How to effectively and fairly handle staff redundancies
As a business owner, making someone redundant is one of the most difficult decisions you can make. But if you find yourself having to make cutbacks, it’s important to understand the process so you are being fair to your staff.
With this helpful Bionic guide, we’ll help clear up confusion around making staff redundant and the best ways to go about it.
What does it mean to make staff redundant?
Redundancy is when you dismiss an employee because you no longer need anyone to do their job.
There might be a few reasons for redundancy, maybe your business is changing hand, choosing to operate in a different way, moving location or completely closing down. Sometimes it can even be because the role simply isn’t needed in the business anymore.
Making someone redundant is very different from firing them or dismissing them for a reason relating to work performance. If you dismiss an employee for this reason, it's not classed as redundancy so you won’t need to pay them any redundancy pay.
When is redundancy necessary?
Redundancy usually happens when a role is no longer needed. There are a few scenarios where a role might become obsolete.
For cost-cutting reasons
Many employers choose to make staff redundant because they need to cut costs. They usually go through their business model and see which roles can be combined so they don’t need to employ as many workers.
Sometimes, it’s simply a case of too many people doing the same job. This can be easily cut down to give a few people the right amount of work to do, instead of too many people with not enough work.
If there is no longer a need for the role
Another reason a worker may be made redundant is if the business is still continuing, but their role is no longer required due to reduced demand or because technology has replaced the job itself.
For example, a shop cashier may find their job is at stake because self-checkouts have been installed in store and there is no need for as many cashiers.
Permanent or temporary full business closure
Another common situation where redundancy happens is when a business closes its doors completely.
Also, if a business relocates to somewhere outside of the area the employee started employment in, then redundancy is sometimes considered as an option.
What isn't classed as redundancy?
There are some situations redundancy shouldn’t be considered and if you go ahead, the employee may have the right to sue you and your business. Be mindful about sticking to the correct employment rules.
Some unfair reasons to make someone redundant are:
- Anything to do with them demonstrating their workers’ rights, like asking for maternity leave
- If they have reported your business for breaking laws (eg: spoken up about bad working conditions)
- If they work in retail and refuse to work Sundays
- If they have voiced concerns about health and safety issues in your business (eg: if there was damp, mould or a lack of fire safety procedures)
- If they are part of a trade union and were involved in an official strike
- If they had to take time off due to jury service
What’s the difference between termination and redundancy?
Redundancy and termination both mean the employee loses their job, but the reasonings behind each are different.
The difference between the two is what happens to your role when you leave. With redundancy your role disappears as it is no longer required anymore. If you are terminated, fired or dismissed, then someone will be hired to fill your role. If you are made redundant and then you see someone being hired to do your exact job role with the same job title, then this is against the law.
What is non-compulsory redundancy?
Non-compulsory redundancy is where you offer employees incentives to leave their role early. For example, to take early retirement. Non-compulsory redundancy is often used as an alternative to voluntary redundancy (this is when you volunteer yourself to leave and are usually given a redundancy package).
The rules of non-compulsory redundancy state the offer must be made across the workplace. You cannot approach certain employees and not others.
How do I make someone redundant?
It’s not a nice decision to consider making staff redundant, but sometimes it is a necessity. This is how you go about it:
- Consult a redundancy expert — You want to make sure everything you’re doing is above board. So, it’s wise to consult a redundancy expert to guide you through the process and tell you what you must offer your employees. For example, are they entitled to redundancy pay?
- Notify any potential employees — Then you need to notify all your employees and let them know ahead of time that you will be making cutbacks and their jobs could be looked at.
- Make a decision — Think carefully about who you are making redundant. Make sure you are not discriminating against anyone. Take into account the skills you will need going forward and base your choices on this.
- Inform the team member in a professional way — When you have decided who you are making redundant, make sure you set up professional meetings with the team member (or members). Give them chance to ask questions and do it in a private place, like a side room or your office. Your employee has a right to bring a representative or union rep with them.
- Send an official redundancy notice letter — You must then give any staff a formal redundancy letter. Don’t forget to do this as the notice really should be in writing.
How much notice do I have to give when I make someone redundant?
According to redundancy law, your employees need to be given a minimum of 12 weeks' notice if they have been working for you for 12 years or more. This goes down to one week's notice if they’ve been employed at your company between one month and two years.
What is the redundancy pay?
If you make someone redundant, they are sometimes entitled to redundancy pay, depending on how long they have worked for the company. For each full year they have worked for your company, they are entitled to:
- Half a week's pay if they are younger than 22
- One week's pay if they are aged 22-40
- One and a half weeks' pay if they are aged over 41
How can Bionic help your business?
Making an employee redundant isn’t a nice job and it can be stressful juggling business affairs. Let Bionic take the hassle out of all your other business admin so you can concentrate on the bigger picture.
Luckily, that’s where Bionic can help you save time, hassle, and unnecessary admin when sorting business essentials. We compare business gas and business electricity, as well as business phone and broadband to help make sure you're on the best deals.