DJM Solicitors

Four things you need to know about redundancy

While no business owner likes to think about it, sometimes you have to let go of staff. It can be particularly hard when making staff redundant as it is often through no fault of the employee, but has to happen.

Here are four things you need to know about redundancies.

You must have a formal procedure in place
Even if you have never previously had to entertain the idea of redundancy, it’s worth having a procedure in place and sticking to it when the situation arises.

It should cover the selection process, communication with employees, liaison with relevant unions and going to reasonable lengths to protect the employees whose roles have become redundant.

You must choose the employees to be made redundant from a ‘fair pool’
To avoid the risk of being sued for unfair dismissal, you should set out a ‘fair pool’ of employees from which to choose from. Your redundancy procedure will describe the selection pool, and you will be expected to follow this.

If you don’t have a procedure in place, you will be expected to act reasonably when identifying the pool for selection e.g. consider whether employees’ jobs are interchangeable.

Objective selection criteria should then be put in place, and each employee will be scored on the criteria, which could include performance and attendance.

If you wish to include length of service as a criterion, it is advisable to seek legal counsel as it could be construed as age or sex discrimination.

We cannot meet our redundancy payments, what can we do?
If you’re not able to pay the statutory redundancy payments, they will be paid out of the National Insurance Fund. If employees are entitled to more than the statutory payments, they will be join the other creditors.

Can we take on additional staff after the redundancies?
Doing this could potentially attract negative attention from former employees, but, as we all know, the fate of a business can change with the win of a single contract.

If you can prove that you had a ‘reasonable expectation’ that the business was about to enter a period of instability, then you will have a defence.

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