If you are reviewing your staffing needs this Autumn your business will not be alone. The thought of making redundancies is understandably a worrying one for many employers and it is important to get it right.
So, here are four things to avoid when making redundancies. You would be surprised how often they catch businesses out, but being aware of them and seeking advice at the planning stage can help you stay on the right track.
Do not:
- Think of redundancy as the ‘soft option’
- Accidentally skip or cut corners on employee consultation
- Forget the need for fair selection
- Overlook the changes that are ahead
Top things not to do when making redundancies:
1. Think of redundancy as the ‘soft option’
Many businesses find themselves with a ‘problem employee’, one they would understandably like to exit as quickly and easily as possible – sometimes their performance is awful, or it could be their conduct or even their attitude. Faced with what can seem like a long and / or difficult road to tackling the matter redundancy can seem like an easier option, after all there is no blame or shame attached to it and the employee will in many cases be leaving with a bit of money in their pocket in the form of a statutory redundancy payment, so what can go wrong?
Unfortunately, in many cases this can expose the business to risk. For starters, to make someone redundant you need to have what in law meets the requirements for a ‘genuine redundancy situation’, such as a reduction in the requirement for employees to carry out work of a particular kind or a whole / part business closure. A ‘sham’ redundancy can lead to an unfair dismissal (or other) tribunal claim.
Here are a couple of things that can help:
- If you think you may have a genuine redundancy situation or are unsure, get in touch to discuss the situation your business is facing before acting, remember we are here with business focused advice. If you do have a redundancy situation we can support you, for example with assistance with your business case for redundancy.
- If you have a ‘problem employee’ you are looking to exit, there may be a better way forward than using redundancy and we can help you here too. It may be possible to address the issue(s) via an appropriate process or if that isn’t possible or you don’t feel that’s right for your business, for example because it may take too long, we can discuss commercial options with you. For example you may wish to consider a settlement agreement – you can find out more about these in one of our earlier Legal Updates.
2. Accidentally skip or cut corners on employee consultation
Bear in mind it is normally necessary to follow a fair process, including informing and individually consulting with employees who are at risk of redundancy in a series of meetings, before any redundancies are made. Not to consult, or not to do so meaningfully, can make a redundancy dismissal unfair. Not all businesses are aware of this so it can be all too easy to accidentally fall foul of the law, particularly if you are under time or financial pressure.
Remember unfair dismissal and other employment tribunal claims can be costly, not just in terms of compensation if an employee is successful but also in the time needed to deal with them.
3. Forget the need for fair selection
Businesses can sometimes find themselves getting into trouble by failing to act fairly and reasonably in relation to pooling and selection. Here are two of the more common mistakes:
- Not identifying an appropriate pool for selection at the outset of the redundancy process – this is the group of employees that are at risk of being made redundant. Depending on the business reasons, an employer may be proposing to make all of those in the pool redundant, or only some of them. If you are proposing redundancies, you need to think carefully about the selection pool and ensure that the pool you identify is reasonable.
- Unfairly selecting who to make redundant – unless a business is appropriately proposing to make all employees in the selection pool redundant a key issue is who is retained and who is made redundant and how to decide? Businesses can fall down when it comes to selection for many reasons such as selecting an employee for redundancy for a reason that is not allowed in law (e.g. because an employee is pregnant), unfairly applying selection criteria or subjectively selecting without any evidence to show they acted fairly.
Bear in mind that an employment tribunal will want to see an easily implemented and objectively fair method of selection – the most common method businesses use is a ‘skills matrix’, this involves identifying appropriate selection criteria and fairly scoring employees on their performance in these areas. This may sound daunting if you have not been involved in making redundancies before, but like every other aspect of the process we are here to help.
4. Overlook the changes that are ahead
As you are likely already aware the Employment Rights Act 2025 (ERA 25) is bringing in some big changes for businesses.
These include the huge reduction in the length of service an employee requires for ordinary unfair dismissal protection. This is reducing from two years service to just six months for dismissals that take effect on or after 1st January 2027. The removal of the statutory cap on the compensatory award for unfair dismissal is also taking effect on 1st January 2027.
The forthcoming changes mean that it is more important than ever to seek advice on the situation in your business before taking any action, particularly if your employees have long notice periods or your redundancy proposal may impact ‘short serving employees’ as it will be vital to make sure they are appropriately dealt with so you are not accidentally caught out by the change to the law.
Remember, employees will still continue to need to two years’ continuity of service for a statutory redundancy payment, and they will still have protection against discrimination and automatic unfair dismissal from day one of employment.
If you are considering making redundancies in your business, we are here to help. We can give you expert advice from the planning stage and throughout the process helping you to avoid mistakes and to protect your business.
Bear in mind that if you are proposing to dismiss as redundant 20 or more employees at one establishment in a period of 90 days or less, there are additional duties that must be complied with, we can help your business to navigate these too so please do get in touch before taking any action irrespective of the number of redundancies that are being proposed.