Managing staff redundancies

Make staff redundant only as a last resort and manage the process properly, according to the law.

The decision to make staff redundant is never an easy one. Aside from the financial stress and emotional trauma for the people being laid off, it could adversely affect the morale of your workforce and your business' ability to grow if prospects improve.

Consequently, before you start the redundancy process, it's important to consider all the alternatives first.

If you're unable to avoid making redundancies, it's vital you create a redundancy plan in order to avoid any legal complications.

Making a redundancy plan

A redundancy plan will help you manage each stage of the redundancy process.

It should cover how you'll:

  • try to avoid compulsory redundancies
  • consult staff in a meaningful way
  • select staff for redundancy in a fair way
  • give staff adequate notice
  • work out redundancy pay
  • support staff and plan for the future.

You also need to handle the procedure fairly and legally. The GOV.UK website provides further information on how to do this.

Compulsory redundancies

You should only make compulsory redundancies as a last resort, after considering all the alternatives.

Alternatives to compulsory redundancies could include:

  • offering voluntary redundancy or early retirement
  • agreeing to flexible working
  • temporarily reducing working hours
  • retraining employees to do other jobs in your business
  • letting go of temporary or contract workers
  • limiting or banning overtime
  • halting the recruitment of any new employees.


Redundancy consultations

You must hold meaningful redundancy consultations before you announce any job losses.

Consultation is when you talk with employees and their representatives to explain your planned changes and invite them to provide feedback.

By law, consultation must be “meaningful” - this means you must get employees' feedback and input, and seriously consider their proposals. It isn't enough to inform employees of a decision that you've already made.

The Chartered Institute of Personnel and Development (CIPD) explains that at the start of the consultation process, the employer is legally obliged to give their employees' representatives the following information:

  • The reason for the redundancy dismissals
  • The number of proposed redundancies and what types of jobs are being made redundant
  • The total number of employees affected
  • The proposed methods for selecting which employees are to be laid off
  • The procedure to follow in dealing with the redundancies
  • The method of calculating redundancy payments.

You must also discuss any planned changes with each employee who could be affected, giving reasonable warning. This can include employees who aren't actually losing their jobs.

Where there are fewer than 20 redundancies, there is no set time period for how long consultation should last before you give notice of redundancy. However, an employment tribunal could accept a claim for unfair dismissal if you can't show you've consulted an employee or their representatives.

Selecting staff for redundancy

You must select employees for redundancy in a fair way and not discriminate against any individual or groups.

The group from which you select employees for redundancy - known as the selection pool - must be carefully chosen. It should include:

  • employees doing the same or similar role who are at risk of redundancy
  • employees with the same or similar skills in other roles who are at risk of redundancy.

It's important to include in the selection pool all employees in the group who are at risk of redundancy. You must take great care not to discriminate against any particular individual or group.

Typically, you might use the following selection criteria to help decide which employees to make redundant:

  • Standard of work
  • Skills, qualifications or experience
  • Attendance record - however, this must not include absences relating to disability, pregnancy or maternity
  • Disciplinary record.

Giving staff notice of redundancy

You must give employees at least the statutory notice period.

This is based on how long they've worked for you. If they've worked for you for:

  • one month to two years - the minimum notice is one week
  • two to 12 years - the minimum notice is one week for each year they've worked
  • 12 years or more - the minimum notice is 12 weeks.

You should also check your employment contracts - they might include a longer notice period.

Working out redundancy pay

You must pay your employees at least the statutory redundancy pay.

You must also share in writing with employees how you've calculated their redundancy payments.

How much redundancy pay each employee gets depends on their age and how long they've worked for you. It's capped at 20 years - working backwards from the date you made them redundant. You must pay an employee:

  • one and a half weeks' pay for each year of work after their 41st birthday
  • one week's pay for each year of work after their 22nd birthday
  • half a week's pay for each year of work before their 22nd birthday.

Weekly pay should also include:

  • regular overtime, if the employee's contract says they must get paid for it
  • any bonuses or commission.

You can use the GOV.UK redundancy pay calculator to work out an employee's statutory redundancy pay.

As of the time of writing (October 2020), the limit for weekly pay is £538 (£560 in Northern Ireland). The maximum total amount of statutory redundancy pay is £16,140 (£16,800 in Northern Ireland).

You should also check your employment contracts as you might need to pay more than the statutory amount.

If your employee's pay changes from week to week, calculate the average weekly pay for the previous 12 weeks from the date you made them redundant.

If they didn't work for a whole week during that time - for example, if they were on holiday or off sick - replace it with an earlier week.

Furlough and redundancy pay

If you've put your staff on furlough, you may have paid them reduced pay. Redundancy pay calculations must be based on their full contractual pay.

Support staff

Redundancies are likely to affect staff morale and all staff may feel in need of support and encouragement.

In any redundancy situation, your immediate priority, as an employer, should be to give fair and sensitive treatment to those people who are losing their jobs. They will need support in coming to terms with the situation and in seeking alternative employment.

You should also make sure that managers within your business are trained to handle redundancies sensitively and fairly. They may also need support to deal with the stress.

You can support staff by providing:

  • counselling
  • additional face-to-face meetings
  • help getting financial advice
  • clear plans for the future of your organisation
  • help finding work for another company.

Getting help

If you have to make redundancies, Jobcentre Plus can give you and your employees support and advice through its Rapid Response Service.

Support could include:

  • helping those people who are facing redundancy to write CVs and find jobs
  • providing general information about benefits
  • helping people to find the right training and learn new skills
  • helping with costs like travel to work expenses.

To find out how your business can use the Rapid Response Service, email [email protected].

More broadly, remember that your organisation's ongoing effectiveness will largely depend on the morale of those employees still with the business. A demoralised workforce that is anxious about job security and critical of how the organisation handled their colleagues' redundancies may not feel committed and engaged.

Reference to any organisation, business and event on this page does not constitute an endorsement or recommendation from the British Business Bank or the UK Government. Whilst we make reasonable efforts to keep the information on this page up to date, we do not guarantee or warrant (implied or otherwise) that it is current, accurate or complete. The information is intended for general information purposes only and does not take into account your personal situation, nor does it constitute legal, financial, tax or other professional advice. You should always consider whether the information is applicable to your particular circumstances and, where appropriate, seek professional or specialist advice or support.

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