I Wonder How to Handle Redundancies Fairly?

Redundancy is a form of dismissal that occurs when a role is no longer required within a business. This typically happens when an employer reduces its workforce due to economic downturns or restructuring.

This article will examine how employers can manage redundancies in a fair and legally compliant manner.

Understanding Redundancy

Under the Employment Rights Act 1996 (ERA 1996), redundancy is recognised as a potentially fair reason for dismissal, provided the employer's decision falls within the range of reasonable responses expected of a fair employer in the given circumstances.

An employee is considered dismissed by reason of redundancy if the dismissal is mainly due to the employer ceasing or intending to cease the business for which the employee was employed, or ceasing to carry out that business at the location where the employee works. It can also apply if the employer no longer requires employees to perform a specific type of work, or if the need for such work, either in the particular role or at the particular location, has ceased, diminished, or is expected to cease or diminish.

The Legal Requirements for Fair Redundancy

Redundancy comes with a set of legal requirements designed to protect employees. Employers must ensure that the process is carried out fairly, with clear, objective criteria for selecting employees for redundancy and a transparent consultation process.

Understanding these legal requirements is essential for both employers and employees, ensuring that the redundancy process is handled in accordance with the law and in a fair and respectful manner.

Fair Selection Process

Employers are required to apply fair and objective criteria when selecting employees for redundancy. Commonly used selection factors include work standards or performance, skills, qualifications or expertise, attendance records (which must exclude absences related to disability, pregnancy, or maternity), and disciplinary records. The criteria should be based on factual evidence, rather than personal opinions. Nonetheless, employers can adopt other criteria appropriate to their specific business needs.

Crucially, employers must avoid discrimination during the selection process. The selection criteria must not be influenced by the nine protected characteristics under the Equality Act 2010. These include age, disability, gender reassignment, marriage and civil partnership, pregnancy and maternity, race, religion or belief, sex, and sexual orientation. The criteria used must also not indirectly discriminate against any employee.

Employers must not select anyone for redundancy based on factors such as being on any type of family leave (e.g. paternity leave or parental bereavement leave), having a role as an employee representative or trade union representative, being a member of a trade union, being on a part-time or fixed-term contract, anything in relation to the Working Time Regulations such as raising concerns about holiday entitlement or rest breaks, raising concerns about national minimum wage or raising concerns about whistleblowing.

Consultation Process

Consultation is another vital component of a fair redundancy process. Employers are legally required to consult with employees before making them redundant. This process can be divided into two stages:

• Individual Consultation – If an employer is proposing to make fewer than 20 redundancies, they must consult with each affected employee. These consultations should provide employees with an understanding of the reasons for redundancy, allow discussion of the selection criteria, address any concerns they may have about the process, and explore any alternative solutions or redeployment opportunities within the company.
   
• Collective Consultation – If an employer is proposing to make 20 or more employees redundant within a 90-day period at a single establishment, they must hold a collective consultation. This involves informing and consulting with employee representatives (such as trade unions or other employee representatives). The consultation must begin at least 30 days before the redundancies are set to take effect. If 100 or more employees are being made redundant, this is extended to 45 days. In addition, employers must also consult with employees individually, as described above.

Employers must genuinely consider any suggestions or objections raised by employees and make efforts to avoid redundancy where possible.

Notice Period and Redundancy Pay

Employees are entitled to a statutory notice period, unless their contract stipulates a longer notice period; in which case, they are entitled to the contractual notice period if they are being made redundant. The length of the notice period depends on the employee’s length of service, ranging from 1 week to a maximum of 12 weeks.

Employees may also be entitled to statutory redundancy pay if they have worked continuously for their employer for 2 years or more.

The amount of redundancy pay an employee is entitled to is determined by their age, length of service, and weekly wage (subject to a specified cap).

Potential Claims and Disputes

Redundancy can sometimes lead to disputes. Employees who feel they have been unfairly selected for redundancy or mistreated during the process may bring claims against their employer. These claims often include unfair dismissal, where an employee argues that their redundancy was not genuine or that the redundancy process was unfair. There may also be discrimination claims where the employee believes they were selected for redundancy for discriminatory reasons.

Best Practices for Employers

Some best practices for employers include:

• Communication – Employers should inform employees about the possibility of redundancy, explaining the reasons and process clearly.
   
• Conduct a fair selection process – By applying fair and objective criteria when selecting employees for redundancy, you ensure that no discrimination occurs.
   
• Documentation – Maintain clear records of the selection criteria, consultations, and decisions made throughout the process.
   
• Support for affected employees – Provide retraining, career counselling, and outplacement services.
   
• Legal compliance – Ensure compliance with all statutory obligations, including redundancy pay and consultation, to mitigate legal risks.

Conclusion

Redundancy is an unfortunate reality for many businesses, but handling it fairly and legally is crucial to avoid disputes and maintain employee trust. By managing redundancies fairly, employers will ensure compliance with the legal framework governing redundancy procedures.

Further Advice

If you have any queries on redundancies or any other employment-related matters, our Peace of Mind Team is here to provide expert guidance. Our Document Audit Team can also assist in drafting relevant workplace policies.

Contact our Employment Team by emailing employment@warnergoodman.co.uk or calling 023 8071 7717.

Make Work Pay Programme

With the upcoming Employment Rights Act 2025, UK employers face increasing pressure to adapt their practices and stay compliant with new regulations.

Our Make Work Pay Programme offers a structured, six-month, fixed-fee solution that helps businesses:

• Understand and prepare for new employment legislation.
• Align internal processes with legal and commercial best practices.
• Minimise risk and build a stronger, compliant workplace.

Click here to learn more about how our Make Work Pay Programme can help your business.