Manager’s Guide to Making Redundancies
Detailed guidance on the redundancy process and every aspect of redundancy that you should consider when making redundancies
A Detailed Guide for Employers to Making Redundancies
Making redundancies 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 redundancies but there are many unexpected challenges and complications that can crop up along the way. In this post, we look at the steps in a UK based redundancy process.
Making redundancies is a complicated process to navigate and, whilst we hope you find the information in this post useful, it’s important to note that this guide does not constitute professional advice and may not cover everything that you could encounter during a redundancy process.
Redundancy is complicated and employees are typically very challenging throughout the process. Therefore, we advise you seek professional support before embarking on a redundancy process of any size.
In this guide, we’ll take you through each step in the redundancy process and then touch on some general areas that you should consider.
Process for Making Redundancies
The diagram below sets out the key steps in a redundancy process.
Step 1 – Consider the Alternatives to Redundancies
Making redundancies is complicated and starting a redundancy process should be the last resort. Before you start the process, you should spend some time considering whether there is a different way for you to achieve your business objective. You are legally obliged to consider alternatives to redundancy and if you can find a way to avoid the disruption and stress caused by conducting a redundancy process, it is better all around.
Your alternatives to redundancy will depend entirely on the situation that you are looking to manage but options include short-time working or temporary lay-off, recruitment freezes and reducing freelancers in the business. You should document the alternatives that you have considered and include this in your business case if you decide that you do need to move ahead with making redundancies.
Step 2 – Create the Business Case for Redundancy
Having decided there are no alternatives to redundancy, you need to document the business case for commencing the redundancy process. Quite simply, you need to answer the questions “What change am I proposing and why am I proposing it?”
This business case will be at the heart of your entire process so taking the time to articulate clearly what you are considering doing and why is vital. In the ideal world, you will share this document with your employees during the consultation process as it will give them the information that they need in order to be able to feed into the decision making.
Some business cases will be longer and more complex than others but ensuring that you have a well documented business case will mean that everything that follows will be easier to navigate and you will be in the best position to defend any employment tribunal claims that arise.
Step 3 – Identify Roles Impacted by Potential Redundancies
The term for identifying roles potentially impacted by redundancy is “pooling”. This is where you determine which of your employees would be impacted by the changes you are proposing and therefore should be part of your redundancy process.
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.
Step 4 – Design the Selection Process
Having determined your business case and the employees who are going to form a part of your redundancy pool, you then need to decide how you will determine which employees are ultimately selected for redundancy. This is your selection process.
There are two key ways that you can conduct this part of your process:
- You can ask people to apply for the roles that you are going to have going forward and then conduct interviews.
- You can create a set of selection criteria that you will apply to employees.
What is important is that your selection process is fair, consistent and transparent. The way that you select people is a key element when it comes to assessing the fairness of a redundancy process and so it’s important to get the redundancy selection criteria right.
Of course, your redundancy process may be looking at just one role performed by one person and in that case, you will not need to undertake selection. Selection is needed when you need to select from a pool of people which employees will be retained in the business.
Step 5 – Consult with Employees
Consulting with employees about the redundancy is the most important element of a fair redundancy process. The purpose of this stage of the process is to present your proposals and business case to the employees who would be impacted and give them the chance to comment and make suggestions.
Redundancy consultation must be ‘meaningful’, which means that it is important that you start this stage of your process before you have decided what you’re going to do. Employees have to be given real opportunity to contribute to the decision-making process and to question the business case that you are putting forward.
During the consultation process, in addition to consulting about the business case and proposals, you will also consult on the selection process that you plan to use.
We recommend that you meet with employees at least twice during the consultation process and, depending on your overall process you may well need more meetings than this. The consultation process is a very useful mechanism for taking the time to explain to employees what is going on in the business and help them understand the need for change. A thorough consultation process can go a long way to helping you avoid challenges at the end of the process.
Step 6 – Select Employees for Redundancy
On the assumption that you decide there is a need to go ahead with your redundancy proposal, you need to apply your selection process.
If you are going through an application and interview process then you need to ensure that you are conducting this thoroughly and fairly. We strongly recommend designing a standard set of questions that you will put to each applicant and taking detailed notes that support your decisions.
If you have decided to use selection criteria then you need to go ahead and complete your assessment and then share the outcome with the employees and give them the opportunity to challenge they scores they have been awarded.
Step 7 – Let Employees Know the Outcome of Redundancy Selection
Having gone through consultation and selection, the last meeting you will have with employees will be where you inform them of the outcome of the process. The outcome isn’t necessarily the end of employment. You may have found ways to re-deploy resources, may have had ideas from employees that have changed your plans and eliminated the need for redundancies but it could be that this final meeting will see you telling people that their employment is coming to an end.
As this last meeting could lead to the termination of employment, employees do have the right to be accompanied to this meeting by either a colleague or a trade union representative.
If you are needing to tell people that you are ending their employment, do make sure that you are clear and direct. Whilst it may feel harsh to say “I am sorry to confirm that your employment will be ending on the grounds of redundancy” it is important that you are this clear.
As well as the meeting, you need to confirm the outcome in writing to the employee and you should have that letter ready to give to the employee at the end of the meeting. The letter should set out exactly what has happened during the consultation process, the dates and times of any meetings that have taken place, detail of any ideas and suggestions that have been raised and the consideration that was given to them as well as confirming the terms around the end of employment such as redundancy pay, arrangement for notice and any other logistics that are relevant to your business. For some more information on how to handle the final redundancy meeting you can click here
Step 8 – Managing Appeals against Redundancy Outcome
When making redundancies in your business, there is no statutory right to an appeal, with the idea being that the employee has been given a lot of opportunity throughout the process to raise their issues and concerns.
However, it is still best practice to offer an appeal and we recommend that you do so.
By giving an employee the right to appeal, you can gain insight into whether the employee is likely to pursue matters through the employment tribunal system, and it does also give employees a final chance to raise ways in which they think the process has been unfair.
Managing the Risks when Making Redundancies
Making redundancies is not an easy process.
The key legal claims that can arise from a redundancy process are unfair dismissal claims and discrimination claims. We tell all of our clients that there is no way to guarantee that your employees will not file an employment tribunal claim against you but, by conducting a fair, thorough and transparent process you do help to minimise the risk of both the claim and losing in the tribunal.
The key things that you can do to help manage the risks when making redundancies are as follows:
- Only use redundancy in a real redundancy situation. This may sound obvious but we often hear “X is really underperforming so we were thinking about making them redundant”. This is unlikely to end well! Redundancy has a legal definition and it’s important that you only use the process in a genuine redundancy situation.
- Have a meaningful consultation. It’s very important that you don’t present employees with the decision made. Employees need to be given a real opportunity to influence the outcome of the process and feed into the plans and proposals before they are finalised. Of course, if you had ideas for an alternative to making redundancy then that is what you would be doing. However, just because you can’t think of an alternative, it does not mean that your employees will not be able to. Be clear with them about the business objectives that you’re looking to achieve and then see if they have alternative suggestions.
- Be transparent. Share information and be open about how decisions are being made. Make sure that employees understand how you are selecting those who remain in the business and give them the opportunity to challenge your thoughts and decisions.
Redundancy is complicated.
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.
Add into this, employees at risk of redundancy are typically very challenging throughout the process.
We really do advise you to seek professional support before embarking on a redundancy process of any size.