8 Steps to Making Redundancies

Introduction

According to CIPD, redundancy occurs when:

• The employer has ceased, or intends to cease, continuing the business, or
• The requirements for employees to perform work of a specific type, or to conduct it at the location in which they are employed, has ceased or diminished, or are expected to do so.

When making redundancies it is a difficult time full of strong emotions for all concerned, from the individuals potentially losing their jobs to the managers having to follow the process, and then there are the colleagues who remain, sometimes feeling a bit guilty to have kept their jobs, mourning their colleagues who have left, but also picking up some of their workload often for no extra pay!

Throughout the process we would advise that you bear in mind these 3 different groups and do all you can to achieve the following:

• Allow any staff made redundant to leave with dignity and feel that although they may be disappointed to lose their jobs, they were treated fairly. It’s the right thing to do but also you never know where they will turn up next!
• Ensure managers are equipped to follow the process fairly. Some managers will need more support than others as this is also an emotional process for them so consider further support including training and counselling where appropriate.
• Look after the staff that remain. This process may make them feel wobbly and it’s important to communicate with them and update them. They will also judge the company by how their colleagues are treated in this process so please be mindful of ‘survivor syndrome’.

When you need to go through a redundancy process we recommend you follow these 8 steps:

1. Analyse what you need the end result of this process to be.
2. Devise a robust plan for carrying out the redundancy process.
3. Announce the plan to all those ‘affected’.
4. Consult with all affected employees, either Individually or collectively.
5. Make and then confirm decisions.
6. Issue Notice of Redundancy letters with a right to appeal against the outcome.
7. Issue Confirmation of Appointment letters to those who move into new roles.
8. Consider further support for employees who are being made redundant.

Our full guide, the Practical Guide to Making Redundancies supports companies of all sizes to carry out this difficult task fairly, legally and to enable people to leave your organisation with dignity and ready to face their next challenge rather than feeling they were treated unfairly.

Step 1. Analyse what you need the end result of this process to be

Whereas initially this may primarily be a cost reduction exercise we advise that you treat it as an opportunity to devise a new structure for the organisation or department that is based on your market as it is now, which may be significantly different to how it looked a few months ago, and also how you expect the market to develop in future.

This is your opportunity to change and improve efficiency through looking at the organisation’s or department’s structure as if it is a blank canvas. Ask yourself the question:

‘knowing what I know now, how should I structure this company / department to be the most effective it can be in today’s market and also the future as I see it?’

Once you’ve considered the structure that best suits your current and future requirements, Job Descriptions should be put together for any new or changed roles.

Step 2. Devise a Robust Plan for Carrying Out the Redundancy Process

If you have worked with us before you will be aware of our most used quotation regarding employment law, which comes directly from an employment Judge:

‘If you want me to find in your favour at Tribunal then follow the law, follow your policy, and act reasonably at all times’.

Please remember that failure to follow a reasonable process may mean you are liable for claims even if there are good grounds for the redundancy dismissal(s).

Our full guide, the Practical Guide to Making Redundancies, explains all your legal requirements and provides you with a model redundancy policy from CIPD to adapt to your company if you need it. With regards to the requirement to ‘act reasonably’, following the guide will enable you to achieve that.

Before making redundancies you should seek to avoid or reduce the need for doing so where possible. You should consider measures such as:

• Widespread offer of Voluntary Redundancy.
• Offering flexible working e.g. part time.
• Temporary reduction in working hours.
• Temporary layoffs.
• Reduction of temporary or agency staff.
• Recruitment freeze
• Restricting overtime.
• A programme to retrain any employees who may be made redundant.

If, after considering these measures, redundancies are still needed then you will need to put a plan together. When doing so you should consider the following:

• Unions and Representatives – there are various times in the process when employees are entitled to be represented by their union or elected Representatives.
• Numbers, Timescales and Locations of redundancies – there is no specified minimum consultation timescale for proposed redundancies of under 20 roles at any individual ‘establishment’. However, for 20 or more redundancies in any 90 day period then Collective consultation must start at least 30 days before notice of redundancy is served. This increases to 45 days for 100 or more proposed redundancies.
• When proposing 20 or more redundancies at any establishment you need to inform the Redundancy Payment Service, by completing form HR1.
• Pregnant employees, people on maternity leave and adoptive parents – receive a high level of protection in any redundancy process.
• Slotting – where a role is very similar in the new structure to one that is being made redundant it may be possible to ‘slot’ an individual into the new role without placing their role at risk of redundancy.
• Pooling – it is a requirement that all roles similar to the roles you propose to make redundant are pooled together, with a fair selection process followed to decide who is appointed and who will be made redundant.
• Apprentices – generally apprentice roles should not be made redundant unless there really are no other alternatives.
• Tupe – if you are proposing redundancies that are connected to an acquisition that involves a Tupe transfer, those employees have an increased level of protection.

Our full guide includes detailed explanations of all the above areas along with template documents for you to adapt to your circumstances.

Step 3. Announcement to all those ‘Affected’.

When deciding who should make the announcement, remember that the final step in the process is to give individuals chance to appeal against the outcome, so avoid the person who would hear any appeals making the announcement.

The announcement should be made to all those ‘affected’ by the redundancy proposal, including those whose roles are being placed at risk of redundancy and also those whose roles you are proposing to change but who are not being placed at risk of redundancy.

Remember to include individuals on maternity leave, sickness absence, holidays etc

The details should then be confirmed in writing and a letter informing individuals that their roles have been placed at risk of redundancy and confirming what happens next should be handed to each affected employee at the end of the announcement.

Full details of what needs to be included in the announcement, along with an example for you to adapt to your circumstances and sample ACAS approved ‘at risk’ letters are included in our full guide.

Some of the actions explained in the announcement and letter need further explanation:

• The Selection Process – you will need a fair method of selecting who will be appointed and who will be made redundant from those who are at risk of redundancy. We recommend that you ask people to apply for roles they wish to be considered for in the new structure and, whereas you may choose any fair selection method you prefer, we recommend using a ‘Selection Matrix’ approach where you score individuals against set criteria for the role.

We would avoid using a ‘Last In First Out’ (LIFO) selection process as this can be found to be discriminatory e.g. against younger workers who often have less service.

• Individual or Collective Consultation? – where the company are proposing 20 or more redundancies at one establishment within a 90- day period Collective consultation must take place with elected Representatives consulting with the organisation on behalf of employees. If under 20 redundancies are proposed the company can choose whether to follow Individual or Collective consultation.
• Choosing Representatives for Collective Consultation – where a union is recognised by your company they will usually appoint Representatives for this process. If there is no union but Representatives have been previously elected for a different purpose then these Representatives may be appointed. Where neither of these apply, Representatives must be elected by secret ballot. You should then confirm the election and role in writing to each Representative.

Our full guide includes full details regarding the above points, including CIPD approved Selection Matrix, ballot forms and sample letters for you to adapt to your circumstances.

Step 4. Consult With All Affected Employees, Individually or Collectively.

When considering under 20 redundancies at any establishment, 186hr has developed a 15-day Individual consultation process that has been widely praised and never challenged legally or at Tribunal despite being followed on numerous occasions. It includes:

• Day 1. First Consultation Meeting shortly after the Announcement – including: Representation; an explanation of why their role is at risk; ‘pooling’; vacancies; the selection process and how to challenge it; voluntary redundancy; the purpose of the process; suggestions to avoid or reduce redundancies; what happens next.

Following each round of Individual consultation meetings we recommend you send round to all those at risk of redundancy a Q and A document.

• Day 8. Second Consultation Meeting- including Representation; vacancies; update on the selection process; proposals to avoid / reduce redundancies; what happens next.
• Day 15. Final Consultation Meeting – same format initially as second consultation meeting but with more details regarding what happens next as the process is about to close and decisions made.

It is possible to follow a shorter Individual consultation process in certain circumstances.

Comprehensive explanations of the shorter process and also the 15 day process are Included in the full guide, also including sample letters, the structure of consultation meetings, an example Q and A document and other documentation for you to adapt to your circumstances.

Where 20 or more redundancies are proposed at any establishment you must follow a Collective Consultation Process, including:

• Appoint Representatives for Collective Consultation – if you recognise a union they will appoint Representatives. Alternatively you may already have elected employee Representatives for a different purpose. If neither of these apply you will need to hold a secret ballot to elect Representatives and confirm appointments in writing.           
• Decide which Representative should represent which employees, remembering to include those who are absent on maternity leave, long term absence etc.
• First Consultation Meeting – including: ensure all Representatives are clear on their roles; all affected employees have a Representative; union involvement; which roles are at risk and why; ‘pooling’; vacancies; the selection process and how to challenge it; voluntary redundancy; the purpose of the process; suggestions to avoid or reduce redundancies; what happens next.

Following each round of Collective consultation meetings we recommend you send round to all those at risk of redundancy a Q and A document.

• Further Consultations in between the first and last Collective Consultation Meetings – including: union involvement; any new vacancies; an update on the recruitment process; alternative proposals to avoid or reduce redundancies; what happens next
• Final Collective Consultation Meeting – including the above content plus when the consultation process will close; details of the individual consultation meetings that must take place before decisions are made; this is the final Collective consultation meeting; when the company will review any alternative proposals, make decisions and inform you of those decisions; when notice of redundancy letters and letters of appointment into new roles will be issued; the right to appeal against redundancy.
• Individual Consultation Meetings following Collective consultation – these should be arranged before the consultation process closes and before any redundancy decisions are made. They should include: reasons for the redundancy situation; a summary of the process so far; why their role has been selected for redundancy; any alternative employment options or ideas to avoid redundancy; timescales of what happens next, whether they will need to work their notice period; £figures if they are made redundant; any further support available from the company.

Detailed explanations of all the above stages are Included in the full guide along with sample letters, CIPD ballot documents, the structure of consultation meetings, example Q and A document and more.

Step 5. Confirmation of decisions

The individual who has managed the consultation process should give a summary to the decision maker for that individual to then consider the evidence, ask for any further action to be taken if appropriate so they have all relevant information to make decisions, consider whether there are any alternatives to redundancy and then make the necessary decisions and confirm them in writing.

Where relevant you may wish to consider ‘bumping’, where you have a need to keep an individual whose role is being made redundant e.g. if they have specialist knowledge or skills. This is where you make a different employee redundant whose role was not initially at risk in order to keep the first individual employed.

Step 6. Notice of Redundancy

This should be confirmed in writing with proof of receipt. The letter should include:

• Redundancy Pay – your start point should be the government’s statutory redundancy scheme, see gov.uk for further details. If you have an enhanced redundancy policy check that it does not discriminate against certain groups e.g. older workers.
• Notice Pay – full contractual notice pay should be paid although you may decide to place individuals on Garden Leave or pay them in lieu of notice. Where there is no contract or ‘wsep’ you should default to at least the statutory minimum notice period of 1 week for each full year served up to a maximum of 12 weeks pay.
• Holiday Pay – holiday pay outstanding as at the termination date should be paid pro rata according to what proportion of the holiday year they have been employed. You may wish to specify that outstanding holidays are taken during Garden Leave.
• Appeal Details – an appeal against the redundancy decision or process followed should be allowed. Wherever possible the individual who hears any appeals should not have been involved in the process so far, especially not any redundancy decisions and should also be more senior than the redundancy decision maker.

Furlough – if you make an employee redundant whilst furloughed then the furlough payments still apply during the notice period, although you will need to top their pay up to 100% for the notice period.

Time off work to look for an alternative role / for training purposes – individuals must be given a ‘reasonable’ amount of paid time off for this.

Full details regarding timescales, decisions, notice of redundancies and appeals are Included in our full guide including comprehensive explanations of the processes, sample letters, a redundancy calculator and other documentation for you to adapt to your circumstances.

Step 7. Confirmation of Appointment into New Role

Details should be confirmed in writing, including: continuous service; remuneration; a new contract of employment or ‘written statement of employment particulars’; trial period of 4 weeks (normally the legal maximum in a redundancy situation).

See our full guide for further guidance on confirming new roles, including sample letters for you to adapt and a sample ‘written statement of employment particulars’ for you to adapt to individuals. Also what your options are if an employee turns down the new role.

Step 8. Supporting employees who are being made redundant

Once an individual has been made redundant you have no obligation to support them further. However, you may choose to offer counselling, outplacement support, invite a recruitment agency or Benefits Agency employee to the workplace during the notice period. Also the National Careers Service offers free consultations in these circumstances.