Redundancies: five ways to map out the legal risk before you start

When planning a redundancy process, it’s crucial to understand the legal framework and the rights of your workforce from the outset. We recommend beginning with these five steps to help you comply with your statutory obligations and minimise the risk to the business.

We know that redundancies are rarely welcomed by employees, and some disruption will be caused, but plotting out the possible areas of dispute will mean that you can limit legitimate challenges. To experienced professionals some of the following may seem obvious but too often a business will rush to the conclusion it wants without considering the basics first.

1. Collate your employee data

Compile a table of all the employees who could be impacted by any potential restructure. For each person list their role, start date, date of birth, pay and notice period.

It will help you understand the potential costs associated with redundancy and who has unfair dismissal protection (see step 3).

In terms of cost, you need to factor in notice pay or payments lieu of notice, statutory redundancy payments (a multiple of age, length of service and pay) and holiday pay. Unless it’s a case of gross misconduct or similar, both notice and holiday pay are due to all departing employees anyway, so the statutory redundancy payments represent the real additional cost.

There may also be enhanced redundancy pay too, if that’s what you normally do or because you want to be more generous or you would like the benefits provided by settlement agreements. You can read our complete guide to settlement agreements for employers here.

Of course, you must ensure you use or share any such data in accordance with data protection law and your employee privacy notice.

2. Highlight those who are on maternity leave

Employees on maternity leave who are at risk of redundancy have the right to be offered suitable alternative vacancies in the post-restructure business. In effect, it’s a form of mandatory positive discrimination in favour of mothers, which is unusual in English law. It allows them to jump the queue in a reorganisation and take any suitable roles over their colleagues.

In general terms, there is no obligation to create a role. Or you might have vacancies but they are not suitable alternatives in the circumstances. Nevertheless, it’s important that the rights of those on maternity leave are understood and met.

In some cases, employers forget all about those on maternity leave completely because they are out of sight and out of mind. If their roles or departments are affected, they have to be involved and invited to consultation meetings in the same way as if they were working (whilst making sensible allowances for childcare commitments). Putting off that difficult conversation until they are back from leave is very unlikely to be the right option.

3. Check who has unfair dismissal protection

If an employee has at least two years’ continuous employment, they have the statutory protection against unfair dismissal. Accordingly, an employer must follow a fair process and ensure they have a fair reason (such as redundancy) before terminating their employment.

If the employee’s service is shorter, they are not protected in the same way and dismissal comes with much less potential risk. Note, however, that other claims such as discrimination or a failure to collectively consult might still be relevant so care should still be taken.

4. Are you dismissing more than 19?

More specifically, are you proposing to dismiss 20 or more employees at one establishment by reason of redundancy within a period of 90 days or less? If so, then you have additional obligations to collectively consult and you can read our guide here. Even those without unfair dismissal protection are covered.

At an early stage, we would also suggest thinking about the timetable for the restructure, no matter how many people are affected. For small scale redundancies, with one or two roles at risk, the process could take around a week or two. However, large redundancies can be a lot of work and you have to plan when everything will happen and who will be responsible for it. Take a site closure with the potential redundancy of 100 people. Following the initial announcement to place everyone at risk, you are likely to have the appointment or election of employee representatives, collective consultation with those representatives, individual consultation with all 100, the process of matching them to redeployment opportunities and then appeals from those who are dismissed.

5. Involve HR and/or your legal advisers from the beginning.

Taking specialist advice will help you avoid costly missteps before they happen. Once you’ve had some initial guidance, it might be that you can then run the process yourself, meaning limited further cost.

Getting specialists involved only once a mistake has been made can leave us with limited scope to help you. If an employee already has grounds for a claim then there might be little we can do to change that and you might have to negotiate how much compensation is paid, rather than if anything should be paid at all.