How to make an employee redundant, and guidance on dealing with a redundancy dispute

A redundancy programme is nearly always a challenging and often stressful experience for both the employees and the employer. It is vitally important that employers ensure that the correct redundancy procedure is followed and that they do not expose the business to the risk of an employee making a claim at the Employment Tribunal which could lead to a costly settlement for unfair dismissal.

Here we offer guidance on the redundancy process and how to manage a dispute arising from a redundancy programme.

The steps to take:

What are some fair reasons for redundancy?

Fair reasons for making an employee redundant.

Choosing a “pool” for redundancy

Choosing a redundancy pool.

When is a redundancy likely to be challenged?

The circumstances in which an employee is likely to be able to challenge a redundancy.

Dealing with a redundancy dispute

How to manage a redundancy dispute and how a law firm can assist.

Preventing redundancy claims

Avoiding claims arising from a redundancy programme.

Frequently asked questions – making an employee redundant

Common queries that arise on making an employee redundant.

What are some fair reasons for redundancy?

A redundancy process must be approached fairly with a valid basis for making a redundancy. There are different procedures for recently employed employees, those who have been employed for two years or under.

The decision to make one person redundant as opposed to another employee should only be made on the basis that the role they occupy is no longer required by the business and should not be influenced by any other factor. If this is not strictly adhered to there is a risk that an out-going employee may claim that their selection for redundancy was automatically unfair.

Any temptation to include an employee because of issues surrounding them, such as, pregnancy, chronic ill heath requiring time off for medical appointments or that a long-term employee will require an expensive redundancy settlement and a new employee will not, is destined to attract a claim at the Employment Tribunal.

All selections for redundancy from the designated “pool” of potential candidates must be fair and reasonable or the very real risk of being considered automatically unfair could arise.

Some common examples of reasons for selection for redundancy that are automatically unfair:

Your employee

Asked for something that they have the right to - such as holidays or minimum wage.
Is a member of a trade union or have participated in an official strike.
They raised concerns about health and safety.
Reported you or your company for illegal activity - whistleblowing.
They work part-time or are on a fixed-term employment contract.
Refused to work Sunday, and they work in a shop.
They have been on jury service.

Choosing a “pool” for redundancy

To reduce the likelihood of unfair redundancy claims from staff that have been employed for two years or more, you will need to be able to demonstrate that you selected employees for redundancy in a fair manner.

In some cases, you will be making an entire team or department redundant because of changes in your business. For example, if a chain of hair and beauty salons stops offering beauty services and only offers hairdressing, they will need to make all their beauticians redundant.
If the business needs to reduce employee numbers across the board, you will need to clearly identify the criteria that you will use to select the redundancies, as well as the "pool" of job roles that have become superfluous to the needs of the business.
If you are making many different roles redundant, you must look carefully at the roles involved. You may need to have more than one selection pool. Each pool should contain roles that are similar and have similar skills. You can have "pools" that only consist of one person, but if there are any people in your business doing a similar role, they should also be included. Not including all similar roles in a selection pool can be considered as evidence that the redundancy process was unfair.

When you have your selection criteria and selection pools defined, you will need to inform your employees who are in those pools that they are at risk of redundancy and engage them in a consultation period.

Once the consultation period has been completed you can then implement the redundancy procedure and inform the employees of your decisions:

You could make everyone in a pool redundant, and invite them to apply for other jobs within the business. You must allow them to apply for any available roles that could be suitable.
Alternatively, you could choose a number of people from the pool to make redundant, using your stated selection criteria.
You will need to provide employees with details of the pool they are in, how many people are going to be made redundant from that pool, and details of any selection criteria that you are applying.
When applying selection criteria to choose the redundancies from the pool, then the criteria need to be clear and able to be measured. You can use one or more measurable criteria such as length of service, disciplinary records, and timekeeping.
You can also use performance criteria, as long as you can clearly show how you measure performance. You must apply the same criteria, in the same way, to everybody in the pool. By applying a score against each measure to each employee in the selection pool, you will be able to identify the employees with the lowest scores - who will be selected for redundancy. You will need to share the employee's individual score with them.

When is a redundancy likely to be challenged?

Redundancy disputes normally arise for one of two reasons. Either the affected employee feels they have been unfairly selected, or they believe you did not conduct a fair redundancy process.

However, it is possible to make employees redundant who meet one of the criteria for automatically unfair dismissal - for example, a person who works part-time can be made redundant. However, you cannot make an employee redundant simply because they are part-time - you will need a fair reason.

An employee could make a tribunal claim for unfair redundancy if they can provide evidence that their selection related to issues such as:

Other people who have the same role and responsibilities within the firm were not considered for redundancy.
A number of employees in the same situation have been chosen for redundancy. For example, if a large proportion of those selected for redundancy are part-time workers or trade union members.
A person was made redundant shortly after requesting something they have a right to, were involved in a strike, informed the firm that they had been called for jury service, maternity leave, whistleblowing, or making a complaint about health and safety.

Dealing with a redundancy dispute

It can be quite time-consuming to receive a dispute from an employee who feels that they have grounds to challenge their redundancy.

In the first instance, the redundant employee will submit an appeal letter outlining why they believe their redundancy was unfair and requesting that you reconsider the decision.

If you reject their appeal, and they still believe that the redundancy is unfair, then they may take their challenge to an employment tribunal.

The employment team at Giambrone & Partners specialises in helping employers deal with a wide range of employment issues, including redundancy disputes, unfair dismissal, and discrimination.

Our highly experienced lawyers will work on your behalf to ensure that any dispute is dealt with quickly and efficiently to enable you to return to running your business as soon as possible.

The lawyers at Giambrone are strong advocates of alternative dispute resolution (ADR) in employment disputes and have already helped a considerable number of businesses resolve disputes before they escalate to a hearing in the employment tribunal by means of ADR and avoided lengthy litigation.

In the event of a matter reaching the employment tribunal, our lawyers can represent you at the hearing. Find out more about how we can help, or contact us today for assistance.

A brief summary of a fair procedure during a redundancy procedure

To conduct redundancy procedure in a legal and correct manner to prevent tribunal claims, the following redundancy procedure should be undertaken:

All employees should be informed of the potential for redundancies.
Each employee should be involved in a consultation with employees.
You should ensure that redundancy selection criteria are fair and consistently applied. Guidance from an expert employment law team will prevent any avoidable breaches.
All available alternative roles for employees affected by redundancies should be extended.

Employment law is complex, and employers should be fully award of the legal obligations in any given situation. Even when a redundancy programme is correctly observed, challenges from employees can arise, and seeking proper legal advice when considering redundancies can considerably help to prevent any challenges from arising.

As employment law specialists experienced in advising employers, Giambrone can guide you through the entire process from start to finish and provide clear advice on how to proceed with redundancies in order to prevent avoidable claims by employees arising. Our lawyers will assist you make the best decisions for your business during times of transition. We can advise on:

Using fair selection criteria when making employees redundant.
How to manage the consultation with employees who have been selected for redundancy, both informally and formally, including cases where collective consultation is a requirement.
On enhanced redundancy packages.

Frequently asked questions

Can an employee challenge a redundancy decision?

Yes, an employee can challenge a redundancy decision if they believe that their redundancy was unfair.

Do redundant employees need to sign a settlement agreement?

Employees being made redundant do not need to sign a settlement agreement.

A settlement agreement is a legal document in which an employee agrees to waive their redundancy rights to take legal action against an employer where the employee is offered a payment, agreed between both parties. Such agreements are not included as part of a redundancy procedure but separate arrangement that is often used with redundancy situations.

How much notice do you need to give when making employees redundant?

You must give employees at least the statutory notice period, which is based on their length of service.

Can you make an employee redundant if there are performance concerns?

If there are concerns about an employee’s performance, this should be dealt with using a performance review process where the employee is supported to enable them meet the required standards of their role. If they are unable to meet the required standards, this could lead to their dismissal via a fair disciplinary procedure.

How is a statutory redundancy payment calculated?

Statutory redundancy pay is based on the number of years of completed service and the employee's age at the date of redundancy. For an employee who has worked at the company for over two years the following applies:

If the employee is under 22, half a week’s pay for each full year
If the employee is over 22 but under 41, one week’s pay for each full year
If the employee is over 41 one and half week’s pay

The length of service is capped at 20 years and the weekly pay is calculated on the basis of the employee’s average weekly earnings over the previous 12 weeks prior to the day they received a redundancy notice. For those employees receiving a lesser weekly pay due to being furloughed the redundancy pay is calculated on the basis of their normal earnings.

Redundancy pay is not taxable but any holiday pay or previously unpaid wages that are outstanding at the time of redundancy will be taxed and national insurance contributions will be deducted. Those employees made redundant after 6 April 2021 will have their weekly pay capped at £544.

Any employee offered another position within the business or who has been offered the opportunity to remain with the company will not be entitled to redundancy pay unless they have a valid reason for so doing.