Updated: 1st February 2020
It is an anxious and stressful time for all concerned when redundancies need to be made, and as an employer, also crucial to follow the correct procedures. Ensuring you meet all statutory requirements will help you to avoid accusations of unfair dismissal, and the potential requirement to attend an employment tribunal.
Making a firm plan of action ahead of starting the redundancy process is a good idea, as there are so many considerations. Amongst many other aspects, you’ll need to consider the statutory notice period that should be given, the consultation process, and redundancy payments for eligible employees.
If the business is insolvent and there are insufficient funds to make redundancy payments, your employees will need to make a claim from the National Insurance Fund (NIF). This can be done via the insolvency practitioner, or by obtaining a form online.
The Redundancy Payments Service (RPS) is part of the Insolvency Service, and payments are generally made within six weeks of a claim being submitted.
The type of consultation procedure that should be followed depends on the number of staff being made redundant:
20 or more
You must conduct a collective consultation if you are making 20 or more people redundant from one place of work, within a 30-day period. This is a statutory obligation, and failure to carry it out could result in a ‘protective award’ being made to employees at an employment tribunal.
It is usually the employees’ representatives or union who are consulted, and discussions will generally include the reasons why redundancies need to be made, as well as any potential alternatives.
Less than 20
If fewer than 20 members of staff are facing redundancy, a group consultation with all affected employees must take place. Following this, you need to meet with each affected person individually to discuss their situation.
As an employer, you should provide a clear business case for selecting the posts that are to be made redundant. If the company is solvent and will continue to trade, you also need to demonstrate the reasons why the post is no longer required, and use a non-discriminatory method of selection.
Any member of staff selected for redundancy has the right to be given a statutory notice period. This is generally a week’s notice for anyone employed for more than one month, but less than two years.
Those who have worked for two years or more are entitled to one week’s notice for each full year of employment, up to a maximum of 12 weeks. In general terms, the notice period in cases of redundancy will be the same as that specified in the employee’s contract of employment.
If your employees have worked for your company continuously for two years or more, they may be eligible to claim redundancy pay. Calculations for this payment are based on their age, length of service, and weekly wage:
These payments are currently capped at £479 per week, with length of service being limited to twenty years.
You need to provide your employees with a written statement as to how their redundancy pay has been calculated, and when it will be received. They may also be eligible for other employment-related payments, such as arrears of wages or holiday pay.
If one of your employees disagrees with their award, they have the right to take you to an employment tribunal within six months. It’s worth noting that, should your business be in danger of insolvency due to making these redundancy payments, you may be able to obtain financial assistance from the Redundancy Payments Service.
If your company is experiencing financial difficulties and you are considering liquidation, Real Business Rescue can provide expert help and guidance on all aspects of the liquidation process including what this means for you, your company, and your employees. Our licensed insolvency practitioners will be able to discuss your options with you in detail and provide your employees with the information they need should they be made redundant in the event of the company closing . Call one of the team to arrange a confidential same-day meeting. Real Business Rescue provide director advice online, over the phone, or in-person at one of our 83 UK offices or a place of your convenience.
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