The Redundancy Process: A Guide for UK Businesses

Navigating the complexities of the redundancy process in the UK can be a daunting task. Redundancy is a form of dismissal that occurs when an employer needs to reduce their workforce. This is a challenging time for any business, and it is crucial to handle the process with care, fairness, and legal diligence. This article provides guidance on the redundancy process, to help employers better understand their obligations and the rights of their employees.

Understanding the redundancy process and its purpose

The primary purpose of the redundancy process is to allow an employer to restructure or downsize its workforce due to changing business needs. A genuine redundancy situation arises when a business, or business unit, or a particular workplace, closes down, or when the requirement for employees to carry out work of a particular kind has ceased or diminished. In such cases, it is essential to establish a genuine business reason for the redundancies, as per UK law, in order to avoid claims of unfair dismissal.

Legal requirements and employer obligations

Employers have significant legal obligations during a redundancy process. Failure to comply with the obligations established by employment law can lead to costly employment tribunal claims. The key legal requirements include:

• A fair and objective selection process: An employer must use fair and objective criteria to select employees for redundancy, which might include skills, performance, or disciplinary records. It is essential to avoid any form of discrimination based on protected characteristics such as age, gender, or disability.

• Meaningful consultation: Consultation is a fundamental part of a fair redundancy process. For fewer than 20 redundancies, the employer must carry out individual consultations with every affected employee. For 20 or more redundancies within a 90-day period, collective consultation rules apply, involving elected employee representatives, or a recognised trade union.

• Notice periods and pay: Employees are entitled to a statutory notice period, or to a contractual notice period, if it is more generous. They may also be entitled to statutory redundancy pay if they have at least two years of continuous service behind them.

• Considering alternatives: Before making any final decisions, employers must consider alternatives to compulsory redundancies, such as offering voluntary redundancy, redeploying staff to other roles, or reducing working hours.

Finally, a key aspect of a fair redundancy process is understanding UK employee statutory rights and how they apply during redundancy.

Employee rights in the redundancy process

Employees have specific rights throughout the redundancy process. These include:

• The right to a fair selection process: As mentioned above, the selection criteria must be objective and not discriminatory.

• The right to consultation: Employees have the right to be consulted about the proposed redundancies, and to have their views considered.

• The right to a notice period: Employees are entitled to a statutory or contractual notice period, during which they should receive their normal pay and benefits.

• The right to redundancy pay: Eligible employees have a right to a statutory redundancy payment. The calculation for this pay is set by law, and considers age, weekly pay, and length of service.

• The right to time off to look for work: Employees under notice of redundancy with at least two years of service behind them have the right to a reasonable amount of leave, or paid time off, to look for another job, or to arrange new training.

• The right to appeal: Employees have the right to appeal their selection for redundancy.

Understanding these rights is fundamental for any business undertaking a redundancy process, and they are a key part of the broader conversation around the UK Employment Rights Bill introduced in 2024.

A step-by-step guide to the redundancy process

Here is a step-by-step guide to help a business navigate the UK redundancy process:

1. Establish a business case: Clearly define the reasons for the proposed redundancies, and document the business rationale.

2. Identify the selection pool: Determine the group of employees at risk of redundancy.

3. Develop fair selection criteria: Work out fair and objective criteria to select employees from the redundancy selection pool.

4. Inform and consult: Begin the consultation process with the affected employees. This is a very critical step in the overall redundancy process.

5. Individual consultations: Hold individual meetings with the affected employees to discuss the situation, the selection process, and any alternatives.

6. Apply selection criteria: Score employees against the agreed objective criteria.

7. Explore alternatives: Actively consider suitable alternative employment or a new role within the business for the selected employees.

8. Confirm redundancies and issue notice: Once all other options have been exhausted, issue written notice of redundancy to the affected employees.

9. Calculate redundancy pay and final salary: Ensure all payments, including holiday pay and notice pay, are calculated correctly and paid on time. For more on this, check out our article on everything you need to know about terminating contracts.

10. Provide support: Offer advice and support to the employees you are going to make redundant, such as outplacement services, or reasonable time off for job hunting.

How long does the redundancy process take?

The redundancy process timeline can vary. For fewer than 20 redundancies, the process can take a few weeks. For 20 to 99 redundancies, a minimum 30-day collective consultation period is required by law before the first dismissal or notice of leave can take effect. For 100 or more redundancies, this extends to 45 days.

Support for affected employees

Supporting employees through this difficult time is a hallmark of a responsible employer. Beyond the legal requirements, providing additional support can make a significant difference to people, and can help protect the brand image of the business. This additional support might include:

• Outplacement services: Offering professional support with CV writing, interview skills, and job searching, to help them secure a new role in as little time as possible.

• Employee assistance programmes (EAPs): Providing access to confidential counselling and support services to help affected employees with the emotional impact of redundancy.

• External resources: Directing affected employees to valuable external, non-competitor resources, including those provided by the organisation ACAS (Advisory, Conciliation and Arbitration Service), and by the official UK Government website, Gov.uk. Both provide free and impartial information and advice on redundancy rights and procedures.