As a business owner, having to make workers redundant is a prospect you never want to deal with. The reality is, however, that sometimes it is a necessary decision you will have to make.
Redundancy can be an incredibly complex form of employment law, so it is essential that you seek expert advice at your earliest possible opportunity to ensure that everything is carried out as it should be.
What is Redundancy?
Redundancy is a form of removing a worker from their position, usually because the job is no longer required. It is often confused with dismissal, which is when an employee loses their job because of something they have done wrong. In the case of redundancy, however, it is purely a business decision and no fault of the worker.
Why Make Workers Redundant?
There are a number of reasons why a business may need to make workers redundant. These are:
Employees can often be made redundant following a review of the company’s finances. This will usually be due to resizing the business or closing down a particular department or branch. In more extreme circumstances, redundancies can come about as a result of administration or a company voluntary arrangement.
No Need for the Role
Sometimes a business will conduct a thorough review of its operations and find that there is simply no need for a particular role to exist, either at all or in a full-time capacity. If the position is only required on a part-time basis, the job must first of all be offered to the person who was already carrying it out. Should that employee turn down the offer, then they will be entitled to receive redundancy pay.
Full Business Closure
The final main reason why a company may need to make workers redundant is due to the complete closure of the business. This can either be voluntarily as a result of a Members Voluntary Liquidation (MVL) or Creditors Voluntary Liquidation (CVL), or due to pressure from creditors in the form of a Compulsory Liquidation.
How to Make Workers Redundant
The process of making employees redundant can be quite a lengthy one with many complex parts. It is essential that you ensure all of these steps are followed to the letter, meaning it is a good idea to seek the advice of a specialist beforehand.
With this in mind, here is a rundown of all the steps involved in making workers redundant.
This is the very first step a company must take if it has to make workers redundant. It involves informing all employees of what will be happening and why the decision has been made. The business will have to explain why the redundancy is necessary and if there are any alternatives. The consultation can either take place on an individual basis or to the workforce as a whole.
A company is obliged to carry out a collective consultation when it is making at least 20 employees redundant over the course of 90 days or less. It is then advisable to carry out individual consultations, as an employment tribunal could find it unfair that staff were only notified collectively.
The consultation must take place at least:
- 30 days before the first redundancy takes place in cases where there are 20-99 employees involved
- 45 days before the first redundancy takes place in cases where 100 or more employees are involved
It is also important to put down everything that was discussed in the meetings in writing – including:
- Reasons for the redundancies
- Numbers and descriptions of the affected employees
- The proposed method of selecting who will be made redundant
- The proposed method in which redundancies will be carried out
- How redundancy payments other than the legal minimum will be calculated
In cases where not all employees will be made redundant, company owners will need to devise a way of deciding who will be let go. A good way of doing this is to work out a scoring criteria, with those scoring lowest being selected for redundancy.
All of the criteria used must be objective, fair and without discrimination. Any records that are used as part of the decision making process have to be completely accurate and up to date. Examples of the criteria that can be used include disciplinary records, attendance records, experience, skills and work performance.
It is essential that employees are never selected for redundancy based on discriminatory reasons, as this could give rise to claims for discrimination and result in employment tribunals. For example, you should not select an employee based on their gender, age, religion, marital status, sexuality or if they have a disability. It is also not permissible to choose them for being on maternity/paternity leave, whistle-blowing, being pregnant or for exercising any of their statutory rights.
Once the decision of who will be made redundant has been made, the next step is to write to all those affected and invite them to a meeting. They will be entitled to be accompanied by a colleague or trade union representative.
Each employee should be consulted with individually to discuss their scores, the proposal for making them redundant and any opportunities for alternative employment – should they exist.
Make Workers Redundant
After any objections or alternative options that resulted from the consultations have been ironed out, employees that have been selected for redundancy should be invited to a final meeting. During this meeting, the reasons for redundancy have to be clearly set out, their redundancy package explained and they should also be advised of their right to take time off work to find alternative employment.
The decision to make the worker redundant should also be given in writing, with their termination date clearly stated. The employees can either be paid for the relevant amount of notice or receive a payment in lieu. They should also be given the right to appeal the decision.
Employees are entitled to receive statutory redundancy payments provided they have been employed by the company for a period of at least two years. The statutory payments are:
- 0.5 weeks’ pay for each full year of service while they were aged under 22
- 1 week of pay for each year of service while they were aged 22-41
- 1.5 weeks’ pay for each year of service that they were aged over 41
The length of service that can be counted is capped at 20 years, while the weekly payment is also capped at £479. For more information about calculating redundancy payments, please see our blog on the subject.
What are the Alternatives?
By conducting a thorough review of the business, it may be possible to look at other alternatives to redundancy, such as:
- Offering early retirement
- Reducing or eliminating overtime
- Retraining and redeploying staff into other areas of the company
- Terminating the employment of contract workers
How Inquesta can Help
Having to make workers redundant is never easy and should only really be carried out as a last resort. This is why speaking to a specialist business advisory company, like Inquesta, can help. We will conduct a thorough review of your business to identify other ways in which your fortunes can be turned around, or to alleviate any financial problems your business may have.
If you are in the unfortunate position that you have to make workers redundant as the result of insolvency, we are also able to act as a licensed insolvency practitioner and ensure that everything is taken care of with your best interests in mind.
Whatever your situation, contact our team today or book a free consultation to find out how Inquesta can assist.