An Overview of the Redundancy Process

An article that provides an overview of the redundancy process.

An Overview of the Redundancy Process

In order for there to be a true redundancy situation there must be a need for fewer employees to carry out a particular kind of work, for example, as a result of a downturn in business. Employers often use redundancy as an excuse to dismiss an employee for other, often performance related, reasons. It is essential that as an employer you can prove that the decision to dismiss for redundancy is a genuine one.

The first stage in a redundancy dismissal procedure would be to notify all staff affected that they are at risk of redundancy. You are able to suggest voluntary redundancies and also invite employees to provide alternative options to the redundancy process. Alternatives to redundancy which you can explore with employees include job sharing and reduced hours or pay. These alternatives are optional and therefore must be selected only if they will assist in moving the business forward.

You must then identify a pool for selection. Depending on your business, this could consist of very clear cut “departments”. However, it is important to note that some staff members may have skills that are “transferrable” to other areas of your business and if so, the selection pool may be quite broad. Once pools for selection have been identified, each employee within that pool must be scored in accordance with a “selection matrix”. This sets out important criteria upon which you must score each employee. It is important that you consider the criteria carefully so that with a reduced workforce you retain all the necessary skills for the business to continue moving forward. The selection criteria could include the following:

Range of skills (against your business needs moving forward)
Revenue earned
Number of external complaints
Client skills/record
Qualifications
Compliance with procedures
Disciplinary Record
Attendance record (but making allowances if anyone is disabled)
Relevant experience
Other work performance (other than revenue earned)

It is important that you individually consult with employees throughout the redundancy procedure. Firstly, to notify them of the risk of redundancy (as much information as possible should be provided in writing before the initial consultation), then as the procedure continues, to let them know the pools for selection and the scores they attained in the matrix. It is not necessary to give individuals their colleague’s scores but to let them know what the “pass mark” was in order for them to avoid redundancy.

Once these steps have been completed you must give the employee notice of redundancy. They may have to work their notice or, you may pay in lieu of notice if their contract allows this. You must also remember that the employee has the right to appeal against any decision.

An employee with more than two years' service is entitled to a redundancy payment. This is worked out as the number of full years worked (up to a maximum of 20 years) x gross weekly wage (up to a maximum of £350.00). If the employee is over 41 then this figure is multiplied by 1.5 for each complete year they have worked over the age of 41. It is important to note that employees with a full year’s service are able to bring a claim in the Employment Tribunal for unfair dismissal and therefore must be taken through the same redundancy procedures in order to avoid potential claims against the company.

It is important to document each stage of the redundancy process and to keep the employees informed of the progress of the procedure so that if any employee does bring a claim against the company in an Employment Tribunal, the employer is able to provide clear evidence of having conducted a fair redundancy procedure.