Back

Making staff redundant: a guide to the redundancy process in the UK

Written with our partners at: Wilkes logo

5 min read

News update – Coronavirus Job Retention Scheme: March 2021 Budget Announcement

The Furlough Scheme has now been extended until the end of September 2021.

There will, however, be some changes which will come into play from July 2021.

From July 2021, businesses will be asked to contribute 10% towards the Scheme. From August and September 2021, businesses will be asked to contribute 20%. Employer contributions (apart from NI and pensions) won’t be requested in April, May or June.

Employees will still receive 80% of their salary until September 2021.

News update - 31 July 2020

Under new laws that came into force on Friday 31 July, furloughed employees who are being made redundant will receive statutory redundancy pay based on their normal amount of pay and not their reduced furlough pay.

This legislation also applies to other employment rights, such as statutory notice pay and awards for unfair dismissal, which are calculated on the basis of an individual’s average weekly pay.

Read the full announcement from the government by following this link.

Covid-19 update

In light of the ongoing disruption caused by the Covid-19 crisis, we’ve been preparing extra resources for employers and employees who are facing a possible layoff or redundancy situation.

Letter changing employment contract for furlough arrangements

We're also keeping up to date with the latest announcements over on our blog:

Saving jobs in Covid-19 world: what the Job Retention Scheme means for your business

Saving jobs in a Covid-19 world: what the Self-Employment Income Support Scheme means for the self-employed

Essential go-to resources for small businesses in a COVID-19 world

You can also find all of the government’s own Covid-19 guidance and documentation for business via the gov.uk website

Rapid FAQs

Can I temporarily lay employees off or reduce their hours?

Yes, but only if your employment contracts with the employees in question contain a clause that allows you to do this.

If that’s the case, and you reduce employee hours or temporarily lay them off, you can reduce their pay. Depending on the duration of these arrangements, your employees may be able to claim redundancy pay. See our guide to lay-offs and short-term working for more detail.

I’ve got no choice but to close my company, what are my obligations to my staff?

This sounds like a classic redundancy situation and this guide contains the steps and materials that you need.

You must make sure you run a fair and proper redundancy process, even in these circumstances, which includes properly notifying employees and explaining the circumstances to them (called ‘consulting’ with employees).

To ensure you’re acting lawfully, you have a duty to consider whether there are any less drastic alternatives to making staff redundant–and you’ll need to evidence that you did consider this responsibly.

Employees who have been employed for over 2 years within your business will normally be entitled to redundancy pay, and the value of this will depend on their age, how long they’ve worked for you and their regular pay (measured weekly).

What you need to know and do is covered below...

Making redundancies can be a stressful time for both you and your staff. We've collaborated with Wilkes to produce this guide full of practical advice that makes the process clear, and helps you deal with redundancy dismissals as fairly as possible.

Before you make the decision to start a redundancy process in your business, it’s important to double-check that you’ve considered other potential alternatives first. For example, layoffs and short-time working may be a better solution for temporary work shortages. (We'll touch on a number of other alternatives below too.)

However, if none of the alternative options work for you, you probably need to consider redundancy.

You should have an existing redundancy policy. This will steer you through the logistics and time-frames involved in the process, because redundancy is a very process-driven exercise and it’s important to ensure that you take the essential steps at the right time, with the right people and using the most appropriate communications and choice of wording.

Meanwhile, this guide provides a step-by-step recipe, bringing together all the relevant materials, options, calculations and legal necessities, to help you make the process as smooth and fair as possible for both you and your employees.

Even with this guidance, we strongly recommend that you also take good expert advice on how to approach and manage this process. It will help to avoid inadvertent omissions or errors that can cause difficulties later.

Employees who have less than 2 years' service with your business

There's no prescribed process for making someone redundant where they have less than 2 years' service as one of your employees.

This means that if an employee hasn’t yet worked for you for at least 2 years, you don’t need to go through the full redundancy process. Instead, you'd likely serve the employee with notice under their normal contract terms.

You do, however, need to ensure that you're following a fair and compliant procedure for any dismissal. The best way to ensure you're doing this is to follow the steps outlined in your redundancy policy and/or according to the relevant employment contract terms.

Check the contract terms

Make sure you check these, in each case, as some contracts will contain obligations on you relating to dismissal processes and your employee's rights and you will need to comply with them.

Length of service does not preclude claims

Just remember that an employee can still challenge your decision to dismiss them for a number of reasons, including unfair dismissal and/or discrimination.

Less than 2 years' service does not preclude certain types of claim.

Employees who have more than 2 years' service with your business

If an employee (or more than one affected employee) has been working with you for at least 2 years, you’ve already ruled out other solutions, and you have valid reasons for making redundancies, then you’ll need to formally notify that employee (or employees) of the potential redundancy situation and that it is possible their job within your business may be affected.

This guide continues on the basis that you know you need to run a redundancy process and it's time to share that news with your staff.

Making more than 20 employees redundant

If you’re making 20 or more employees redundant in a 90 day window period, you’ll also need to go through an additional process called 'collective consultation'.

This is a process when appropriate employee representatives of the affected employees will be given information about the redundancy proposals and be consulted about this.

Appropriate employee representatives will be either:

representatives of a trade union (in the rare situation you recognise a trade union in respect of your staff); or
an existing standing body of staff who are authorised to represent the employees about redundancies; or
employees who are specifically elected to represent the affected employees about the redundancies (this is the most common situation).

Staff are given around 1–2 weeks to elect representatives to consult with your management on their behalf.

The representatives can be a valuable help to you and to your affected staff, as you progress through the redundancy process. They are able to gauge sentiment, relay staff anxieties to you, help you to manage these and explain why there may be no way to avoid what is happening, etc.

Representatives have the right to reasonable paid time off to carry out their representation duties. They are also protected against dismissal and any other detrimental treatment.

They are not entitled to extra pay or any other benefit, however.

If you need to invite staff to elect representatives because you fall into a 'collective consultation' situation, you can use our template invitation when prompted to do so later in this guide.

There's also a nomination notice that you'll need to make available to your staff at that stage, so they can put forward their nominations for the position(s).

Trade union representatives

If you recognise a trade union in respect of your staff (take a look at our guide to trade unions for more information on this), you’ll need send to the trade union written information (in form HR1) about the redundancy situation, and be prepared to work with the trade union and its representative(s) before starting the collective consultation process.

When this situation arises...

Taking advice is invaluable where you believe you're going to need to let at least 20 employees go.

In reality, you're unlikely to be considering this staffing impact in isolation of wider business activities (e.g. sale of a business, restructuring activities, shutting a business unit down), on which you are probably already taking advice from legal and/or tax and financial experts.

Want to access this guide?

Already have a Farillio account?Sign In

Get unlimited access to 100s of legal resources by signing up to Farillio today.

Manage your legal documents online
Well written legal templates by our partners
Guides to help you understand law
Legal help available every step of the way

Read the full guide

Farillio members have access to all our online content

Farillio is THE trusted resource for businesses and households with:

Self-serve guides
How-to-do-it videos
Interactive documents and checklists
On-demand advice without hefty fees

If you need to do something complicated fast, we can take you through it, in plain English.

Many household names have chosen Farillio for their customers or members so we may be included in a service or product you've already purchased.

Already have a Farillio account?

For who

Starting a business

Running a business

Growing a business

Freelance businesses