Making an employee redundant

Table of contents

Making an employee redundant 2

Introduction 2
Redundancies, lay-offs and short-time
working 2
Avoiding redundancies 3
Redundancy selection - non-compulsory 4
Redundancy selection - compulsory 5
The redundancy consultation process 6
Rights of redundant employees 7
How to help redundant employees 9
Potential problems following redundancy 10
Here's how we planned ahead to avoid making
redundancies 12
Helplines 13
Related guides on businesslink.gov.uk 13
Related web sites you might find useful 14

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 Making an employee redundant

Subjects covered in this guide

Introduction
Introduction
It may be the case that the jobs of some or
Redundancies, lay-offs and short-time all of your employees become redundant.
working This could be because your:

Avoiding redundancies • business stops operating

• business relocates
Redundancy selection - non-compulsory • employees carry out work that is no
longer necessary, eg due to the
Redundancy selection - compulsory introduction of new technology
The redundancy consultation process
If this happens, you must not only follow a
Rights of redundant employees fair redundancy dismissal procedure, but
also keep the affected employees - and
How to help redundant employees possibly their representatives - informed.
Potential problems following redundancy
This guide offers an overview of redundancy
Here's how we planned ahead to avoid procedures and employee rights in England,
making redundancies Scotland and Wales. Different laws govern
Northern Ireland.
Helplines

Related guides on businesslink.gov.uk Redundancies, lay-offs and

Related web sites you might find useful short-time working
Redundancy is when you dismiss someone
because:

• their workplace closes

You can find this guide by navigating to:
• there is no longer a need for them to
Home > Employing people > Dismissals, do the type of work they were
redundancies and other exits > Making an employed to do, eg due to the
employee redundant introduction of new technology

For a redundancy to be genuine, the job that

the employee does must disappear, ie you
can still take on new staff but not to do the
work the redundant employee was doing.

Lay-offs and short-time working

As long as their terms and conditions of

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 Making an employee redundant

employment allow, you may be able to lay For information on the laws governing
off an employee or put them on short-time Northern Ireland, call the DEL Redundancy
working rather than make them redundant. Payments Helpline on Tel 0800 58 58 11.

A lay-off happens when you temporarily

can't give an employee paid work. Avoiding redundancies
You should take reasonable steps to avoid
Short-time working, for redundancy compulsory redundancies by considering
purposes, is where the employee's pay is alternatives, such as:
less than half a week's pay.
• seeking applicants for voluntary
However, provided they comply with certain redundancy and/or early retirement -
time limits, employees can claim a statutory see the page in this guide on
redundancy payment if the lay-off or redundancy selection -
short-time working runs for: non-compulsory
• seeking applications from existing
• four consecutive weeks or longer staff to work flexibly - see our guide
• a series of six or more weeks - of on flexible working - the law and
which not more than three were best practice, or use our
consecutive - within a 13-week interactive tool to investigate what
period kind of flexible working will best
suit your employees and you
You can read about lay-offs and • laying off casual or contract staff -
short-time working on the Acas website - provided that they are not fixed-term
Opens in a new window. or part-time employees
• recruitment restrictions
• reducing or banning overtime
Guarantee payments • filling vacancies with existing
If you don't provide the employee with work employees
throughout a complete day during which • retraining employees and then
they would normally be required to work, moving them to other parts of the
they are entitled to a statutory guarantee business
payment. The maximum payment is five • short-time working or temporary
days in any three months. lay-offs - see the page in this guide
on redundancies, lay-offs and
short-time working
See the page on guarantee pay -
entitlement, calculation and exemptions
in our guide on pay - an overview of Consulting with employees can help
obligations. businesses avoid making redundancies.
Employees may have different insights into
the way the business operates and can offer
For more information see our guide on pay - alternative solutions.
an overview of obligations.
Effective planning can lead to better job

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 Making an employee redundant
security for employees and it can avoid
short-term solutions not suited to the
long-term needs of your business.
Download advice for employers on
training, recruitment and redundancy
from the Jobcentre Plus website (PDF,
179K) - Opens in a new window.
Offers of alternative work
Even if you have selected an employee for
redundancy, you could still avoid dismissals
by offering them alternative work - if
available.
For an offer to be valid:
• The job must actually be offered to
the employee, ie the employee
shouldn't have to apply. The offer
should therefore be unconditional
and ideally in writing.
• The offer must be made before the
employee's current contract ends.
The offer should show how the new job
differs from the old. The new job must either
start straight after the end of the old job or
within four weeks. Employees who accept
an offer of alternative work are allowed a
four-week trial period to see if the work is
suitable.
Suitability depends on a number of factors,
including pay, job status, location, working
environment and hours of work.
If you agree that the work is not suitable, the
employee may still claim a statutory
redundancy payment (SRP). On the other
hand, if you think that the job is clearly
suitable but the employee unreasonably
refuses to take it, they may lose any
Making an employee redundant | Created by Business Link on 16 September 2009 14:36 è Crown copyright 2007
entitlement to an SRP.
Different laws govern Northern Ireland. For
information call the DEL Redundancy
Payments Helpline on Tel 0800 58 58 11.
Improving business performance
Before considering redundancies you should
look at your business and see whether there
are other things that you can do to improve
its performance.
We have a range of guides and interactive
tools that can help you do this. For example,
for information on ways to improve your
business' profitability and save money, see
our guides on increase your profitability
and save money by using energy more
efficiently. For advice on operating in tough
market conditions see our guide to
managing a business during a recession.
You can also use our interactive tool to
assess how well your business is
performing or for more information and
sources of assistance see our feature on
help for businesses.
Redundancy selection -
non-compulsory
Non-compulsory redundancy covers
voluntary redundancy and early retirement.
Voluntary redundancy
You could ask employees if they are willing
to volunteer for redundancy and then select
those to be made redundant from the
resulting list.
The advantages of voluntary redundancy
Page 4
 Making an employee redundant

are that:
The disadvantages are that it:
• it is less demoralising for the
workforce than compulsory • can be expensive compared with a
redundancy one-off voluntary redundancy
• it is less disruptive, provided the right payment - the business may have to
people volunteer fund a long-term pension
• less work is needed to check that • may be hard to find new staff for
redundancy selection criteria are fair specialised jobs if business improves

The disadvantages are that: Early retirement is not a dismissal as long

as:
• it is often more expensive -
longer-serving employees requiring • both you and the employee agree to
higher redundancy payments tend to it
volunteer • the employee has a genuine choice
• you may need to offer enhanced between early retirement and
redundancy payments to attract continuing in employment - even if
people to leave they still might go on to be made
• you may get more volunteers than redundant
needed - those not selected may
react negatively For early retirement, you do not have to use
• you could end up with an imbalance the statutory retirement procedure.
in the skills and experience of
remaining employees Different laws govern Northern Ireland. For
information call the DEL Redundancy
To prevent imbalances, many companies' Payments Helpline on Tel 0800 58 58 11.
redundancy policies maintain management's
right to decide whether a particular
employee should be allowed to leave. Redundancy selection -
compulsory
Early retirement
If - despite your best efforts - you have to
The advantages of early retirement are that make compulsory redundancies, you will
it: need to establish:

• is often an acceptable alternative to • A pool of employees, all or some of

redundancy for employees and trade whom will eventually be made
unions redundant. For example, these could
• is less harmful to employee morale be employees at a particular site
than compulsory redundancy and/or doing a particular type of
• gives opportunities to promote junior work. A pool should be as wide as
employees if those retiring occupy possible, but can consist of only one
more senior grades employee.

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 Making an employee redundant

• Redundancy selection criteria. • legal industrial action lasting up to 12

The criteria must be objective,
non-discriminatory and applied consistently.
Among the variety of criteria that can be
used to select employees for redundancy
are:
• Skills, qualifications and aptitude -
these can help keep a balanced
workforce.
• Standard of work performance -
with this method, you need to provide
supporting objective evidence, for
example from the business' appraisal
system. See our guide on how to use
appraisals to manage
performance.
• Adaptability - it may be important for
your business that employees accept
different types of work as needs
change.
• Attendance/disciplinary record -
you must apply this method
consistently, and be sure your
records are accurate and that you
understand the reasons for
absences. Do not include absences
for maternity, paternity or adoption
leave .
To avoid the possibility of unlawfully
discriminating against anyone, you should
use more than one criterion.
weeks, or longer
• certain employee representative
reasons
• actions taken on specified health and
safety grounds
• reasons associated with pregnancy,
maternity, paternity, adoption and
parental leave
• reasons relating to regulations on
part-time workers
For a complete list, see the page on
automatically unfair reasons for
dismissal in our guide on dismissal.
Different laws govern Northern Ireland. For
information call the DEL Redundancy
Payments Helpline on Tel 0800 58 58 11.
The redundancy consultation
process
If you fail to consult employees - and their
representatives if applicable - in a
redundancy situation, the redundancy
dismissals will almost certainly be unfair.
Collective redundancy consultation
If you plan to make 20 or more employees
redundant in one place of work within a
90-day period - a collective redundancy
situation - you must:

Automatically unfair selection criteria • Notify the Department for Business,

Innovation & Skills by letter or using
Using certain selection criteria will make any form HR1. You can download form
subsequent redundancy dismissal HR1 from the Insolvency Service
automatically unfair, including selection due website (PDF, 128K) - Opens in a
to: new window.
• Consult with workplace
• trade union membership, representatives. These may be either
non-membership or activity trade union representatives or, where

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 Making an employee redundant

no union is recognised, elected

employee representatives instead. If
your employees choose not to elect
employee representatives, you must
give the relevant information directly
to each individual.
Consultation must start in good time - when
redundancy proposals are in their formative
stage - and at least:
• 30 days before the first redundancy
where there are 20 to 99 proposed
redundancies
• 90 days in advance where there are
100 or more proposed redundancies
If you fail to carry out collective redundancy
consultation, affected employees may claim
a protective award from an employment
tribunal - see the page in this guide on
potential problems following
redundancy.
• the reasons for redundancies
• the numbers and categories of
employees involved
• the numbers of employees in these
categories employed at the
establishment
• how you plan to select employees for
redundancy
• how you will carry out redundancies
• how you will work out redundancy
payments
Consultation does not have to end in
agreement, but it must be properly carried
out with a view to reaching agreement,
including ways of avoiding the redundancies
or minimising their effect.
Individual redundancy consultation
You should consult employees individually
regardless of the number you plan to make
redundant.

Redundancy and I&C agreements If you fail to do so, any subsequent

dismissals may be unfair.
If you have an information and consultation
(I&C) agreement in place, you have a duty
to inform and consult employees or their Rights of redundant employees
representatives on - among other things -
changes to the workforce. This means that Redundant employees have a number of
you may have to inform and consult on any rights, the main one being the right to
proposed redundancies. receive a statutory redundancy payment
(SRP).
However, you do not have to inform and
consult at the same time under both the The right to receive an SRP
redundancy and the I&C legislation - you
can choose instead to 'opt out' of your I&C To receive an SRP, an individual must:
agreement and consult under the
redundancy legislation only. • be an employee, ie partners, casual
workers, agency workers, the
What information must you provide? self-employed and directors not
working under a contract of
At the start of the consultation, you must employment do not qualify - see our
provide written details of: guide on employment status

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 Making an employee redundant

• have at least two years' continuous

service - see our guide on payment you make in addition to SRP is
continuous employment and subject to tax and National Insurance (NI).
employee rights
• have been dismissed, laid off or put You must be careful however, when you are
on short-term working, ie those who making other termination payments to the
opted for early retirement do not employee at the same time, eg a payment in
qualify - see the page in this guide on lieu of notice and holiday, as you may have
redundancy selection - to deduct tax and NI for these.
non-compulsory
Failure to make an SRP
A redundant employee also has the right to
receive a written statement setting out the An employee has six months from the date
amount of any redundancy payment and their employment ended to make a claim for
how you worked it out. payment to an employment tribunal where
either:
You must make the payment when or soon
after you dismiss the employee. • The employee disagrees with the
amount of the payment, or
• You fail to make any SRP, eg
How is an SRP calculated? because you think that the employee
An SRP is based on: is not entitled to it. If they fail to make
the claim in time, a tribunal still has
the power for a further six months to
• the employee's age decide whether or not the employee
• the employee's amount of continuous should receive an SRP.
service - up to a maximum of 20
years
• the employee's weekly pay - up to a If you cannot pay, eg because you're
limit of £350 where the employee's declared insolvent, the employee can apply
employment ends on or after 1 to the Department for Business, Innovation
February 2009 (£380 where & Skills (BIS) for a direct payment from the
employment ends on or after 1 NI Fund.
October 2009)
However, they must have applied in writing
Currently, the maximum SRP payable is to you for a payment within six months of
£10,500 (£11,400 from 1 October 2009). their employment ending, or applied
successfully to an employment tribunal
within the six months after that.
Use our interactive tool to calculate the
statutory redundancy pay due to your
Other redundancy rights
employee.
Redundant employees also have the right
Taxation of SRPs to:
As long as it's not more than £30,000, an
SRP is not taxable. Any redundancy • Be offered alternative employment

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 Making an employee redundant

wherever possible.
• Have a trial period in the alternative • Advise them to contact their local
employment without losing their right Jobcentre Plus to find out about
to an SRP. suitable vacancies or training.
• Reasonable time off on full pay for • Set up interviews onsite for
job-hunting or to arrange training. redundant employees. You could
• Not be unfairly selected for consider using a specialist
redundancy. Employees normally outplacement agency - outplacement
need at least one year's service to counselling and retraining is tax
claim unfair dismissal. However, if an deductible in respect of all redundant
employee is selected for redundancy employees, including part-time
on certain grounds, their dismissal workers.
will be automatically unfair and they • Contact other local employers who
do not need a minimum amount of may have vacancies.
service. • Offer advice on searching for suitable
vacancies in the press and on the
internet.
For more information, see our page on • Offer guidance on CVs, job
automatically unfair reasons for application forms and interview
dismissal in our guide on dismissals. techniques.
• Highlight the importance of being
Different laws govern Northern Ireland. For prepared to consider a wide range of
information call the DEL Redundancy jobs.
Payments Helpline on Tel 0800 58 58 11. • Consider re-employment if business
picks up, where this is appropriate.

How to help redundant employees
Employees (especially those who have
worked for many years in the same job or
workplace) can find redundancy a traumatic
experience - even if they have received a
redundancy payment above the legal
minimum.
Where possible, you should try to find ways
of helping employees come to terms with
their situation. The practical and financial
help you offer will of course depend on the
size of your business and the seniority of
any employee being made redundant.
It is good practice to do your best to help
employees find a new job. To do this, you
could:
You can also help with financial issues by:
• providing clear information on the
financial effects of redundancy -
amount of redundancy pay, effect on
pension payments and state benefits
• pointing out the need for the
employee to discuss the financial
implications of redundancy with their
family as early as possible
If you have the budget, you could consider
offering individual counselling. Alternatively
you could train personnel managers, if you
have them, to carry out this task.
You could also suggest that employees
worried about redundancy could call the
NHS Credit Crunch Stressline on Tel 0300

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 Making an employee redundant
123 2000.
Support for 16- and 17-year-olds being
made redundant
People aged 16 and 17 can get extra
support from their local Connexions service
when they find themselves without work or
training.
If you employ a 16- or 17-year-old in a job
which does not include a training element,
Connexions will already be contacting that
young person regularly to find out how they
are progressing. It is important that
Connexions is able to track the young
person's progress in case there is a risk of
them losing their job or needing further
support.
If you find that you have to make a 16- or
17-year-old redundant, you should contact
your local Connexions service as soon as
possible. Find contact details for your
local Connexions service on the
Connexions Direct website - Opens in a
new window.
If Jobcentre Plus is working with you to help
a number of employees being made
redundant, let them know if anyone affected
is under 18.
Professional and career development
loans (PCDLs)
To help them improve their skills in order to
find a new job, employees made redundant
can apply for a low-interest loan of between
£300 and £10,000 to fund a work-related
training course.
Redundant employees can find out about
PCDLs on the Directgov website - Opens
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in a new window or call the PCDL Helpline
on Tel 0800 585 505 to order an application
pack.
Apprenticeship redundancies
If you employ an apprentice who is about to
lose their job, it is possible for them to
continue their apprenticeship through
full-time training for a period of up to six
months. This will allow redundant
apprentices to maintain their framework
while they and their learning provider look
for a new employer.
It is therefore important that you let the
providers know if there is a risk of an
apprentice being made redundant.
Further help and advice on redundancies
Contact Jobcentre Plus to find out what
support is available to help you with training
and recruitment. Jobcentre Plus and its
partners can also help support you when
making redundancies.
Find out how Jobcentre Plus can help
you with training, recruitment and
redundancies on the Jobcentre Plus
website - Opens in a new window.
If you have a question about redundancy
payments or your responsibilities as an
employer, you can also get help from the
Department for Business, Innovation and
Skills Redundancy Payments Helpline on
Tel 0845 145 0004.
Different laws govern Northern Ireland. For
information call the DEL Redundancy
Payments Helpline on Tel 0800 58 58 11.
Potential problems following
redundancy
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 Making an employee redundant

Following redundancies, an employee can
claim unfair dismissal if you:
• Have unfairly selected them for
redundancy. This covers both where
you used selection criteria that were -
on the face of it - fair but you
incorrectly applied them and where
the criteria themselves make the
dismissal automatically unfair.
• Failed to offer alternative work where
it was available.
Employees may also be able to claim a
protective award if you fail to properly
consult with employees' representatives.
Unfair redundancy selection
If you fail to offer alternative work where it's
available, any subsequent redundancy
dismissal could be unfair.
For more information on offering alternative
work, see the page in this guide on
avoiding redundancies.
Failure to properly consult
If you fail to properly carry out collective
redundancy consultation, a complaint may
be made to an employment tribunal by:
• trade union or elected employee
representatives
• individual employees who have been
dismissed as redundant

An employee will have been automatically The tribunal may award up to 90 days' pay
unfairly dismissed if you select them for to each affected employee.
redundancy for certain reasons.
For more on collective redundancy
For more information, see our page on consultation, see the page in this guide on
automatically unfair reasons for the redundancy consultation process.
dismissal in our guide on dismissals.
Read about protective awards on the
If you select the employee for redundancy Department for Business, Innovation &
for any of these reasons, they will be able to Skills (BIS) website - Opens in a new
make an unfair dismissal claim regardless of window.
how long they have been in your
employment.
Financial problems

Selecting an employee for redundancy If your business would become insolvent as

based on poor performance or attendance
without being able to provide comparative
information for everyone in the same area
may also be seen as unfair.
Failure to offer suitable alternative work
a result of making the statutory redundancy
payments, assistance is available from the
BIS Redundancy Payments Service (RPS)
and Insolvency Service, though you will be
expected to repay the debt as quickly as
possible.

You should try to find alternative work in The RPS can also help if you become
your business for employees you have formally insolvent and fail to pay the
selected for redundancy. employer's contributions into an

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 Making an employee redundant

occupational or personal pension scheme or What I did

owe pay in arrears.
Learn from the past

Different laws govern Northern Ireland. For "In the late 80s, Easibind experienced rapid
information call the DEL Redundancy growth, largely through expanding our
Payments Helpline on Tel 0800 58 58 11. customer base and thereby increasing sales
volumes. Riding the wave of economic
prosperity, our sales force ballooned and we
Here's how we planned ahead to were growing at 30 per cent year on year.
avoid making redundancies
"When recession hit in the early 90s, a
Harry Skidmore sizeable number of our customers went to
the wall, severely denting our revenues. We
Easibind - Opens in a new window realised then that our customer acquisition
Harry's top tips: tactics had merely amounted to buying
sales, rather than adding real value to the
business or investing in its future.
• "Watch out for bad debts and
consider taking out insurance to
cover them. Not getting paid what "Drastic action had to be taken, including
you're owed is the quickest route to reducing the workforce from over 200 to just
failure." 70 people. That was a bitter regret to the
• "Keep in constant touch with your management team, especially since our
workforce and be completely honest company is closely integrated with the local
with them about the company's community. It took several years to recover
prospects." from that position and we vowed that we
• "Fight to retain key skills in the wouldn't let it happen again."
business. When tough times recede, Re-evaluate everything
which they will, you'll need those
people to help you move forward." "Good intentions are fine, but you have to
do more than just talk the talk. We
undertook a top-to-bottom review of the
Easibind International provides consultancy company.
services in product packaging, promotion
and presentation, incorporating techniques "Debt collection practices were an early
such as 3D mechanical design and target. While the money had been flowing in,
advanced finishing processes. The company we'd been too relaxed about debtors. We
is based in Heanor, Derbyshire and put strict new procedures in place which
currently employs around 100 people. Here, we've continued to adhere to ever since.
managing director Harry Skidmore
describes how lessons from the 1990s
"We also re-visited our business model,
recession led the company to introduce
focusing on a smaller number of higher
measures designed to strengthen the
value customers and placing greater
business and avoid making redundancies in
emphasis on distribution via trade partners.
the future.
This reduced our sales and marketing

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 Making an employee redundant
overheads from 15 per cent of revenue to
just 3 per cent.
"In addition, we invested in new digital
printing technology and product innovation,
forging partnerships with key suppliers and
undertaking Knowledge Transfer
Partnerships (KTPs) with universities in
order to share resources.
"Perhaps most importantly, we re-skilled our
workforce and changed the structure of our
sales teams. Employees on the production
side received training to enable them to
work more flexibly across a variety of
different machines and processes.
"On the sales side, we introduced graduates
into the mix, working alongside older and
more experienced employees who moved
into customer-relationship-management
roles. This was a conscious move away
from traditional sales management, where
one person is responsible for a single
account. It means we can utilise different
skills at different stages of the sales cycle,
according to customer requirements."
Keep looking ahead
"As well as laying foundations for longer
term stability, there are things you can do at
a tactical level, to be deployed at relatively
short notice if necessary. For example, in
early 2007 we spotted signs of market
corrections as evidenced in market reports
and information gleaned from trade
associations and customers.
"As a precaution, we introduced a wage
freeze for all employees. This was
discussed with our workforce and
implemented with their co-operation, on the
understanding that if conditions improved,
bonuses would be payable to make up the
Making an employee redundant | Created by Business Link on 16 September 2009 14:36 è Crown copyright 2007
shortfall.
"We also introduced annualised hours,
again in full consultation with employees.
This is a system by which employees' hours
are calculated on a yearly rather than a
weekly or monthly basis. The employer and
employee then agree the spread of hours
worked according to business needs during
a particular week or month. This has worked
extremely well for us by increasing our
flexibility to react quickly to fluctuations in
demand."
Helplines
Acas Helpline
08457 47 47 47
Department for Business, Innovation and
Skills Redundancy Payments Helpline
0845 145 0004
NHS Credit Crunch Stressline
0300 123 2000
Related guides on
businesslink.gov.uk
Use our interactive tool to get a checklist
of how to handle potential redundancies |
Use our interactive tool to calculate the
statutory redundancy pay due to your
employee | Pay - an overview of
obligations | The employment contract |
Dismissal | Insolvency and bankruptcy |
Use our interactive tool to investigate
what kind of flexible working will best
Page 13
 Making an employee redundant

suit your employees and you | Flexible

working - the law and best practice | Redundancy selection process guidance
Managing a business during a recession on the Acas website - Opens in a new
| Increase your profitability | Save money window
by using energy more efficiently | When
an employee retires | Prevent Making compulsory redundancies
discrimination and value diversity | Use guidance on the Here for business
appraisals to manage performance | website - Opens in a new window
Inform and consult your employees |
Handling employment tribunal claims | Redundancy consultation process
Employment status | Workers leaving: guidance on the Acas website - Opens in
the basics | Issue the correct periods of a new window
notice | Continuous employment and
employee rights |
Download and print form HR1 from the
Insolvency Service website (PDF, 128K) -
Related web sites you might find Opens in a new window

useful Guidance on offering alternative work on

Download training, recruitment and the Acas website - Opens in a new
redundancy advice for employers from window
the Jobcentre Plus website (PDF, 179K) -
Opens in a new window Guidance on tax-exempt payments for
outplacement counselling on the HM
Training, recruitment and redundancy Revenue & Customs website - Opens in a
advice on the Jobcentre Plus website - new window
Opens in a new window
Protective awards guidance on the BIS
Handling redundancy guidance for website - Opens in a new window
employers on the Acas website - Opens
in a new window Download redundancy payments
guidance for employers from the
Redundancy consultation and Insolvency Service website (PDF, 300K) -
notification guidance on the Department Opens in a new window
for Business, Innovation & Skills (BIS)
website - Opens in a new window Download the code of practice for
work-based pensions from the Pensions
Redundancy questions answered on the Regulator website (PDF, 92K) - Opens in
Here for business website - Opens in a a new window
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Lay-offs and short-time working

guidance on the Acas website - Opens in
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