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What happens when making staff redundant?

  • Blog
  • 27 September 2017

Having to restructure your business and downsize can be a difficult and taxing time for any entrepreneur. This can especially be the case if the period involves a series of staff redundancies.

We explain what happens during the process of making staff redundant and what you need to do to make this process as efficient and fair as possible.

What happens when making staff redundant?

The steps to redundancy

Redundancies can sometimes be unavoidable, especially if a business is changing, discarding a service area, downsizing, or closing down.

Handling redundancy proceedings badly can cause a number of problems for your business. Rectifying these problems is usually handled in an employment tribunal. Costs incurred here can make a financial situation even more difficult, which can be even more detrimental to your business.

To avoid being taken to an employment tribunal, your redundancy process needs to be compliant and followed correctly. There are a number of steps through the redundancy process that should be considered. These are:

  • Assess and avoid
  • Consultation
  • Notification
  • Pay

If you are already an FSB member, we strongly advise you to call our employment helpline before you take any action and we will ensure you follow the right processes and stay on the right side of employment law.

Assess and avoid

The first step in any redundancy process is to work out how many staff members you need to let go, and what steps can be taken to avoid this.

The aim is to avoid having to make compulsory redundancies. There are several methods which could be used to do this.

Primarily, you could look to see if any staff are willing to take voluntary redundancy or early retirement. This allows staff to leave earlier than they planned and, in the process, helps to protect other jobs by doing so.

You could also aim to cut down on wage bills, either by stopping overtime, halting recruitment, or even cutting working hours. You might also have to stop working with freelancers and contractors. This can help to ease spending and help a business potentially get through a rough patch.

Another option could be to lay-off employees. This is where they are given unpaid leave, while your business looks for a solution. However, it’s important to note that if the unpaid leave runs for longer than 4 weeks, the employee can make a claim for their redundancy pay from you.

Consultation

If compulsory redundancies are unavoidable, then you should begin communicating this to your staff members.

Best practice is to keep staff fully aware of what is happening at all times. Failure to do so can lead to an employment tribunal potentially ruling in favour of the employee, if they seek to claim for unfair dismissal.

The major steps to a redundancy consultation are:

  • Notifying the Redundancy Payments Service
  • Meet with union representatives or directly with staff
  • Inform all parties involved about the redundancies and provide enough time for this to be considered
  • Respond to requests for more information about the redundancy process
  • Notify affected staff, letting them know when their last working day will be
  • Finally, issue redundancy notices

Notification

The amount of notice you should give to staff varies depending on how many years they have been with your company. This tends to range from anywhere between one to twelve weeks. During this time, you still need to pay staff.

In some instances, you can give staff pay in lieu of notice. What this means is that you pay staff for the work they would have done during their notice period, but you immediately end their employment. This at least covers the staff member while they look for new employment.

Notification goes beyond letting staff know when their employment ends. Throughout the entire consultation process, staff should be fully aware of what is going on and steps should be taken to support them during this time, as redundancy can be difficult for all parties involved. This can include help with CVs, employment advice, and guidance on the next steps they should take.

Pay

The last step within redundancy proceedings is to calculate the payment each member of staff is entitled to.

Statutory redundancy pay is based on staff fulfilling several criteria:

  • They must have a contract with your business
  • They need to have at least two years’ continuous service at your business
  • They must be being dismissed or laid off, for example. Early retirement doesn’t qualify for redundancy pay

You can offer redundancy to staff who have been at your company for less than two years. However, this isn’t mandatory.

Calculating redundancy pay should factor in the length of time an employee has worked for your business, as well as their age.

Employees between 22 and 40 years old will get a week’s pay for every year they have been at your business. For employees under 22 years old, this is half a week’s pay. For employees over 41, they receive a week and a half. Mandatory redundancy pay is capped at 20 years of service. However, should you wish to you can pay staff more. Again, this isn’t mandatory and is at the discretion of your business.

How can FSB help during my staff redundancies?

Getting your redundancy process right is crucial. This can be a difficult time for any business. The last thing you want is more undue stress and difficulty caused by being taken to a tribunal.

At FSB, we aim to help with this by providing our members with an employment protection and law advice service. This helps guide them through the process of redundancy, while avoiding running afoul of employment law. The service gives you access to:

Our FSB Employment Protection service is included as standard in our FSB Business Essentials package and to ensure you protect you and your business, contact us before you take any redundancy action. To find out more about how we could help your business navigate redundancy, visit our FSB Employment Protection page. Or to see how else we could help your business, look at our package comparison page.

FSB Employment Protection from FSB

A wealth of important information and advice, available online in-case you face dismissal or discrimination claims and employment tribunals.

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