What is redundancy and when is it lawful?

Redundancy is a lawful method of dismissal which allows an employer a way of reducing the size of its workforce.

The rates of redundancies have been high between 2020 and 2022 due to the arrival of COVID-19; it has forced many businesses to take the hardest decisions to ensure their own survival.

The statutory definition of “redundancy” encompasses three different types of situation:

• Ceasing or intending to cease to carry on the business for the purposes of which the employee was employed by it (also known as a business closure);
• Ceasing or intending to cease to carry on that business in the place where the employee was employed (this is a workplace closure); or
• They may have a reduced requirement for employees to carry out work of a particular kind or to carry out work of a particular kind at the place where the employee was employed to work (essentially, a reduced requirement for employees).

In order to ensure that a dismissal for redundancy is fair, an employer must establish that Redundancy is the real reason for the dismissal and that the employer acted reasonably in the circumstances in treating redundancy as the reason for dismissing the employee.

Redundancy should only be considered as a last resort, and there is a duty on the employer to consider all other options prior to making redundancies. Initial considerations that the employer should contemplate include:

• Suspending or restricting recruitment.
• Reduction or removal of overtime opportunities.
• Not renewing the contracts of contractors.
• Ceasing or reducing the use of agency workers.

Collective consultation 

Where 20 or more employees are being made redundant over a period of 90 days or less, an employer has a duty under the Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA) to:

• Inform and consult appropriate employee representatives. Where 100 or more redundancies are proposed, consultation must begin at least 45 days before the first dismissal takes effect. For less than 100 but more than 20 redundancies, the consultation period is 30 days.
• Notify the Secretary of State. Notification must be received by the Secretary of State at least 45 days before the first dismissal, where the employer proposes to dismiss 100 or more employees within a 90-day period. Where less than 100 redundancies are proposed, the notification period is 30 days.

A tribunal may award up to 90 days’ pay in respect of each employee where there has been a breach of the information and consultation duty (also called a protective award). An employer may be fined if it fails to notify the Secretary of State.

Whenever there is an obligation to consult collectively, the employer will also need to ensure that it has followed a fair procedure in relation to individuals, including consulting with them properly, so as to minimise claims for unfair dismissal.

The test of reasonableness

A tribunal must consider whether the decision to dismiss an employee was within the range of conduct that a reasonable employer could have adopted.

Case law has established that an employer will normally not act reasonably (and a dismissal will therefore be unfair) unless the employer:

• Warns and consults employees, or their representative(s), about the proposed redundancy.
• Adopts a fair basis on which to select for a redundancy. An employer must identify an appropriate pool of potentially redundant employees and must select using objective criteria.
• Considers suitable alternative employment. An employer must search for and, if it is available, offer suitable alternative employment within its organisation.

When considering the fairness of any dismissal for redundancy, consultation with employees prior can be fundamental. A number of matters should be discussed with individual employees depending on the circumstances, but usually the discussion should include the following:

• An opportunity for the employee to comment on the basis for selection (if applicable).
• An opportunity for the employee to challenge their redundancy selection assessment and to explain any factors that might have led to their selections/of which their employer might not have been aware.
• An opportunity for the employee to put forward any suggestions for ways to avoid their redundancy.
• Consideration of any alternative employment positions that may exist.

Regardless of the nature of the process, redundancies are very stressful for the individuals involved, especially the employees. It is extremely key that any employer who is planning to start a redundancy process takes sufficient time to plan and make sure that the necessary steps are taken.

Should any steps be skipped or should an employer make an errors, they may be setting an employee up for a strong unfair dismissal claim due to lawful redundancy breach.

Further reading

More information about redundancy can be found in our FAQ here.

WHAT TO DO NEXT

If you feel that you have been unfairly made redundant or if you’re an employer looking for assistance in dealing with the process correctly, please do not hesitate to get in touch with us on 0113 200 9720.