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Making someone redundant: The Small Business Employers Guide

Making someone redundant is one of the hardest things you'll ever have to do – and you need to get it absolutely right, for the sake of your team and of your small business. In this post, we'll show you how to run a redundancy process that's both in line with the law and fair on your team.

Redundancies are a stressful process to go through, for everyone involved.

The risk of unintentionally doing something that would harm your team and your business is high, especially if you are a startup with no previous experience of redundancies.

You need to be certain you're doing the right thing for the company, and the right thing for the people you are making redundant. If you fail, your business will be vulnerable to legal action that could mean paying out large amounts in compensation.

The top five most common redundancy mistakes (and how to avoid them)

Click here to download our guide for the 5 most common redundancy mistakes

With no HR expertise and a tight budget, many small companies are left finding the answers to their questions online — which, especially for something as sensitive as redundancies, can be risky. How can you make sure the information you find is up-to-date? Can you trust it? Your company and employees’ future depends on how you action this information — the stakes are high.

In the redundancy process, there are a number of challenges that that can’t be solved through an online search because they depend on your company’s unique context, such as:

  • Finding out if you can make someone redundant
  • Deciding who to make redundant in your team
  • Preparing for a redundancy consultation process
  • Writing compliant redundancy letters for each of the team members you’re making redundant

In these cases, a Google search won’t do — you’ll need advice that is tailored to your circumstances and those of your team.

In this guide, we’ll help you solve this dilemma:

What is redundancy?

Redundancy is the process by which an employer ‘lets someone go’ from their company when there’s no longer a business need for the work they are doing. It’s a very different thing to ‘firing’ someone, which implies that the employee has done something wrong – when someone is made redundant, it’s simply because their role no longer exists.

How do I know if I can make someone redundant?

It’s worth making one thing clear, straight off the bat – for a redundancy to be genuine, you’ll need to be able to demonstrate that the employee’s job no longer exists.

There is an important difference between:

  • Termination (when you fire someone for performance or misconduct reasons. Usually someone else is hired into their position to complete the tasks they were doing); and
  • Redundancy (when a role is no longer needed at a company).

Confusing the two by, for example, making someone redundant for misconduct reasons, can lead to serious legal issues, including being taken to tribunal.

You can only make team members redundant in a limited number of circumstances, which depend on:

  • The reasons behind your decision
  • Whether the role you’re making redundant fulfils (or not) your business’ needs
  • Your plans for hiring or moving people across the business

You’ll have to find out whether you tick all the required criteria you need to be compliant before making any redundancies.

At Charlie’s HR Advice, we know the mistakes most businesses make at this stage, and we can make sure you are covered on all fronts.

Your dedicated HR advisor will look at your team’s set up and at the reasons behind your need for redundancies. They’ll be able to establish whether you have the legal right to make a specific role redundant or not — so you’re safe in the knowledge you are making the right decision.

Click here to find out how HR advice can help you make the right decisions around redundancy

Avoiding redundancies altogether

The first step set out by Acas, the public body that advises on employment law in the UK, is trying to make sure that it doesn’t need to happen at all.

Before you get as far as making someone redundant, there are all sorts of measures you need to consider to see if it can be avoided. If saving money is the objective, then there are all kinds of ways of cutting costs that don’t extend to letting people go. Cheaper office space, withdrawing perks and benefits or Learning and Development budgets are all valid options.

There are also methods of cutting staffing costs that don't go as far as making full on redundancies. That could mean:

  • Reducing your use of freelancers or casual labour
  • Slowing down recruitment in other areas of the business
  • Reducing or eliminating overtime
  • Moving the employees whose jobs no longer exist into other areas of the business
  • Short-time working (when an employee works reduced hours)
  • Offer some employees early retirement (with incentives to encourage them to take the offer)

Non-compulsory redundancy (or voluntary redundancy)

Non-compulsory redundancy is where you ask your employees if they’d like to volunteer for redundancy.

For some people, at certain stages of their life, voluntary redundancy might be an attractive option. They could be contemplating a career change, or perhaps approaching a crossroads in a different aspect of their life. In any case, giving people who are open to redundancy the chance to take it helps you protect the team members who are depending on these jobs more.

Compulsory redundancy, or involuntary redundancy

If, after taking measures to prevent redundancy and going through a voluntary redundancy process your company still needs to let some people go, you would move on to compulsory redundancy.

What is a redundancy process?

After you’ve made sure you want to and can make compulsory redundancies at your company, you need to go through a step-by-step redundancy process that has been set out by Acas.

Not only does following this process ensure you’ll keep on the right side of the law (although that’s an important aspect). It’s also about handling the redundancy process in a way that’s fair, considerate and respectful of the person you’re letting go from the company.

Making someone redundant — the step by step guide

In the rest of this post, we're going to guide you through the full redundancy process with a step-by-step guide. However, there's no getting away from the fact that this is a complicated process that needs to be handled carefully – get it wrong, and your company could face a time consuming and expensive tribunal case.

If you're looking for professional redundancy guidance tailored specifically to your small business, think about getting in touch with our HR Advice service.

Step 1 - Running a redundancy consultation

The way your company makes decisions about who is made redundant needs to be as transparent as possible. That is achieved via a redundancy consultation.

Redundancy consultations aren’t an optional step in the process. If you make any redundancies without going through a consultation process, those redundancies are almost certainly going to be unfair – and you risk being taken to an employment tribunal.

This process starts with notifying your employees that you are entering into a redundancy consultation. That means informing them of:

  • The business reasons for the redundancies
  • The number of redundancies you are expecting
  • What parts of the business will be affected
  • How you plan to select employees for redundancy
  • How you’ll carry out redundancies
  • How you’ll work out redundancy payments

The details of how you should run a redundancy consultation process depend on two main factors. The first is regulated by the law:

a) The number of people you’re making redundant: if you’re planning to make more than 20 people redundant, you need to do a collective consultation with a person representing that group. You’ll also need to contact the Redundancy Payments Service before your consultation begins.

A second factor takes into account your team members’ unique circumstances at the time they risk being made redundant:

b) Their personal circumstances: Being made redundant will mean different things for each of your team members. Will they work during their notice period? Or will they leave the company immediately? Would they consider being moved to another role to avoid being made redundant?

You’ll have to consider these factors before starting your consultation process — they’ll ultimately change the format of the consultation and what you’ll have to tell your team.

Our HR advisors can help you prepare for each of these difficult conversations on a case-by-case basis. This is vital to ensure every team member is treated in a way that’s fair, compliant and compassionate.

Click here to find out how HR advice can help you prepare for redundancies

Step 2 - Sending an 'At risk of redundancy' letter

You will also need to specifically notify the employees who could be affected that they could be looking at redundancy, setting this out in an ‘at risk of redundancy letter’.

In this letter, you must include details such as why you are considering making redundancies, and how long the consultation process will take. You might want to consider signing up to HR Advice to have a certified advisor help you get this sensitive information right.

Step 3 - Making a decision on who to make redundant in your team

If you have more than one employee in the job role that is being made redundant, you’ll need to identify who you’re going to let go. Your process for making this decision has to be a fair one – you can’t discriminate according to who you’d personally prefer to see stay or go.

A fair selection criteria for redundancy would include things like:

  • An employee’s skills or qualifications
  • Their aptitude for their role
  • Their historical standard of performance
  • Their attendance or disciplinary record
  • Their length of tenure at the business

On the other hand, some selection criteria are automatically unfair (and illegal). You mustn’t choose an employee for redundancy based on any of the following reasons:

  • They are pregnant
  • They make use of statutory or contractual parental leave
  • They have been acting as a trade union representative, or have joined a trade union
  • Their age, disability, gender, or marriage and civil partnership status
  • Their religion, belief, or sexual orientation

Our HR advisors can help you with this delicate process. They’ll go through each employee at risk of redundancy to evaluate their personal and professional situation, and help you decide who you should let go. That way, you’ll know you’ve gone through a process that’s fair and objective, for the sake of your company and of your team.

To find out more about how we can help, simply book a 15-minute call with us.

Step 4 - What to say when making someone redundant

Once you’ve completed the redundancy consultation, you need to notify the employees of your decision and your reasons for it. The best – and fairest – way of doing that is by a face-to-face meeting.

When you have the meeting to notify someone of their redundancy, don’t drag out the conversation. Tell them in your first sentence what you have decided, and then go into the business reasons for your decision.

“I want to be honest with you. The role that you currently do is no longer going to exist so we have to make it redundant.”

When you do go into your reasoning, try and keep the conversation as impersonal as possible. Keep the conversation within the frame of business logic – remember, this isn’t about them or their performance, it’s just that their job no longer exists.

End by explaining to them the support that your business is able to provide to help them find a new role. Career advice from senior members of your company, intros to other businesses where there might be a suitable role, time off from work to make applications – all these things will help make sure the employee lands gently.

At Charlie, we know how difficult these conversations can be for both employers and team members. This is especially especially true for startups’ close-knit teams where everyone knows each other well and is highly invested in the business.

Our HR advisors can help you prepare for redundancy conversations — so not only can you make sure you’re compliant, but also treat your team members as fairly and humanly as possible. If you’ve got any questions about how we can help, feel free to book a 15-minutes chat with us.

Step 5 - Redundancy notice letter

You must follow up on this meeting with a redundancy notice letter, setting out your decision and reasoning in writing.

You should prepare your redundancy letter very carefully and ensure it includes all the information required by the law. At Charlie, we provide all of our HR Advice customers with a letter template and help them fill it in with the correct details.

Before writing the letter, you should make sure you know the answers to these five questions:

a) How much notice to make someone redundant?

You  need to make sure that you notify team members of your decision with enough notice.

The amount of notice you are obliged to give depends on how long they have been working for you.

  • 1 month to 2 years = at least a week
  • 2 years to 12 years = a week’s notice for every year they’ve worked for you
  • 12 years or more = 12 weeks

b) How does redundancy pay work?

When we talk about redundancy pay, we’re really talking about two things.

  1. Notice pay (or payment in lieu of notice)
  2. Statutory redundancy pay

c) What is notice pay?

Notice pay is simply the employee’s standard pay or salary, which you are obliged to continue paying for the duration of their notice. However, you can also let this person leave the business before their notice is up by paying their notice pay in advance (payment in lieu of notice).

d) What is statutory redundancy pay?

UK law sets out a certain minimum level of statutory redundancy pay which employers are obliged to abide by. To be eligible for statutory redundancy pay, an employee needs to have been employed with you for two years.

e) How to calculate redundancy pay

Statutory redundancy pay is calculated through a combination of the employee’s age and the length of their tenure. Here’s how it works:

Employees are entitled to:

  • 1.5 weeks’ pay for each full year of employment after their 41st birthday
  • A week’s pay for each full year of employment after their 22nd birthday
  • Half a week’s pay for each full year of employment up to their 22nd birthday

The upper limit on the amount of statutory redundancy pay is £15,750.

How to write a redundancy notice letter

Calculating the right notice period, notice pay and redundancy pay is a complex but essential step in the process.

Once you collected all this information about each of the team members you are making redundant, you need to put it together in clear redundancy notice letters (one per team member) and send these in a timely manner.

If you are making more than one person redundant, you may want to consider getting a qualified HR advisor to help you avoid:

  • Making any mistakes or miscalculations.
  • Forgetting about any details that are required by the law.
  • Wasting a lot of your time getting the data right and writing up the letter.
  • Sending the letter at the wrong moment in the redundancy process.
  • Getting the tone wrong — either too colloquial and amateurish or filled with obscure legal jargon.

With Charlie’s HR Advice you get a dedicated advisor to check all your redundancy letter’s details for you. They will:

  • Go through each of the people you are making redundant and make sure you calculated their notice period, notice pay and statutory pay correctly.
  • Guarantee your letter is compliant, so you don’t have to worry about it.
  • Help you write the letter in a professional and compliant style that also reflects your company identity.
  • Advise you on the right time to send out the letter.
  • Always be there to answer any questions you may have throughout the process.

If you have any questions about how HR Advice can help you write a redundancy letter, feel free to book a call with us, and we’ll walk you through the process.

Click here to find out why you need a personalised redundancy letter

How long after making someone redundant can you employ someone else?

There are no hard and fast rules around how long you should wait after making redundancies before you hire someone else. It’s a slightly murky area, and for that reason, it’s worth thinking carefully before you hire anyone again.

While there’s no specific law that prohibits you from rehiring after a redundancy, where you could get in trouble is if you are misusing the redundancy process to get rid of someone and hire someone else. The redundancy process is designed to allow businesses to let people go when there is no longer a business requirement for the role – if the redundancy happens for any other reason, it is not a genuine redundancy and the employee could take you to court for wrongful dismissal.

Many employers get caught out by making redundancies and then re-advertising for the same (or very similar) roles soon after. Unless those companies can provide a good explanation – such as winning a new contract, or similar – employment tribunals might well rule those redundancies as non-genuine and find that those employees were wrongfully dismissed.

Charlie’s HR advisors can help you protect your business from these legal troubles. We’ll look at the new roles you want to hire for on a case-by-case basis, and flag if any of them may breach the redundancy regulations. If we find that those redundancies were made for legitimate reasons and there is a genuine business need to rehire, you’ll be safe in the knowledge  you can bring on new staff without repercussions.

HR Advice - Unlimited advice and support at a price you can afford

Running a redundancy process that’s both in line with the law and fair on the employee is a difficult thing to get right. This guide is a good place to start.

However, most small companies with no previous experience of redundancies will need personalised support to ensure their redundancy process is fair and compliant. Our HR Advice service was especially made to help small businesses navigate these difficult situations:

  • Our live, on-demand chat support means you’ll get a quick answer to any question at any time.
  • We are a small team ourselves — which means you’ll always receive bespoke support from your own personal advisor, tailored to you.
  • We care about the same things as you — not just complying with the law, but also looking after your team and making your company a great place to work.
  • We offer unlimited advice from CIPD-qualified advisors for a price you can afford — just £299 per month. This is a fraction of what other comparable services charge for, and also much cheaper than hiring a full-time HR person:
Cost of a full time HR £4000 compared to CharlieHR monthly plan £299

If you’d like to find out more about HR Advice, feel free to book a chat with us and we’ll answer any questions you may have.

You can also watch our free webinar, where you’ll get to hear myself and Ben Branson-Gateley, CEO of CharlieHR, talk you through:

  • What to do when the government’s furlough scheme comes to an end
  • How to run a redundancy process that is fair, legal and compassionate
  • The action you can take right now to protect the future of your company

Click here to watch our webinar on redundancies