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Restructuring and redundancy

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Redundancy is a form of dismissal and may arise where the requirement for employees to undertake work of a particular kind has ceased or diminished. The diminished or ceased requirement could be across the organisation or in a specific location.

Examples of potential redundancy situations might be where you:

  • can no longer employ one or more members of staff in your organisation, due to reduced funds
  • decide to restructure the way things are undertaken, so that some posts are no longer required.

Employees who have two years’ service or more, including those on a fixed term contract, have the right to not be unfairly dismissed on the grounds of redundancy (or any other unfair grounds) and they have the right to statutory redundancy pay.

In some cases, a contract you have may transfer to a new provider. If this is the case, TUPE may apply rather than redundancy. See Transfer of undertakings (TUPE).

Fewer than 20 employees

The guidance below is given on the assumption that there are fewer than 20 employees to be made redundant. If there may be 20 or more employees ‘at risk’ of redundancy, additional procedures and certain timescales apply. You are advised to seek external HR advice. Please also see the Acas guide to handling large-scale redundancies (pdf, 522KB).

Minimising the need for redundancies

Where possible, you should make efforts to avoid or minimise the need for redundancies in the first place. For example by:

  • restricting overtime
  • reducing the use of temporary employees
  • reorganising work rather than recruiting additional employees.

Key principles

In order for a potential redundancy situation to be fair under the law, you must:

  • consult (on ways of avoiding the redundancies and minimising hardship)
  • select fairly who is to be made redundant
  • identify and offer suitable alternative employment, if this is available.

Consultation

You should start the consultation period by setting out your proposals in writing, with the reasons. The proposals should specify which employees are ‘at risk’ of redundancy and why.

Key points to remember are that you should:

  • provide adequate information to which affected employees can respond
  • give a reasonable time (eg at least two weeks) for the consultation process
  • give conscientious consideration to any points raised.

During the consultation period, you should meet with affected employees and receive their views on the proposed changes as well as their thoughts on how redundancy could be avoided or its effects mitigated. You should consider these views with an open mind; a change to your proposals could result.

Below is how a fictional organisation commenced redundancy consultation.

The Westwich Association (the WA) had for some time employed a part time book-keeper. The treasurer, a qualified accountant, had taken responsibility on a voluntary basis for producing management and annual accounts.

As the WA grew, the treasurer became unable to undertake this work. The WA trustees considered that they would need to pay for accountancy support instead.

Having considered various options, the WA felt that the most appropriate option might be to appoint a part-time financial accountant, who would prepare management and annual accounts as well as undertake all book-keeping.

Because their funding was limited, they would not be able to keep on a separate book-keeper.

The WA therefore entered into a consultation process with the book-keeper about the proposed change and the impact on his job.

First, the general manager met with the book-keeper to explain the situation. She made sure that she met him mid-week, rather than on Friday afternoon, so that he could discuss the situation further with her at work on the following day, if he wished. 

She explained:

  • that the WA proposed to replace his current post with a more senior post of accountant
  • the reasons for the proposal – that there was a need for accountancy support as the treasurer was no longer able to undertake this work
  • that should the proposal go ahead, the book-keeper could apply for the higher position, but if he were unsuccessful and there were no other suitable alternative employment, his post would be redundant and statutory redundancy pay would be payable
  • the proposed timescale for change.

At the end of the meeting, she gave the book-keeper a letter containing the information she had talked through with him. Here is the letter:

------------------------------------------------------------

Dear Paul

CONSULTATION ON REDUNDANCY OF YOUR POST

I write to let you know that Westwich Association is proposing a restructuring of the way that financial management and administration is conducted. Up to now, you have undertaken book-keeping work, with our treasurer having responsibility, on a voluntary basis, for producing management and annual accounts. Our treasurer is no longer able to fulfil this role.

This proposed restructuring will directly affect you, as the proposal is to replace your role with the role of financial accountant. This post would prepare management and annual accounts as well as undertake all book-keeping. Because our funding is limited, we would not be able to keep on a separate book-keeper. This means that your current post is ‘at risk’ of redundancy.

I must stress that at this stage, no firm decisions have been made. This letter is intended to start a formal consultation process with you. You may have thoughts on how we could achieve our objective in different ways and we are genuinely keen to hear these.

Should the proposal go ahead, you will be given the opportunity to apply for the financial accountant post and we would discuss with you reasonable training to achieve the requirements of the role.

Should you be unsuccessful in applying for the accountant post, you would be entitled to redundancy pay at statutory levels.

I and the trustees would like your response within two weeks of today, ie [date]. I would like to meet you again on [date] (one week’s time from now) to discuss your thoughts at that stage. I am also happy to discuss the matter with you at any other time during the two-week consultation period.

At the end of the two weeks, we will take a decision on how to proceed. I need to inform you that one option is that you could be given notice of redundancy. However, no final decision has yet been made and we would like to explore all feasible options with you before taking that decision.

I appreciate that this is an uncertain time and would like to take this opportunity to thank you for all the good work you do. This proposal is in no way connected with the quality of your work.

Yours sincerely

Freda Platt
General Manager

Selection for redundancy

You will need to decide which employees you propose to make redundant. In some cases, this will be clear – eg if there is only one employee undertaking a particular job. However, if there are two or more employees undertaking the job and you need only one, then you will need to select between them, using fair and objective criteria.

Please note that it is generally not advisable, and could be unlawful, to select individuals only on the basis of ‘last in, first out.’ You should also not select people purely on the basis of part-time status, due to age, or because they are pregnant or on maternity leave. Indeed, those on maternity, adoption or shared parental leave have additional protection under the law in redundancy situations.

Once you have conducted your selection process, you will need to inform the employee who is selected the reasons why they have been provisionally selected for redundancy rather than their colleague(s), and give the individual the opportunity to comment on or challenge this selection. You should do this before you issue notice of redundancy.

Notice of redundancy

At the end of the consultation period, you will either confirm your plans, or amend them according to the comments received.

If, after period of consultation, you are proposing to issue a notice of redundancy to an employee, then you should do the following:

  1. Send a letter to the employee, stating that it is proposed to make the employee redundant and the reasons for this, and inviting the employee to a meeting to discuss the matter. 
  2. Arrange the meeting, giving the employee the opportunity to be accompanied by a work colleague or certified trade union official. Give the employee the opportunity to express any views about how redundancy might be avoided or the impact on them minimised. 
  3. Adjourn the meeting to consider what was discussed. Give genuine consideration to any points raised by the employee. 
  4. Having considered all the information, inform the employee in writing about any decision and give the employee the right of appeal against the decision. If notice of redundancy is to be given, it should indicate the employee’s last day of service with you. The employee is entitled to the notice period in their contract of employment or the statutory notice period (which increases yearly and reaches a maximum of 12 weeks’ notice after 12 years’ service), whichever is higher. 
  5. If the employee appeals against their selection for redundancy, hold an appeal meeting. Again, the employee has the right to be accompanied at the meeting and where possible, the appeal should be held by a manager or trustee who has not been previously involved. The person/people hearing the appeal should consider whether or not the employee has been fairly selected for redundancy. 
  6. You should continue to consult with the person selected about ways of avoiding the redundancy, and ways of minimising the hardship on them, during the redundancy notice period. 

Suitable alternative employment

If there is suitable alternative employment available, you should discuss it with the employee and give them the opportunity to have a trial period of four weeks in the alternative job. Make sure you check the employee’s views.

In some cases, available alternative employment may not strictly be ‘suitable’, but the employee may prefer it to redundancy, so you should discuss any such employment with them as well.

If you can offer alternative employment, you need to put the offer in writing, showing how the new employment differs from the old. You should make the offer before the employment under the previous contract ends. In accordance with the law, the new job should start either immediately after the end of the old job or after an interval of not more than four weeks.

The employee will have a right to a four-week trial period in the new job.

If the trial period does not work out for either employee or employer, the employee normally retains the right to a redundancy payment.

Redundancy payments

You must, as a minimum, pay statutory redundancy pay. If your employee’s statement of terms and conditions (‘contract of employment’) states a higher entitlement than statutory levels, you must pay the higher entitlement. You should set out in writing how you have calculated the redundancy payment due.

Statutory redundancy pay is paid once an employee has two years’ service with an employer. GOV.UK provide a redundancy pay calculator. Remember that in addition, you will need to make payments for any annual leave accrued but not taken. If you do not require the employee to work their notice, you will need to pay in lieu of notice.

Support

You’ll need to support the employee as much as you can. This will include reasonable time off work to seek alternative work, or to arrange for training for new employment. Such time off is a legal right during the notice period, provided an employee has two years’ service or more.

Confidentiality

Consider how you will keep relevant matters confidential. Consult with the employee about how best to inform their colleagues about when they will be leaving.

Recognising and thanking the employee

Consider how you might recognise the employee’s service in a tactful way. For example, a gift from other staff may sometimes be appropriate.

Further information

Page last edited Jun 28, 2018

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