Redundancy overview

Redundancy is a form of dismissal from employment. It happens when a business closes down, or if the need for employees to carry out work of a particular kind has ceased or diminished or is expected to cease or diminish. When redundancies occur, the employer has a number of statutory duties towards employees, including the duty to consult them and to pay redundancy pay to those who are eligible.

Why you need to act correctly

Few organisations can avoid making redundancies at some stage. The managers who have to deal with these difficult situations have the added burden of working their way through a vast amount of employment legislation and case law. Managing redundancy will never be simple or straightforward but this toolkit will assist managers to work through redundancies more effectively and avoid breaching employees’ rights and consequently appearing in the employment tribunal.

What you need to do as an employer considering redundancies.

  1. External communication — arrange external communication with press, customers, suppliers, etc — see the topic Communications Strategy for advice on managing this.

  2. Internal notification — announce the situation at the earliest opportunity and if appropriate invite volunteers.

  3. Notify the Department for Business, Energy & Industrial Strategy (BEIS) — if you are dismissing 20 or more employees 30 days’ notice is required, and for 100 or more employees 45 days’ notice.

  4. Begin collective consultation — see the topic Collective Redundancies for further details.

  5. The consultation process — full details of your duties to consult are contained in the Information and Consultation topic. If dismissals take place before the consultation period has ended, the employees can claim compensation from you that cannot be offset against pay in lieu.

  6. Determine severance terms and arrangements — tell trade unions and/or employee representatives how you will calculate redundancy pay that exceeds statutory requirements. Follow your Redundancy Policy.

  7. Select for redundancy — select people likely to be made redundant using objective criteria. Selection must not be influenced by any of the protected characteristics.

  8. Consult with individuals affected — consult individually with each person selected. Seek his or her views on possibly changing jobs or work arrangements and consider bumping if appropriate. There are lots of template letters in the Resources section for you to utilise.

  9. The final decision — there are minimum statutory notice periods that must be given to employees who are being dismissed by reason of redundancy. See the Wrongful Dismissal topic for full details of notice periods.

  10. Issue redundancy notices — when consultation has ended, issue notice letters and be specific about the date that work will stop and when employment legally ends.

  11. Offer alternative employment if possible — once notices of redundancy dismissal have been issued, the employer is under a duty — until the effective termination dates — to seek to identify suitable alternative employment for the redundant employees.

  12. Action during redundancy notice period — employees who are under notice of redundancy, and who have been continuously employed for at least two years, have the legal right to take a reasonable amount of paid time off work to look for another job or to arrange training.

  13. Provide pension statements — as appropriate, arrange for pension statements to be issued: these can take a long time.

  14. Prepare severance documents — calculate statutory or enhanced redundancy pay, make a statement of all other payments, prepare P45, ensure everyone is told when outstanding wages, bonus, holiday pay, etc will be paid.

The main, comprehensive source of all information on Redundancy can be found within the Croner-i section, “Termination of Employment”. Here you have the option to look either at the Quick Facts relating to Redundancy — an “at-a-glance” overview of the key elements — or at the In-depth, which shows detailed information on all matters in this topic. The in-depth information starts with a list of employers’ duties and employees’ duties, followed by extensive guidance.

There are a wealth of other resources related to the Redundancy topic. For example, if you need to draft a policy on redundancy or perhaps a policy on redeployment of staff, there is one available for you to tailor to your requirements.

Around 30 different letters relating to redundancy are available to download and use. We’ve done the work for you to save you time and the pressures of maintaining a legally compliant set of documents. We also update them whenever there is a change in law.

And if line managers within your organisation need an overview of the redundancy process and its aftermath, Line Manager Guides can be downloaded or emailed to colleagues to ensure they are up to speed with this complex and often difficult part of a line manager’s responsibilities.

Problems calculating redundancy payments? Not only can you find worked examples, but also a handy, user-friendly employment calculator will help show how statutory and enhanced redundancy pay is calculated.

If you need any further assistance in managing the redundancy process in your organisation please contact Croner to speak to a qualified consultant on 0844 561 8149.

Last reviewed 4 June 2018