Redundancy and restructuring: Advice and guidance

by | May 27, 2021 | Blog

Whilst the government has intervened to attempt to avoid redundancy, including the extension of the job retention scheme until September 2021, it is inevitable that businesses will still have to restructure to reduce their teams due to the months of uncertainty they have faced, with some even being unable to operate for the majority of the past 12 months.

The situation is unprecedented, but employers who decide there is no alternative to redundancies still must follow normal fair redundancy procedures.   In addition, making time to plan is a vital part of any redundancy process as both the positives and negatives should be thoroughly considered before putting the plan into motion.

When implementing the redundancy process, it is vital that it is carried out well and with compassion. This means taking the time to deal with employees on an individual basis and to communicate carefully and considerately with them at each stage of the redundancy process. Not only will this show empathy to employees, but it will also help to save the relationship and reduce the risk that the parting will be on bad terms.

Of course, acting with compassion is not the only thing to consider, and acting legally is crucial meaning employers must follow a fair procedure.   So we set out the key stages of a redundancy programme which employers should follow as a minimum.

Before redundancy commences

As indicated above, entering into redundancy consultation should be well considered and organisations should always attempt to avoid redundancies and consider alternative approaches.   Managers should first look at achieving all other cost savings (including pay freezes, overtime reductions), factor in natural wastage, and recruitment freezes. 

Practical tip – if the redundancy involves more than 20 employees, you must complete a HR1 and notify the Secretary of State.

Identifying the pool for selection

In our experience, it is at this stage some managers are challenged to correctly identify the redundancy selection pool.  Yet, this is such a crucial stage as if an employer fails to consult and consider a selection pool correctly, the dismissals may be legally unfair.   Ensure you take time, and seek advice, on which employees will be selected for redundancy (the selection pool).

Voluntary redundancy – a possible option

After the careful planning stage, offering a voluntary redundancy package and seeking volunteers may avoid compulsory redundancies.  Do remember it is you, as the employer, who decides if a request for voluntary redundancy is accepted.   Also bear in mind offering voluntary redundancy to only certain age groups (eg as part of an early retirement package) could be unlawful age discrimination.

Redundancy consultation

Employers are required to consult individual employees and give them reasonable warning of impending redundancy.

Another frequent question we get is about minimum redundancy timescales.  Whilst there is no minimum statutory timescale when fewer than 20 employees are made redundant, the consultation must be meaningful and may also be covered by contractual terms or policies.   For example, it is not enough only to inform employees of a decision that has already been made.  You should consult on the proposed selection process and scoring system etc.

If 20 or more employees at one establishment are to be made redundant, collective consultations with recognised trade unions or elected representatives must start within minimum time scales:

  • At least 30 days before the notification of redundancies for dismissals of 20-99 employees.
  • At least 45 days before the notification of redundancies for dismissals of 100 or more.

Selection for redundancy

Once consultation has concluded, you may need to choose individuals from within the selection pool (if you have not achieved the savings you require through methods such as voluntary redundancy).   Employers use a range of criteria, which should be objective, and could include attendance records, skills, competencies and qualification, work experience, performance records and disciplinary records.

You will often hear ‘Last in, first out’ (LIFO) being referred to but be careful to use this as the sole method as this can be a risky selection method as those with less service are likely to be younger which could result in potential age discrimination claims.

Wherever possible we would advise scoring is carried out independently by at least two managers.

You will need to write to those selected for redundancy to inform them they are ‘at risk’ of redundancy and invite them to individual consultation meetings.

The consultation stage

The number of consultation meetings to be held will depend on what the employee has to say.  Do not automatically assume that one individual consultation meeting will suffice – if for no other reason than it sometimes takes time for individuals to come to terms with being ‘at risk’ meaning they may need time to formulate their thoughts and ask appropriate questions.  You must consider any points that the employee puts forward.

Offering suitable alternative employment

Perhaps as part of your planning you will already have identified suitable alternative work to redundant employees.   Employees can have a four-week trial period in a new role. If the employer and employee then agree that the role is not a suitable alternative, the employee reverts to being redundant.  Bear in mind, and seek advice on, what happens if an employee unreasonably refuses suitable alternative work as they could lose their entitlement to a statutory redundancy payment.

The final stage – dismissal and appeals

Once the individual consultation stage is complete, you must decide whether the employee is to be made redundant and give a written redundancy notice. This will be either the statutory minimum notice or the contractual notice, whichever is the greater. The employer must also explain the redundancy payment calculation.

Employees should be allowed to appeal against the redundancy decision.

Other important points to note:

  • If there are no recognised trade unions or employee representatives, you must facilitate an election, by the employees, of representatives for the consultation.
  • At all stages of consultation an employee is entitled to be accompanied at all individual consultation meetings by a trade union representative or colleague.
  • The law requires employees who have at least two years’ service to be given paid time off to look for work during the final notice period.
  • Factor in potential logistical challenges where employees are not at work or are working remotely, Any stages carried out remotely will require careful and innovative planning. All employees affected must have the equipment and skills to participate in a digital process.