Redundancy Guide for Employers

Redundancy is a reason for dismissal from employment, and for redundancies to be made, there must be a genuine business case that can prove that there is a reduced need for the type of work that the employee does.


James Rowland

Commercial Director James leads Account Management, Sales and Marketing at Neathouse Partners.


14 June 2022


16 July 2024
4 min read

This can often occur when there is a downturn in sales, new systems replace manual workers, or the company is closing, being restructured or moving elsewhere.

With over 400,000 workers being made redundant in 2020, redundancy has been thrown into the spotlight in workplaces around the country as COVID-19 changed the shape of the workforce for many organisations.

If you’re faced with the difficult decision of whether to make redundancies or not, Neathouse Partners can help. 


The Impact Of Redundancy

The emotional toll of redundancy for employees that are being made redundant cannot be underestimated.

The process can have a real impact on morale, productivity and motivation across the company, whether directly impacted or not.

To minimise the impact on affected employees and the wider workforce, it’s imperative to take professional HR advice so that you can be confident that you are handling the situation correctly to help the restructuring of your business go as smoothly as possible.

Redundancies and restructuring your business can be challenging and stressful situations to be in.

This is a complex area of HR that needs to be dealt with in a sensitive manner adhering to fair redundancy processes to ensure that all employees are treated fairly, whilst maintaining the morale of the rest of the workforce.

The correct handling of redundancy is also important to ensure that you don’t leave yourself open to employment tribunals, unfair dismissal claims and discrimination claims from disgruntled employees.

Neathouse Partners can offer you professional guidance and redundancy advice on both an ad hoc basis and as part of one of our fixed-fee packages.

Read on for a brief overview of fair redundancy processes to follow and how you can get help managing these difficult restructuring conversations in your business.


Managing Redundancy

Shortlist for redundancy on keyboard

Whilst not an easy process to go through, redundancy is a potentially fair reason for dismissal where the dismissal is attributable to business closure, a workplace closure or a reduced requirement for a particular type of work or skill set.

To ensure that a fair redundancy process is followed, you should note the following key points in your management of redundancy:

  • Employers need to follow a fair redundancy process if employees have worked for them for at least 2 years by the time their job ends.
  • A fair redundancy procedure for any business will include:
    • Giving as much notice as possible to the affected employees and their representatives.
    • Consultation with the employees and their representatives throughout the process.
    • At least one meeting with each employee at risk individually before confirming your final redundancy decision. This meeting should cover, why redundancies are being made, why the employee is being considered for redundancy, if other jobs are available, and answer any questions that they may have.
    • Your consideration of whether alternative employment options in the company are available to those at risk.
    • Let employees know how you will choose people for redundancy. You must adopt and apply a fair selection process for the redundancy pool. Candidates cannot be at risk of redundancy due to any protected characteristics that they possess or personality clashes.
    • Telling employees how long the decision will take. Note that if you are planning to make more than 20 redundancies, special consultation rules apply that can be very costly if not followed correctly.
    • Sharing details of the meetings that employees can attend to discuss the restructuring and when they will take place
    • Advising how employees can appeal if they have been chosen for redundancy


Employee Entitlements

As well as being entitled to the fair redundancy steps outlined above, employees that have been with the company for two years or more at the end of their redundancy notice period should also be given:

  • Reasonable paid time off during normal working hours to look for / apply for a new job or attend interviews.
  • A final payment that includes the redundancy pay they are entitled to, their last wages, pay in lieu if they are not required to work their full notice period, any holiday pay, any outstanding bonus, commission or expenses they are due to date.


Redundancy Pay Calculations

When deciding if you need to make redundancies, it’s important to consider the cost of doing so for your business.

On top of a drop in morale and changes to the workplace atmosphere, redundancy can be expensive for employers, so it’s important to consider this when working out if redundancy is the best way to proceed for the business objectives.

The level of redundancy pay that employees will be due will depend on; the amount of time that they have worked for the company, whether they have been offered alternative work and refused it, the type of role that they work in, and whether your firm has its own redundancy package over and above statutory redundancy payments set by the government.

Statutory redundancy pay is payable to any employee with two or more years of service and is capped at 20 years of service.

The calculation of weekly pay to use when working out redundancy payments is based on the average earnings made per week in the 12 weeks before sending the redundancy notice to staff.

Statutory redundancy pay for employees with over 2 years of service: 

  • half a week’s pay for each full year you were under 22
  • one week’s pay for each full year you were 22 or older, but under 41
  • one and half week’s pay for each full year you were 41 or older


Proactive Steps Can Help

It’s natural for employees at risk of redundancy to have lots of questions and concerns.

As their employer, you will need to be able to answer these efficiently and effectively to make sure that the redundancy process runs as smoothly as possible and minimises the stress that employees will experience.

Consultation is key and during the consultation process, you should listen to any questions that are asked and ensure that they are responded to.

A common complaint from employees who are made redundant is that they felt that the process was merely a box-ticking exercise and it is vital to ensure that staff feel that you are genuinely engaging with them to try to find alternatives to redundancy.

Even where this is not possible, you should still try to be as considerate as possible as this is likely to be a time of great concern for those affected.


Next Steps

As you can see, there are plenty of steps that you as employers need to take to ensure a smooth and fair redundancy process when you need to make difficult decisions about the size of your workforce.

If you would like support with managing redundancy conversations or guidance on the procedures to follow to protect yourself from claims of unfair dismissal or employment tribunals whilst ensuring that employees are treated fairly, please contact us.

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