Redundancy: overview

An overview of when and how an employee can legally be made redundant.

Under the Employment Rights Act 1996, fair reasons for redundancy are that an employer:

Either ceases or intends to cease to carry on the business in which the employee was engaged, or
Closes or intends to close the location where or in which an employee was working, or
There is no longer a need for employees to carry out work of a particular kind, or for employees to carry out work of a particular kind in the place where they are employed or
The need for the employee to carry out work of a particular kind has diminished, or is expected to cease or diminish.

Redundancy must be handled sensitively. It affects everyone's morale. It is therefore good practice for an employer to provide redundant employees with counselling or some similar support.

Fair redundancy

Redundancy is considered fair when:

There is a true redundancy situation that meets the legal definitions
All available and suitable alternatives to compulsory redundancy have been considered (for example voluntary redundancy)
Selection for redundancy is non-discriminatory, based on set and (preferably) agreed criteria such as:
- Skills
- Experience
- Job performance
- Attendance (care should be taken, however, to exclude any periods of absence that relate to maternity or disability)
- Length of service (to be used with caution)
The employer has conducted the redundancy in accordance with the organisation's procedures (if applicable). These procedures should have been made available to employees with their terms and conditions of employment
The employer has consulted with individual employees, elected employee representatives or independent trade unions. Consultation should take place at any early stage, before decisions about redundancy are made
Where possible, the employer has tried but failed to find alternative jobs for redundant employees.

The employer must also be careful that the method of selecting employees for redundancy does not inadvertently discriminate disproportionately against either a particular gender or ethnic or national group. For example, if an employer decided to select part-time workers for redundancy, this would probably discriminate disproportionately against women as well as constitute less favourable treatment against part-time workers.

Employers should also be cautious about using length of service as a selection criteria, as this may result in age discrimination.

If performance is to be used as a method of selection, care should also be taken to ensure that accurate performance records have been kept, to ensure objective and fair decisions can be made.

It is not a redundancy situation if an employer replaces a dismissed employee with another person to do the same job within a short period of time. In such cases, redundancy cannot be used as an excuse to dismiss an incapable employee. This would amount to unfair dismissal.

If the redundancy is not carried out fairly this could lead to a claim for any of the following:

Wrongful Dismissal
Unfair Dismissal

Redundancy consultation

Employers must consult trade union or elected employee representatives for at least 90 days if more than 20 employees are to be made redundant.
Meaningful consultation should still take place where less than 20 employees are affected.