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March 24, 2020

Redundancy: a Brief Guide

Redundancies may occur when businesses wish to improve efficiencies, or ride out tough times and periods of slow growth. But what exactly is redundancy? And what do businesses need to consider when carrying out the redundancy process?

Read our brief guide to redundancy to find out.

What is redundancy?

Redundancy is the termination of employment due to the work an individual does ceasing (e.g. due to a business closure) or diminishing significantly. It should be used as a last resort, bearing in mind the initial costs and when businesses may return to growth.

How do I go about the redundancy process?

Consultation

If you need to consider redundancies and have placed your workforce, or the relevant section of it, ‘at risk’ of redundancy, you will need to consult individually and collectively with your workforce. The aim of consultation is to avoid any/all redundancies.

Collective redundancies 

There are special rules that apply to collective redundancies where 20 or more roles are affected. Not following these rules can have significant financial implications. It’s important to remember that employees are redundant at the end of the process, not before you have consulted with them about ways to avoid or minimise job losses.

Evaluating the work

The key thing to focus on is the work, not the individual. It may seem obvious to you whose job is ending, but it’s vital to step back and consider the remaining work and the skills across your workforce before making any decisions.  If people are doing similar work and you need fewer of them, then you may have to ‘pool’ them in order to choose between them. Through consultation you must agree a fair way of evaluating the work and everyone’s skills in order to reach a decision on who is selected for redundancy.

Redundancy pay

Employees with more than two years’ service are entitled to statutory redundancy pay, you may also have contractual redundancy pay to consider.

Alternatives to redundancy 

Alternatives to redundancy are imposing holidays with notice, reducing hours, agreeing pay reductions, reorganising the work, adapting your business model (i.e. hotels offering NHS workers rooms at zero/very low cost), laying off* workers, or putting them on short-time* working.

*requires a contractual right in the Contract of Employment and/or Employee Handbook, find out more in our blog post here.

What next?

Moorepay customers, if you want make redundancies or look at other options, you MUST take advice from us first. Call us on 0345 073 0240, select option 2. If you don’t, you may be putting your business at risk. Plus, if you have our legal expenses indemnity insurance, you will be breaching its terms.

Before calling us, please prepare the following information:

  1. How many employees are affected? And how many have less than two years’ service?
  2. What is your business case for redundancies? This might seem obvious, but we will need full details of what internal/external factors have caused you to consider redundancies, the scale of business reduction and its impact.
  3. What the organisation structure is, what you think it needs to be and why?
  4. Whether you have any contractual redundancy terms such as an enhanced redundancy pay scheme?
  5. Do you have job descriptions for the affected roles?
  6. If you have a recognised employee representative/recognised trade union?

Don’t have access to our HR, Employment Law and Health & Safety Advice Line? To find out how we can support your business, call us on 0345 184 4615.

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About the author

Audrey Robertson

About the author

Audrey Robertson

HR Consultancy & Insurance Manager, Audrey, has a strong background in HR, Employment Law and related insurances in a career spanning over 15 years leading teams in-house and as a consultant supporting clients across retail, education and the B2B sectors. At Moorepay, Audrey heads up the Policy & HR Consultancy team as well as the insurance claims department. With a strong commitment and investment in employee wellbeing, having studied counselling and coaching, Audrey is a qualified Mental Health First Aider and supports our staff on-site.

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