If your employer is considering redundancies, they must follow a fair procedure.
If your employer gets the procedure wrong, you could claim compensation for unfair dismissal. Alternatively, you may be able to agree a settlement agreement with your employer as a way to avoid a tribunal claim.
Here are the 12 steps your employer should take in a redundancy procedure
1. Determine the number of redundancies needed
Your employer needs to work out the numbers of redundancies needed. This should include considering whether there are ways of avoiding redundancies.
2. Decide whether collective consultation is necessary
If your employer is making more than 20 redundancies, they must consult with the workforce collectively. There is a prescribed procedure they must follow, which is set out in this government guidance
If your employer is making fewer than 20 redundancies, they are still expected to follow a reasonable procedure and consult individually.
The following steps apply if your employer is making fewer than 20 redundancies.
3. Choose a selection pool
If your employer is reducing employee numbers, they will need to identify a pool of people at risk of redundancy.
In some circumstances, this may be a pool of only one employee.
4. Decide on selection criteria
Your employer should draw up fair and objective redundancy selection criteria.
As far as possible, the criteria should not be dependent on the opinion of a the person making the decision. Instead, the scoring should be capable of being objectively checked.
Examples of objective selection criteria are:
- disciplinary record
- length of service
The employer may apply different weight to each of these criteria.
5. Send a letter to the ‘at risk’ employees
Your employer should write to you and anyone else affected, explaining:
- why they are making redundancies,
- the anticipated number of redundancies
- the selection pool
- the selection criteria
- the process and likely timetable
6. Invite employees to apply for voluntary redundancy
Your employer isn’t obliged to invite applications for voluntary redundancy but they may decide to do so.
This usually means that they are offering an enhanced redundancy package in a settlement agreement as an alternative to going through the redundancy procedure.
7. Hold the first individual consultation meeting
Your employer has a legal obligation to consult meaningfully with you and any other affected employees. At this meeting, your employer should:
- explain the situation
- give you the chance to comment on the selection criteria
- listen carefully to any suggestions you make
Your employer may also take the opportunity to discuss voluntary redundancies with you.
Your employer must keep an open mind during consultations and genuinely listen to you and other employees. This is because you may come up with ideas they haven’t previously considered.
8. Score each employee
Using the selection criteria, your employer should score you and other members of staff who are at risk of redundancy. They should then send you a copy of their score sheet.
They should also tell you the ‘break point’. That is the score you need to beat in order not to be made redundant.
Unfortunately, you’re not allowed to see other people’s scores because that would breach data protection law. However, your employer is allowed to show you average scores.
9. Hold the second consultation meeting
If you fall below the break point, your employer should hold a second consultation meeting with you. At this meeting, they should:
- discuss your scores
- give you a chance to explain why you think you’ve been underscored
- consider whether the scoring should change
This meeting is also an opportunity for your employer to discuss alternative employment for you.
10. Consider any suitable alternative employment
Your employer should take reasonable steps to determine whether there is suitable alternative employment for you within the company or any group companies.
An employee on maternity leave should be given priority to other staff if there is any suitable alternative roles.
11. Hold the third (and final) consultation meeting
If there is no suitable alternative employment, your employer should hold a final consultation meeting at which they tell you that your selection for redundancy is confirmed.
This is also the point at which your employer should give you notice that your employment is coming to an end. The length of the notice period should be stated in your employment contract.
12. Make the appropriate termination payments
If your employer decides to dismiss you, they must pay you your statutory redundancy payment. This is calculated by reference to:
- your salary
- your length of service
- your age
To calcualate your statutory redundancy payment, use the calculator on this government website: https://www.gov.uk/calculate-employee-redundancy-pay
Your employer should also pay you any contractual entitlements, such as
- your notice,
- holiday pay that has accrued up to the termination date
- any enhanced redundancy entitlement
There is no legal obligation on your employer to offer an appeal in a redundancy situation, although many employers choose to do so as a matter of good practice.
Accepting a settlement agreement instead of redundancy
Managing a redundancy procedure can be time consuming for an employer.
In order to avoid the burden of going through the procedure, your employer may offer you a settlement agreement instead. Usually, this means that you will receive more money in exchange for giving up your rights to claim unfair dismissal.
You will need to weigh up the risks and the incentives when considering whether to accept a settlement agreement instead of going through a redundancy procedure. However, it is often a better option, both for you and your employer.
If you’ve received an offer of a settlement agreement as an alternative to redundancy, you will need to make sure you receive legal advice on it.
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