Redundancy – avoiding the pitfalls
The ongoing effects of Covid, coupled with rising energy costs, wage increases, and supply chain issues, have left many smaller businesses struggling. It is likely that redundancies will increase as a result.
Making employees redundant is a difficult decision for any employer to take and there are many pitfalls to avoid.
Take early advice
If your firm is thinking about making redundancies, make sure you take appropriate legal advice at the earliest opportunity. The biggest pitfall we see with employers is when the need to take prompt action leads to hasty decisions, rushed actions and subsequent costly mistakes.
If you do not follow a fair redundancy procedure you could end up with a claim for unfair dismissal or a discrimination claim that will cost your business much more than just the redundancy payment.
Is it a genuine redundancy?
First, make sure the redundancy situation is a genuine one. Is the need to make a redundancy an actual necessity or is there an alternative option? Do not use redundancy as an excuse to dismiss an employee for another reason, such as underperformance.
Defining the pool
To establish the potential ‘pool’ of employees who are at risk of redundancy, you need to consider:
- Which kind of work is disappearing
- Which employees do this work.
Be very careful when defining the pool of those whose jobs are redundant. This can be complicated where job roles are interchangeable. If your pool is too narrow it could lead to claims of unfair dismissal.
Selection process
This is the area where employers make the most mistakes. Speak to one of our employment experts for advice and support on compiling the selection criteria before embarking on the redundancy process.
Criteria for redundancy selection must be fair and reasonable, and applied in a consistent and non-discriminatory way. It should be based on facts and not affected by personal opinion. So, you need to ensure it is as measurable and objective as possible.
In the past, employers often used a ‘last in first out’ selection process for redundancy, but this could lead to accusations of age discrimination.
Consultation
There are ‘collective consultation’ rules to follow if you’re making 20 or more employees redundant within any 90-day period at a single establishment.
For fewer than 20 there are no set rules as to the length of consultation period, but you should conduct meaningful, proper consultation with the affected employees. Notify employees as soon as is reasonably practicable. The ‘at risk’ letter should identify the business rationale and set out the timeline and schedule for consultation.
Give employees time to understand the process and reasons for it and give them time to comment on the proposals and express their views.
Failure to consider alternative
Make sure you consider all alternatives to redundancy, such as redeployment, a pay cut, or a reduction in hours. Any offer of suitable alternative employment should provide the employee with a 4-week trial period to see if the work is suitable.
Wider impact of redundancy
Don’t forget to consider the wider impact of any redundancy and the impact on those staff who remain in the business. Take steps to ensure they feel supported and motivated.
As an alternative to formally making an employee redundant, an employer may consider using a settlement agreement to bring the affected employee’s or employees’ contracts to an end. This can remove the risk of claims being made. Read our Settlement Agreement blog for more information.
For further advice and support, contact one of our experienced employment lawyers today:
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