to selection. The most important thing is that nothing you do can be seen to be discriminatory.
Firstly, you can ask people to apply for a role. In this scenario you’ll typically ask people to submit a CV and then conduct an interview process. Making sure that the interview process is fair, consistent and well documented will be vital as you could need to evidence at a later date that your selection process was fair, unbiased and non-discriminatory.
An alternative model, and one that is more typically used when a headcount reduction is being considered, is assessment against a set of selection criteria. If this is the approach that you want to take, then one of the things that you need to consult on will be the selection criteria that you want to use, and how and by whom individuals will be scored. Your selection criteria must be fair to all involved. You will typically choose 4 or 5 different criteria against which each individual in the pool will be scored. Wherever possible, scoring should be conducted by more than one individual as this helps you to avoid allegations of bias.
When the scoring has been completed, the scores should be shared with the individual employee and that employee should have the opportunity to challenge the scores they have been awarded. You should listen to the challenges that the individual raises and adjust the scores if you think it’s appropriate to do so.
Once this scoring challenge meeting has been conducted, you’ll know who has been successful in retaining their jobs and who will be leaving you. You can now move to concluding the process.
9. Concluding the Redundancy Process
At the appropriate time, you’ll need to bring your redundancy process to an end. You’ll have explored all alternatives and concluded that you do need to move ahead with the redundancy process. You’ll also have completed selection and know who it is that has unfortunately not secured a role. Now you need to inform everyone.
For those people who have been successful in securing a role, it’s a straight-forward and positive conversation. Have a meeting with them and confirm that consultation has closed, that they have been successful in securing one of the roles, and their employment will be continuing. You should confirm this in writing.
For those people who haven’t been successful, it’s clearly not a positive conversation. When we work with clients, we will provide them with a “close consultation” letter that can act as a script for the meeting, but you should confirm:
- That no viable alternative to the proposed redundancies has been found and that there is a need to move ahead as per the original business case.
- Unfortunately, the employee has not been successful in securing a role and therefore their employment will be terminated on the grounds of redundancy.
- The terms of the redundancy are as per the initial letter the individual received and go on to state what those terms were.
- The arrangements for their notice period (do they need to work, are they on garden leave, are they receiving payment in lieu of notice?)
You should be prepared for an emotional response from your employee but, having gone through the consultation process, we find that many people are fairly resigned to the outcome by the time you reach the close consultation meeting.
10. Common Questions and Misconceptions
We’ve given you a lot of detail about the end-to-end redundancy process but there are some commonly occurring questions/misconceptions that didn’t really fit in anywhere so we’re going to summarise them here.
Do people have the right to be accompanied at redundancy meetings?
Yes and no!
The right to be accompanied does not extend to redundancy consultation meetings; the right does, however, extend to the close meeting. This is because the right to be accompanied applies to any meeting in which employment may be ended. Because one outcome of the close consultation meeting could be the termination of employment, the individual does have a right to be accompanied at this meeting. You should inform them of this right when you invite them to the final meeting.
Whilst there is no right to be accompanied at redundancy consultation meetings, you should allow people who may need additional support to be accompanied. So, don’t automatically say no if you receive a request to be accompanied at a redundancy consultation meeting. Seek more information as to why the individual wants to be accompanied and then be reasonable.
Can an employee bring a lawyer to the final meeting?
No. The employee only has the right to be accompanied by a trade union representative or a fellow employee.
Can either the company or the employee record meetings in the redundancy process?
If everyone who will be participating in the meeting gives consent, then it’s fine for meetings to be recorded. If you are going to allow recording, start the recording with everyone present stating that they give consent for the recording to be made as there can then be no debate at a later time.
A word of warning on recordings – if you are going through the redundancy process on your own for the first time then we would encourage you to avoid recording the meetings. It can be an added pressure and you could find yourself being quite formal and cold for fear of saying the wrong thing and it being recorded.
Is there a right to appeal the decision to end employment on the grounds of redundancy?
The right to appeal does not extend to the redundancy process. The rationale behind this is that all questions and issues should have been raised throughout the process so there is no need to offer a right to appeal.
However, we recommend that you offer an appeal process. It gives employees an opportunity to raise any issues that they’ve had with the process that they don’t feel were adequately addressed. It also gives an opportunity to see the likelihood of an employment tribunal claim heading your way, and you may be able to resolve any outstanding issues through an appeal process rather than forcing an employee to raise an employment tribunal claim against you as that’s the only way they can have their issues heard.
11. Our Top Five Guidelines for Managing a Redundancy Process
We got together as a team and thought about the 5 bits of advice we’d give to any client who is embarking on a redundancy process. Here are our pearls of wisdom:
- Don’t rush to action – the most important part of the entire process is the planning. Rushing this stage can make life very difficult down the line and lead to unpleasant surprises. Take time to make sure you really do know the roles that people are doing, that you understand where roles overlap, and where you could face challenge on your pooling decisions. Take time to think about whether there’s an alternative to redundancy that you want to take to people. It can be very easy to want to move to action quickly, but we see time and time again that this ultimately slows everything down and makes processes more difficult and challenging than they needed to have been.
- Document everything and document it in detail – we are the harbingers of doom and we are always thinking about the worse-case scenario of a client finding themselves in an employment tribunal. If you do find yourself in this horrible position, then documentation that you created at the time you were undertaking the redundancy process will carry far more weight than any witness statement that you provide as part of your evidence submission. You also need to be mindful of the fact that it could be 18 months to 2 years before you get to a hearing; remembering what happened that long ago can be challenging. Having everything well documented means that you aren’t having to rely on your memory, and you have evidence of what you did and why.
- Don’t run out of patience – there are times when redundancy processes can be very, very challenging and extremely frustrating. Employees can bring up all manner of issues. You can find yourself dealing with a grievance that the employee raises to counter your redundancy proposal. The employee can make lots of impractical and unrealistic suggestions as to other roles they could do or ways the redundancies could be avoided. With trying to do your day job, it can be very tempting to try to rush through the process or to get super frustrated. This is when mistakes happen. Hang on in there and remember it will still take you far fewer hours to get through the redundancy process than it will take to prepare for and attend an employment tribunal.
- Let the process do what it is designed to do – whilst on the surface it can feel like the redundancy process is overly complicated and convoluted (and we’ve felt your pain many times!), when you engage with it, it’s really quite helpful. There’s also very little point in fighting the process as you’re legally obliged to follow it. If you go through each step without any pre-determined outcome then you significantly reduce your risk of facing an employment tribunal and, if you do find yourself there, you significantly increase your chance of winning.
- Only use the redundancy process when it’s really redundancy – it is far easier to navigate the redundancy process when you can be open and honest. When you’re using a redundancy process to try to manage a situation that isn’t redundancy, that’s far harder to do. If you have an underperforming or troublesome employee, then you should performance manage them (and we can help you with that).
And, whilst the above are our top 5 tips for our clients, we’d add a 6th tip to anyone considering undertaking a redundancy process who doesn’t have HR support – please get some professional guidance. There are so many technicalities and potential pitfalls in a redundancy process that this isn’t an area that you should try to navigate alone.