Redundancy basics

If you’re contemplating the need to make redundancies in your small business it’s essential you understand the basics of what redundancy is, when it applies and what the legal risks might be.

Here are some key points you need to know before you start:

What is the definition of redundancy?

There are a number of potentially fair reasons for terminating employment, one of which is redundancy. Redundancy has a specific definition, which is the ceased or diminished need for employees to carry out work of a particular kind in a particular location.

What kind of situation might count as redundancy?

Redundancy can sometimes be very clear, such as the complete closure of a business or a workplace – in these types of situations the roles clearly no longer exist. There are still legal risks to be careful of, but in terms of demonstrating that the situation is a redundancy, it will be easier.

However redundancy also commonly happens where work isn’t completely ceasing, but there is a change in the workplace meaning the need for that particular role has diminished.

Perhaps you don’t need as many people doing that kind of work anymore because there is simply less work available, or perhaps business needs have changed and you need to restructure how things are done, meaning you don’t need certain roles any more, or perhaps you are introducing new technology. All of these might be redundancy situations.

What situations would not be considered redundancy?

It is important to be able to demonstrate that the need for the work is ceasing/diminishing – wanting different people to do the work, or wanting to change the terms and conditions staff are on would not be the work reducing, so would be unlikely to be considered a redundancy situation.

If you are restructuring your business there may be an argument for redundancy if the work is changing, but there may not be, so you should take advice. Introducing new shift patterns to cover the same work is unlikely to be redundancy, for example, or deciding that the staff you have in place do not have the skills and experience or qualifications you need. Sometimes employers want part time staff to go full time, and this would not be redundancy either, as the work itself is not diminishing.

What are the legal risks during redundancy?

The main legal risks in a small business making fewer than 20 redundancies would be unfair dismissal claims. The minimum required length of service for bringing those claims is normally two years, however there is an additional risk of discrimination claims – if someone feels their selection for redundancy was related to a protected characteristic, such as their sex, ethnicity or the fact they are pregnant or on maternity leave, they could bring a claim of automatic unfair dismissal and unlawful discrimination.

Another potential claim would be for redundancy pay, where there is an entitlement to this. Redundant employees with at least two years’ service are entitled to statutory redundancy pay. This is calculated based on a number of weeks’ pay, depending on length of service and age. The amount used as a week’s pay for the purposes of statutory redundancy pay calculations is subject to a cap, reviewed and changed periodically by the Government.

What is a lawful redundancy procedure?

The basics of a lawful redundancy procedure would constitute informing affected employees of your proposals, and why you are contemplating redundancies; a period of consultation; followed by a final decision at which point you give normal notice of redundancy.

 

If you are contemplating redundancies it’s important to ensure you have fully understood the risks and can clearly demonstrate a genuine redundancy situation.

If you’d like some advice on handling redundancies in your small business, do get in touch.