Make redundancies

Unfortunately, sometimes it's necessary to make redundancies in the course of running a business. Find out how to follow the correct procedure to avoid being taken to an Employment Tribunal.

If you need to make one or more members of staff redundant, you may have to select from a 'pool' of employees with similar roles. Ensure that you carry out any selection process fairly and objectively. You should inform anyone at risk of redundancy at the earliest possible stage and consult with them throughout the process. Redundancy pay may be required and any employees dismissed on grounds of redundancy should be given a chance to appeal against their dismissal. Alternatively, if you need to make one member of staff redundant and that employee is in a unique role, there is no need to select from a 'pool' of employees, although staff must still be selected carefully and fairly. For further information, read Redundancy.

Redundancy occurs where the role or job of an employee has ceased to exist or diminished (eg using machinery or software in place of people) or the closure or reduction of a business is necessary (eg as a result of financial pressures). Staff can't be made redundant on grounds of performance or misconduct. For further information, read Redundancy.

If a particular type of job is no longer required at all, then redundancy selection is generally not necessary. This is more likely in small or micro-businesses, where employees perform their roles individually. For further information, read How to make someone redundant in a small business.

If redundancies are taking place because fewer people are needed for a particular role - either due to automation/change of working practice or lack of funds - then a careful selection process will have to take place.

The first thing to do is create a redundancy pool which is essentially a group of employees from which redundant staff are to be selected. This pool will consist of employees who perform the same or similar roles (eg sales or IT). At this point you should inform any relevant employees that they are at risk of redundancy; consider using an At risk of redundancy letter for this purpose. You don't need to use this letter when making just one employee redundant who is in a unique role.

The next step is to select the employees within a particular pool who are most at risk of being made redundant. It's vital that this selection process is methodical and objective. A matrix, or set of selection criteria, should be applied to each employee. This can include disciplinary or attendance records, skills and experience, appraisal ratings and relevant qualifications. Avoid anything which could potentially be considered discriminatory (eg don't count sickness absence or maternity leave if looking at attendance). You should also be cautious about using a 'last in first out' method for selecting employees as it is potentially discriminatory to women and younger employees.

For further information, read Redundancy pooling and selection.

Before performing the selection process, you should consult with all the employees who are at risk of redundancy. Consider using a Redundancy consultation letter to inform employees of the date and time of a consultation meeting. If you are making just one employee redundant with no 'pooling', this letter can be used as the first step in the redundancy process.

During the consultation process, if any employees object to the methods of selection, be prepared to make changes if any valid concerns are raised. Once you've selected the employees for redundancy, you should consult further with them, providing their scores relating to the selection criteria.

If 20 or more employees are being made redundant, special consultation rules apply and you should Ask a lawyer about this.

You should always consider suitable alternative employment that might be available within your business for any employees being made redundant, even if additional training may be needed. When you make the redundancy itself, consider using a professionally prepared Dismissal for redundancy letter. Ensure that you give the employees being made redundant the relevant notice and provide them with time off to look for alternative employment during this period.

Remember that employees who are made redundant after at least two years' service are entitled to a statutory redundancy payment according to their pay, age and length of service. Some employers choose to enhance this payment. It's also important to not forget about any accrued holiday pay.

Employees being made redundant should be given the chance to appeal the outcome of the selection process. If they choose to do so, there should be a redundancy appeal hearing to either review or remake the selection decision. You can notify an employee of the arrangements for a redundancy appeal hearing using an Invitation to a redundancy appeal meeting letter.