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Employer's guide to dealing with redundancy

As an employer, you may not want to think about the possibility of having to make redundancies, but unfortunately they can be a reality of running a business, especially in a recession.

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What is a redundancy?

Legally, a redundancy is where a dismissal is wholly or mainly attributable to the closure of a business, relocation of the workplace, or reorganisation resulting in a reduced need for employees.

Redundancy is about the needs of the business and a change in requirements. It is NOT about the individual's failings in their role. Poor performance should be dealt with through your capability and disciplinary procedures. Never use redundancy simply as a tool to root out the poor performers as this carries a high risk of resulting in unfair dismissal claims.

Whether or not you are planning to make a redundancy, failure to prepare for the possibility of such a situation can leave you in danger of walking into a minefield of costly and time consuming problems.

Know how to identify a potential redundancy situation

Redundancy arises when an employer no longer requires a role to be carried out, where there is a reduction in the number of people required to fill a role or when a business is closing or relocating. It is important to remember that redundancy is about the needs of your organisation and the change in the need for the role. It is not about the performance of an individual or their failings. Note: TUPE (transfer of undertakings) when a business or part of it is sold is not the same as redundancy.

Plan thoroughly and take advice

Where any potential redundancy situation is identified, plan thoroughly and timetable what actions you need to take. Take advice to minimise the risk of expensive and time consuming claims.

Redundancy exercises take many weeks to carry out properly. Do not expect you can immediately dismiss employees.


The largest part of a redundancy exercise is carrying out consultation. Collective redundancies (where 20 or more employees are proposed to be dismissed within a period of 30 days, or 100 or more employees in a period of 90 days) require the giving of specific written information and consultation with trade union or employee representatives over prescribed periods before any employee can be given notice. Individual consultations must take place too.

If the collective consultation rules apply, you also must send a form to the Redundancy Payments Office (the HR1) confirming the proposals and provide a copy of the form to the representatives. The same timescales apply as for collective consultation. Failure to send the form is a criminal offence.

Consultation is a two way process. Representatives and individuals have a right to respond to the redundancy risk, any selection methods and how these are applied, plus alternative ways in which jobs can be preserved. All of this must be discussed before you make a final decision.

Follow the statutory procedures

Statutory procedures apply to dismissals on the grounds of redundancy. They do not technically apply where the collective consultation provisions apply, but in practice employers are advised to follow them to show a degree of individual consultation and dialogue.

Consider who you put at risk

The pool of employees who may be at risk will need to be identified. Whilst it is often considered best practice to consider all those at risk, you may not want to cause a period of uncertainty for those who will stay. This is a fine line and an incorrect pool can ultimately make a subsequent dismissal unfair.

Get your selection right

Where employers need to select from a pool, selection must be by criteria which is objective, capable of measurement and non discriminatory. A 'last in, first out' policy carries an age discrimination risk (which needs to be carefully assessed with a legal adviser) whilst attendance should discount any absences caused by disability or pregnancy.

Know how much employees will get

Identify the cost of contractual notice or payment in lieu of notice and redundancy payments. In collective redundancies, formal notice is usually unable to be given until the prescribed periods have elapsed.

Statutory redundancy payments are based on length of service, age and salary. Employees may also be entitled to more if there is a contractual right to an enhanced redundancy payment.

Watch your language!

Consistently use the right terminology such as proposed, envisaged and intended to show that nothing is set in stone. All relevant documents are potentially required to be disclosed in any subsequent tribunal claim.

Lists of names identifying those to be made redundant, inappropriately worded e-mails or future organisation charts are traps for the impatient and unwary employer.

Effective communication is also important throughout all stages of the process, from the initial announcement right through to the redundancy discussions with the individuals concerned. Good communication ensures that all employees know what is going on and don't have to rely on the grapevine for information.

Beware of future recruitment

If there are vacancies available which can be filled by those at risk of redundancy, then they must be offered to them. Seeing job adverts is an easy way to antagonise those made redundant and any tribunal will carefully scrutinise when such vacancies arose.

Look after those that are staying

The purpose of redundancy is to make an organisation run more efficiently and it is easy to lose sight of the employees who are going to stay and make that a reality. Consider how you will communicate with them, what you will say and how you can make the message for them positive.

Note: This article is provided for guidance only and does not constitute legal advice. We advise any employer in a redundancy situation to seek legal advice immediately – members should call us on 0845 130 1722.