Making Staff Redundant – Simple Guide to be 100% Compliant
Small Businesses - Thinking of Making Staff Redundant?
If you’re thinking of making staff redundant, then there are a number of legal issues and procedures you have to be aware of. Notwithstanding, of course, the fact that the whole process must be handled sensitively and fairly, and staff should be offered support as needed for what will be a trying time.
Redundancy is not the same as firing someone, and applies only when the needs of the business have changed, and requirement to perform the job (or jobs) doesn’t exist any more.
When is Redundancy Appropriate?
Redundancy is when you dismiss an employee because you no longer need anyone to do their job – from the gov.uk advice on redundancy for employers, which is a great resource for a deep dive into this topic. This guide will focus on small businesses making a small number of staff redundant.
- Try to find suitable alternative employment for employees being made redundant.
- Give your employees being made redundant reasonable time off to look for alternative work, or undertake training.
- Attempt to avoid compulsory redundancies of permanent staff by various measures, including:
- Seeking voluntary redundancies
- Not using or reducing casual labour, contractors or freelancers
- Restricting recruitment
- Restricting overtime
You must also consult employees before making redundancies. This includes consulting with trade unions where necessary. If you’re making at least 20 employees redundant in a 90-day period, there are specific rules on this, called “Collective Consultation” – described below.
If you’re making fewer than 20 employees redundant, then there are no specific rules on how this is done, or the length of the consulting period. You don’t have to reach an agreement with consultation, but it should be carried out with a bona fide intention of reaching it, including ways of reducing or completely avoiding redundancies.
Many small businesses see this as a simple “step they have to go through” – but it shouldn’t be. Listen to your employees, and give them time to make suggestions. They may be happy to make voluntary changes to working practices, or have ideas on how to make the business more profitable, which will work out for everybody. We’re happy to advise on this with our HR consultancy service.
Once Consultantation has Finished
If the consultation period has ended, and you have concluded that you need to be making staff redundant, then staff must be given a minimum statutory notice period
If employed for 1 month to 2 years, this is a week. If more than 2 years, this is one week’s notice for each year employed (max of 12 weeks).
You can give payment in lieu of notice if you like, but payment must be made in full.
Tax and NI must be deducted from payment in lieu, and you still have to make pension, health care and other contributions you’re legally obligated to.
Finally, employees may be eligible for statutory redundancy pay if you’re making staff redundant. This is in addition to any payment in lieu of notice you may have made.
An employee is eligible for redundancy pay if they:
- Are working under a contract of employment (not a casual worker).
- Have 2 years’ continuous service.
- Have been dismissed or laid off – anyone who took early retirement doesn’t qualify.
- 1.5 weeks’ pay for each full year of employment after their 41st birthday
- a week’s pay for each full year of employment after their 22nd birthday
- half a week’s pay for each full year of employment up to their 22nd birthday
Length of service is capped at 20 years.
Your employee’s weekly pay is the average they earned per week over the 12 weeks before the day they got their redundancy notice.