Making staff redundant is stressful. For staff, and for managers. How you plan and manage staff redundancies can have a lasting impact on those affected. It can also impact your business reputation.
How you plan and manage staff redundancies can have a lasting impact on those affected. It can also impact your business reputation.
So how do you manage staff redundancies to minimise the stress for everyone and ensure a smooth process?
Staff Redundancy Planning
Consider why you feel redundancy is needed and explore other options. For instance, could you reduce costs in other areas of your business?
Reducing hours, freezing overtime or removing discretionary benefits are options. You could also consider changing terms and conditions. Whilst these options may not be popular, they may save jobs.
Redundancy Communication and Consultation
Before you finalise any redundancies, you must inform employees they are “at risk”. You are legally expected to discuss the situation with them in full. You should allow at least two weeks for redundancy consultation and communication. Depending on your business, you may need to offer longer.
Before you finalise any redundancies you must inform employees they are “at risk”. You are legally expected to discuss the situation with them in full. You should allow at least two weeks for consultation and communication. Depending on your business, you may need to offer longer.
You must be able to show that you have:
- explored alternatives to redundancy
- discussed possible redeployment
- responded to any questions or concerns from staff (see Managing Redundancy Communications)
Making The Role, Not The Person, Redundant
Remember, you are making the role redundant, not the person. If you have multiple people doing the same role, you need to consider everyone fairly when making redundancy decisions.
Don’t use redundancy as a solution to resolve a specific person problem! Legally, you must show that you’ve used the right procedure for the right reason.
How do you fairly decide which employees will be made redundant? If you need to save costs, but work is still required, it can be difficult to identify how to achieve this.
Do you have several staff doing the same role? Do you need to reduce numbers? Consider offering staff voluntary redundancy.
For example, you have 5 people now, and will only need 3 in the future. Ask all 5 if they want to be considered for voluntary redundancy. Some employees may be prepared to reduce their hours to save jobs.
Consider how you will manage requests. You could base your decision on:
- redundancy costs
- loss of skilled or experienced staff OR
- not being able to say yes if everyone would like to leave!
This applies if :
- The role is completely removed from your business
- You need to select from a group of affected employees
Decide how you will select which staff will be made redundant.
Redundancy selection and scoring criteria could include:
- Qualifications held and relevance to business
- Level of experience / skill / performance demonstrated
- General attitudes / team working
- Time keeping / attendance
- Any current disciplinary or formal capability warnings in place
- Level of sickness absence (excluding disability or pregnancy related absence)
- Length of service
Ideally, at least two managers/individuals should score each affected employee. You should also consider your future business needs. You should also ensure you keep careful notes of the reasons for your decisions.
Consider how you will recruit to other available positions or newly created roles. Also, consider which colleagues may be eligible to apply or be automatically moved.
You are legally obliged to take reasonable steps to avoid redundancies. Additionally, all affected staff should be fairly treated.
When redeploying staff, consider agreeing 4 week-trial periods. This will allow you to ensure new roles are suitable before making final decisions.
Consider the financial costs. Will you apply the minimum statutory redundancy calculations or offer something extra?
All employees are entitled to a fair redundancy process.
Employees with less than 2 years’ continuous service are not entitled to redundancy pay.
Staff with 2 + years’ service are entitled to redundancy pay. Redundancy page is based on their age, average weekly salary and number of full years’ service.
They are entitled to :
- half a week’s pay for each full year they were under 22
- one week’s pay for each full year they were 22 or older, but under 41
- one and half week’s pay for each full year they were 41 or older
Length of service is capped at 20 years / maximum paid is 30 weeks.
At the time of writing the statutory cap for weekly pay is £525 (this is reviewed every April).
Up to £30,000 for redundancy payments (severance pay) can be paid Gross. This is not subject to deductions.
Severance pay should be separately itemised on the final salary payslip.
You will need to ensure you have given the correct notice periods and that these are paid in lieu if not being worked.
Give either statutory or contractual notice periods (whichever is the longer).
Statutory notice is calculated as follows:
- at least one week’s notice if employed between one month and 2 years
- one week’s notice for each year if employed between 2 and 12 years
- 12 weeks’ notice if employed for 12 years or more
Notice pay will be subject to normal deductions.
Final Salary Pay
You should ensure final salary payments include:
- accrued pro rata holiday entitlements
- outstanding payments for overtime
- commission etc.
Deduct tax, national insurance or pension contributions from final salary payments.
Redundancy Right of Appeal
Employees facing compulsory redundancy have a legal right of appeal.
Right to be Accompanied
There is no statutory right for employees to be accompanied to redundancy meetings. However, it is good practice to allow them to be.
When speaking to staff about redundancies:
- Be as clear and transparent as you can
- Clarify the timeframes and process
- Help the employees understand what they need to do and consider as next steps.
- Where there are fewer roles, be open and honest about the process
Confirm Redundancy Details In Writing
Don’t forget to confirm all outcomes in writing, for example:
- Date that compulsory or voluntary redundancy applies
- Details of any promotion / demotion / change to role
- Any variations to terms and conditions and/or if new contracts are being issued