Dealing With Redundancies: A Guide for Employers

Dealing with redundancies is one of the most challenging aspects of being an employer. Regardless of whether redundancy arises from financial challenges, technological issues, or restructuring, employers must comply with UK employment law to ensure the process is legally compliant and fair. This guide outlines key legal requirements, best practices, and key tips for handling redundancies professionally.

Understanding Redundancy in UK Employment Law

Redundancy is when an employer needs to reduce the staff because a role is no longer needed. This could be due to full or partial business closure, relocation, or a reduced need for that specific role/roles. Under the Employment Rights Act 1996, redundancy is a fair reason for dismissal, but it must be handled correctly.

Legal Obligations for Employers

Employers must follow UK employment laws when making employees redundant. Key legal obligations include:

• A valid reason as the redundancy must be genuine, not used to unfairly dismiss an employee.
• A fair selection process with an objective criteria to select employees for redundancy.
• Consultations with employees before final decisions are made.
• Statutory redundancy pays for eligible employees.

Failing to meet these obligations could result in claims for unfair dismissal or discrimination.

The Redundancy Process: Step-by-Step

Step One: Planning and Business Justification

Before initiating redundancies, employers should –

• Assess alternatives (e.g., reducing hours, redeployment, voluntary redundancy)
• Document the business case for redundancies
• Identify which types of roles are affected

Step Two: Selecting Employees for Redundancy

The selection criteria applied must be fair, objective, and non-discriminatory.

Common criteria include –

• Length of service (last in, first out – this should be the one the least weight is applied to as it may spark allegation of age discrimination)
• Skills, qualifications, and experience (skills the employer wishes to retain within the business should be a key factor in selection)
• Performance records
• Attendance (excluding maternity/ pregnancy-related or disability related absences)

Avoid criteria that could be deemed discriminatory, such as age, gender, and disability.

Step Three: Employee Consultation

Consultation is a legal requirement under UK law. The process depends on the number of employees affected –

• Fewer than 20 redundancies – individual consultation is required
• 20+ redundancies within 90 days – collective consultation with employee representatives or a trade union (minimum 30-day consultation period)
• 100+ redundancies within 90 days – minimum 45-day consultation period

Failure to properly consult could lead to claims for unfair dismissal or a protective award of up to 90 days’ pay per employee.

Step Four: Redundancy Notice and Pay

After consultation, affected employees must receive –

• A formal redundancy notice (length depends on contract and statutory requirements)
• Redundancy pay (if they have at least two years of service)

Statutory Redundancy Pay (2024 Rates) –

• Half a weeks pay per year of service (under age 22)
• One weeks pay per year of service (aged 22-40)
• One and a half weeks pay per year of service (over 41)

But note that a weeks’ pay capped at £700 (as of April 2024) so if you earn more than this, this is the maximum that will count when calculating (if you earn less, your actual weeks’ wages apply).

Step Five: Supporting Employees and Alternative Employment

Employers must consider offering alternative roles within the organisation. Employees have a statutory right to a 4-week trial period in an alternative role without losing redundancy rights.

Note that those who are pregnant or on maternity/adoption leave are entitled to special protection so advice should always be sought.

Providing support, such as career counselling, CV workshops, and references, can help maintain morale and employer reputation.

Legal Risks and How to Avoid Claims

Common Legal Pitfalls:

• An unfair selection criteria could lead to discrimination claims
• A lack of consultation could lead to unfair dismissal claims
• Incorrect redundancy payments could mean employees can take legal action

Avoiding Tribunal Claims:

To minimise legal risks –

• Follow ACAS guidelines and seek legal advice when unsure.
• Keep detailed records of the process, selection criteria and communications.
• Be transparent and communicate with employees throughout the process.

Redundancies should be a last resort, and when necessary, they must be handled with care, fairness, and legal compliance. Following UK employment laws, maintaining clear communication, and supporting affected employees will help protect your business from legal claims and reputational damage.

If you’re facing redundancies, don’t hesitate to contact Aston Bond’s experienced employment solicitor at imardarescu@astonbond.co.uk to ensure you comply with UK employment laws and treat employees fairly.