Business Law & Compliance

Meeting your legal obligations when making staff redundant

5 min read

08 November 2017

When facing difficult times, restructuring the business to make efficiencies is often the only solution. Unfortunately, this can result in a human cost if it requires staff to be made redundant.

Organisations facing financial difficulty want to effect dismissals as quickly as possible, but this is likely at odds with legal protections for individuals, who require adequate warning and consultation. Employers who get making staff redundant wrong risk expensive tribunal proceedings at a time when the business may find it difficult to bear additional costs.

Employers’ obligations

A redundancy procedure will be triggered where either a business or workplace closes down, or where the numbers of the workforce are reduced or their functions changed. In that situation, UK law dictates that employers must:

(1) Undertake a fair and reasonable selection process to identify which employees should be made redundant.
(2) Consult with the employees at risk of redundancy.
(3) Explore ways in which to avoid employees being made redundant, including identifying suitable alternative roles within the company.
(4) Allow employees a reasonable period of time off during their notice period to look for a job or arrange training for future employment.
(5) Make a redundancy payment to dismissed staff, considering both statutory and contractual entitlements.

If it is proposed that 20 or more individuals be made redundant in a period of 90 days or less, then the employer must meet additional obligations. The employer must notify the government via Form HR1.

Where the employer is proposing to dismiss at least 20 employees within a 90-day period, notification must be received at least 30 days before the first dismissal takes effect; this increases to 45 days for 100 employee or more. Failure to notify can lead to a fine

In addition, employers must inform and consult collectively with employee representatives. This will either be with the representative of a recognised trade union, or where the company does not recognise a union for all or part of the workforce, elected employee representatives. Where the latter option is taken, the company will arrange for elections to take place so that the consultation process is not delayed.

Where between 20 and 99 employees are affected, the period of consultation (i.e. before the first dismissal takes effect) must be at least 30 days. Where over 100 employees are involved, that period increases to 45 days.

Employers should be careful about announcing plans to make redundancies until they are fully formed – plans must be more than mere contemplation – otherwise, the period of consultation may be triggered earlier than intended.

Employers who fail to meet such legal obligations will risk claims for unfair dismissal from those made redundant.

Further, in cases of mass redundancies where employers are required to inform and consult with employee representatives, a failure to do so can result in an award of up to 90 days’ full pay for each person affected. It is therefore particularly important for companies to get these consultation obligations right.

Managing your employees

A redundancy procedure will, inevitably, be a stressful time. It can often lead to disgruntlement and a drop-off in work productivity and employers should thus consider how to support staff. To maintain good relations, employers should consider the following:

  • Where possible, be open, honest and responsive to employees about the company’s plans
  • Encourage awareness of employees’ rights and options to keep them engaged with the process.
  • Be flexible with the consultation process. For example, allow additional meetings/ correspondence for those who are not in the business (for example, because of sickness). Also consider allowing employees time off to deal with the potential effects.
  • Offer skills training and job searching to improve morale.

In our experience, the key to a successful redundancy process is planning, allowing adequate time and keeping channels of communication with employees and their representatives open.

Tilly Harries, a barrister, and James Buckley, a solicitor, are in the employment team at PwC