How to inform employees of a redundancy decision

So far in our series of articles explaining the redundancy process in detail we have covered reviewing the business then putting a redundancy plan together, announcing the plan to all employees ‘affected’ by the proposal, some important considerations such as the selection process for who should be made redundant from those at risk, and then in the last two weeks we have discussed the Individual and then the Collective consultation processes.

Once the above stages have taken place employers will have fulfilled the ACAS requirements regarding redundancy consultation and so decisions can be taken. That is what we will cover in today’s article, along with how to give notice of redundancy to employees and the requirements regarding confirming individuals into alternative roles if they can be found – whether they want to be appointed or not!

Next week we’ll complete this series of articles by looking at the processes that should be followed once notice of redundancy has been given, including time off for seeking alternative work, outplacement support, and finally the process regarding appeals against redundancy decisions.

Making a redundancy decision

As covered in previous articles, the decision maker would normally be the director or senior manager who made the initial redundancy announcement to those staff who are affected by the proposal. This individual does not need to have been heavily involved in the consultation process thus far.

The individual who has managed the consultation process should give a summary to the decision maker to consider the evidence regarding possible alternatives to making employees redundant. They should then challenge the evidence, asking for any further action to be taken if appropriate so they have all relevant information to hand on which to base their decisions.

As part of this interrogation of the evidence the decision maker should consider whether there are any alternatives to making redundancies, for example through:

• Widespread offer of voluntary redundancies.
• 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 employees who wish to move to other parts of the business.
• ‘Bumping’ employees out of roles and appointing employees whose roles are redundant into these roles. This may be appropriate where the business has a need to retain certain knowledge, skills or experience.

For more details about the redundancy decision making process or redundancies in general please see our free guide 8 Steps to Making Redundancies

Alternatively, 186hr has produced a comprehensive guide to making redundancies that includes detailed explanations of how to carry out each stage of the process, model policy documents, letters and other documents that have been provided by ACAS and CIPD along with 2 hours of consultation with a highly CIPD qualified, highly experienced senior HR professional to help you tailor the process to your organisational needs.

Once alternatives have been considered then decisions should be made as to whether individuals are to be made redundant or appointed into ‘suitable alternative employment’.

It is inadvisable to make such decisions on the same day that the final consultation meeting(s) take place as that implies that the result was a foregone conclusion and already decided before the end of the consultation process – which would place the organisation at risk of an unfair or constructive dismissal claim.

We therefore recommend waiting at least until the next working day before making and confirming any decisions.

Ideally, communicating the decisions would be done face to face but often logistical issues dictate that it is done remotely either by phone or Skype / Zoom etc. or even email. The decisions should then be confirmed in writing by the decision maker and we’ll look at the requirements regarding such letters now.

Notice of Redundancy letter

As confirmed by ACAS in their redundancy guidance, see www.acas.org.uk/redundancy, the letter should include:

• The dates consultation meetings took place and an explanation of the purpose of those meetings.
• Confirmation that the individual has been selected for redundancy and the date this is effective.
• Length of notice as per the contract of employment.
• Whether the individual will need to work some or all of their notice period i.e. whether some may be paid in lieu and whether the individual will be placed on garden leave for some or all of their notice period.
• Confirmation that the individual may take a reasonable amount of time off to look for alternative employment during their notice period.
• Details regarding accrued but untaken holiday entitlement and that payment for this will be made in their final pay. Alternatively, any overtaken holidays will be deducted from final pay.
• Entitlement to redundancy pay, or confirmation that the individual does not qualify for redundancy pay.
• How to appeal against the decision.
• A schedule confirming the specific payments that will be made.

Please see the above guide for a copy of the ACAS notice of redundancy letter that you can adapt for each individual who is being made redundant.

When giving notice of redundancy please be mindful that notice is deemed to start the day after the:

• letter has been handed to the individual.
• day the notice letter is received in the post. Letters should be sent with proof of delivery.
• letter has been received by email.

Redundancy Pay

Unless you have an enhanced redundancy pay policy your start point should be the government’s statutory redundancy scheme which, in the 2021 /2022 tax year is as follows:

• To receive a redundancy payment the individual must have worked for you for at least 2 continuous years.
• For each full year worked where the individual is aged under 22 they should receive half a week’s pay. A week’s pay is capped at £544.
• For each full year worked where the individual is aged at least 22 but under 42 they should receive one week’s pay. A week’s pay is capped at £544.
• For each full year worked where the individual is aged at least 42 they should receive 1.5 week’s pay. A week’s pay is capped at £544.

Rather than doing this complicated calculation yourself, a quick and accurate way to calculate redundancy pay is to type ‘statutory redundancy pay’ into a search engine and follow the link to the gov.uk website entitled ‘calculate my redundancy’. You will need the individual’s age, redundancy date, weekly pay and the number of full years they have worked for you. Alternatively paste the following link:

https://www.gov.uk/calculate-your-redundancy-pay

Redundancy payments, including any enhanced redundancy pay, are tax free up to £30,000. All other payments are taxable.

Enhanced Redundancy Pay

With regards to enhancing redundancy pay, this is allowed and many companies do so. However, please be careful that you do not enhance it in a way that may discriminate against certain individuals or groups.

Although it could be argued that the statutory scheme, on the face of it, discriminates against younger workers on the grounds of their age, it is a statutory scheme so cannot be challenged. You may remember from previous articles that an organisation can justify a discriminatory act if it can show it is a ‘proportionate means of achieving a legitimate aim’. The government can show that younger workers gain employment quicker than older workers and therefore need less compensation to tide them over in between jobs and that is how it justifies the scheme.

Increasing payments whilst keeping the same proportions as the statutory scheme is acceptable e.g. if you wished to double the number of weeks’ pay for all, or remove the maximum £544 weekly pay for redundancy calculations etc.

The main issue to consider if you move away from the statutory scheme is clearly age discrimination as if you overly enhance the payments to older workers without a justifiable reason that may disadvantage younger workers and lead to a claim of age discrimination.

Also, if you decide to enhance redundancy payments you should do some analysis to ensure that certain groups are not disadvantaged e.g. are male employees getting the majority of the enhanced payments ahead of females; are there any minority ethnic groups of employees who will receive a lower proportion of the enhanced terms than white employees ….?

There are, as you will be aware, specific groups of employees with ‘Protected Characteristics’ such as age, sex, sexual orientation, disability etc who could claim they were  discriminated against if they are disadvantaged by any enhanced redundancy terms either directly or indirectly so if in doubt please take advice.

186hr is a specialist training organisation in diversity and inclusion related matters. If this is of interest, talk through the options with us or see our website www.186hr.co.uk for further details.

Notice Pay

In addition to redundancy pay, all individuals who are being made redundant should receive their full contractual notice pay.

If employees have not been issued with a contract of employment or a ‘written statement of employment particulars’ specifying notice periods then you should default to at least the statutory minimum notice period for employers, which is 1 week for each full year served up to a maximum of 12 weeks for all employees, irrespective of age.

Notice pay is taxable in the same way as normal salary.

You can ask individuals to work some or all of their notice period if you wish, or you can pay some or all as Garden Leave or, if your contract of employment allows it you can pay notice ‘in lieu’, meaning they can leave early and still receive their notice pay in full.

Be careful when paying notice in lieu if you do not have such a clause in the employment contract. Doing so may be classed as a breach of contract and although you are unlikely to be sued for this breach of contract as there will be no loss to the individual, they may argue that as you have breached their contract by paying notice in lieu, they are also therefore able to breach their contract with regards to clauses such as confidentiality, non-poaching of clients, restrictive covenants etc.

Redundancy, notice payments and furlough

If you make an employee redundant whilst they have been furloughed then the furlough payments still apply during the notice period, although you will need to top these employees’ pay up to 100% for the notice period.

Holiday pay

Any 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.

Likewise, if the individual has taken more holidays than their pro rata holiday entitlement as at the termination date then the extra should be deducted from their final pay.

Holiday pay is taxable in the same way as normal salary.

Unless prohibited by the contract of employment you can normally ask employees to take any outstanding holidays during their notice period. You can also specify that outstanding holidays are deemed to have been taken during any period of garden leave.

If you make an employee redundant whilst they have been furloughed then the above still applies regarding holiday pay. You will need to top their holiday pay up to 100%.

We’ll now move on to confirming individuals have been appointed into a new role either during or following the redundancy consultation process.

Suitable Alternative Employment

As explained in previous articles, an employer’s main obligation during a redundancy situation is to try and avoid or reduce the number of redundancies where possible. This includes looking to provide ‘Suitable Alternative Employment’ to those whose roles the company proposes to make redundant.

There are rare occasions where an organisation has either slotted an individual into a role or appointed them into a new role as part of the redundancy process but the individual decides they don’t want the new role and would prefer to be made redundant.

Whereas the company clearly cannot force the employee to undertake the new role, under these circumstances the employer has fulfilled their legal requirements and have found them ‘Suitable Alternative Employment’ and would therefore not need to pay the individual redundancy pay if they left your employment.

This means that if the employee refuses to undertake the new role that would be classed as a normal resignation, not redundancy and you should simply pay their contractual notice pay or until their leave date if sooner.

Clearly this rule applies where the role they have been appointed into is of similar status and has at least the equivalent terms and conditions as the previous role. If that is not the case the employee will be able to argue that the Alternative Employment is not ‘Suitable’ and they would have a good case to claim redundancy.

Confirming an employee has been appointed into a new role

Please see the above 186hr guide for a template letter to confirm the appointment in writing that organisations can adapt for each individual who is being appointed into a new role either during or following a redundancy process.

The following points apply regarding such appointments:

• Their length of service will be continuous.
• Unless an individual has been slotted into a role very similar to their previous role then remuneration for the new role does not have to be the same as it was before the reorganisation. It should be made clear to all from the start of the process that if they apply for any role during the process then their application will be based on the terms and conditions of the specific role they apply for, not their previous terms.
• A new contract of employment should be issued.
• Where a contract of employment has not previously been issued but a ‘written statement of employment particulars’ was provided when the individual started their employment, an updated written statement of employment particulars letter may be sent with the new details, as opposed to a contract of employment.
• We sometimes find that neither of the above documents have been issued to employees by SMEs when we work with them. If that is the case for your organisation then please contact us and we will help you to do this on a low cost consultancy basis, using CIPD approved documentation.
• If you are devising the document yourself you may wish to refer to our previous article https://186hr.co.uk/i-know-its-a-pain-but-smes-really-should-issue-contracts-to-all-employees-heres-why/

 where we provided a list of what needs to be included in such a document. All letters should be checked against this checklist.

• A trial period of 4 weeks is normally the legal maximum permitted when appointing an employee into a new role following redundancy consultation unless there is a formal training requirement that would take longer. After this 4-week period the individual is deemed to have accepted the role and if they leave your employment they would not be entitled to a redundancy payment.

If, either during or at the end of the trial period, the role is shown to be unsuitable then the individual should be made redundant on the same terms as if they had not been appointed into the role.

We hope this article has been useful. If you would like to discuss the redundancy process, or any other HR matters, further please do not hesitate to contact us