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FAQs about redundancy

We answer some of the trickier questions about redundancies that don’t involve collective consultation.

Q1: We are going to have to make a number of people redundant. A few members of staff have asked to take voluntary redundancy. Do we have to accept them?

No. It is common for employers to ask for volunteers before making compulsory redundancies and, taking this step will usually form part of a fair procedure. However, you aren’t obliged to accept anyone that requests voluntary redundancy.  

It is sensible to ask for volunteers at the same time, or shortly after you have notified staff that you are considering making redundancies. We recommend that you make it clear that you can’t guarantee that all applications for voluntary redundancy will be accepted, and reserve the right to turn down  any application from an employee whose continued employment you consider in the best interests  of your organisation.

Q2: We’re planning to relocate our business to a new site. Can we rely on contractual mobility clauses to force staff to move and avoid redundancy payments?

Including a mobility clause in a contract of employment may give you some flexibility to make unilateral changes to an employee’s place of work, but it’s not a “get out of jail card” giving you an unfettered right to move employees around and avoid redundancy payments.  You will only be to rely on it if the wording is clear and unambiguous, not overly harsh on  the employee, and the clause is exercised reasonably.  In practice, the distance between the old and new places of work will also be a factor.

You must not act in a way that will destroy what is known as the implied duty to maintain trust and confidence between you and your staff.  So, even if you believe that your contractual term clearly permits moving the employee to a different location, if the scope of the change is unreasonable or the way in which you manage the process is unreasonable, the employee may be able to resign and claim constructive unfair dismissal (provided s/he has a minimum of two years’ service).

As you are relocating, you must decide at an early stage whether you are going to invoke your employees’ mobility clauses and require them to relocate, or go through a redundancy process, which will include consideration of alternative employment.  You are only required to go through a redundancy process if you envisage making redundancies and you would not do so if you can move staff to a new location under the terms of their existing contracts of employment. 

If you can relocate staff under the existing terms of their contracts of employment, there will be no dismissal for redundancy and so no right to receive redundancy payments.  If an employee refuses to move, you may be able to dismiss him/her on the grounds of misconduct.  Before doing so, we recommend that you take legal advice to ensure that you can rely on the mobility clause, otherwise you may expose your organisation to unfair dismissal, breach of contract and other claims.

Q3: We use agency staff. Can we still make permanent members of staff redundant?

That will depend on what work the agency staff are doing and how often you use them.

The legal definition of redundancy includes situations in which the employer’s requirements to carry out work of a particular kind or work in the place that the employee works “have ceased or diminished or are expected to cease or diminish.” In many cases this will mean that you need less people.

If agency staff are carrying out the same or similar work to employees you are planning on making redundant, then a Tribunal may decide that the redundancy exercise is not genuine or necessary and that any permanent members of staff you have dismissed as redundant have been unfairly dismissed and are entitled to receive compensation. You will be expected to reduce the number of agency and other temporary staff you use before dismissing permanent members of staff.

However, if you are only using agency staff for a specific and limited reason and you genuinely don’t need permanent employees in those roles, you may be able to show that any redundancy dismissals are fair. This strategy is, however, risky and we recommend you take advice and always consider letting agency workers go first.

Q4: How do we decide who to put at risk of redundancy?

Unless you have an agreed redundancy procedure in place, you have a lot of flexibility in deciding who should be put at risk of redundancy.  Tribunals generally give employers a large amount of discretion to decide the “at risk” pool from which employees are selected for redundancy. Most employers limit pools to employees doing the same or similar work, and this is certainly the safest option.

However, selecting from a narrow pool might not be appropriate if you want the flexibility to select less capable staff across a range of departments or job categories instead of losing valued employees from a more narrowly defined group.

Provided you have thought about the most appropriate pool and the decision you reach is objectively reasonable, a tribunal should not interfere with your decision, even if a redundant employee argues that it would have been fairer for you to adopt a different pool.

If you are challenged, the Tribunal will consider these factors when deciding whether the pool you selected was reasonable:

  • Whether other groups of employees are doing similar work to the group from which selections were made;
  • Whether employees’ jobs are interchangeable;
  • Whether the employee’s inclusion in the unit is consistent with his or her previous position; and
  • Whether the pool was agreed with any union (if you recognise one).

 Q5: What is the best way of selecting candidates for redundancy?

To dismiss someone fairly for redundancy you must adopt a procedure that is fair and reasonable in all of the circumstances.  Part of this involves identifying fair selection criteria to choose which members of staff you will retain and which  you will make redundant.

The starting point is to set criteria that are objective and measurable and are not discriminatory.    In the past, many employers adopted a policy of making redundant those with the shortest length of service (known as “LIFO” or last in, first out) as it was both simple and, on the face of it, objective.  However, using LIFO now will expose your organisation to the risk of discrimination claims as younger people and women are most likely to have shorter periods of service.  In addition, most employers want to keep their ‘best’ employees and using LIFO as the selection criteria does not always achieve this. 

You have flexibility to choose the most appropriate criteria and assessment method to reflect the skills you wish to retain in your business.  ACAS recommends that appropriate criteria might include:

  • Attendance records (but you must ensure that these are  accurate and that the reasons for absence are known – as you may have to discount some absences such as those linked to disability or pregnancy);
  • Disciplinary records;
  • Skills or experience;
  • Standard of work performance;
  • Aptitude for work.

You are not limited to these.  You must have an evidential basis for the application of your scores - such as HR records, appraisals etc).  Not all of your selection criteria have to be entirely objective but if you use subjective criteria (such as performance) you must be able to point to supporting evidence to back up the scores, to avoid complaints of bias or discrimination. 

Q6: Do we have to consider “bumping”?

Bumping is the process of moving a potentially redundant employee into another role, and dismissing the employee currently performing that role.  Whilst that is likely to appear to be unfair to the person “bumped” out of a job, their dismissal is treated as a redundancy and if they have at least two years’ service, they are entitled to receive a redundancy payment.

You must follow a fair procedure when making redundancies, and this  will involve consulting employee and considering if there are any other suitable roles that he/she can undertake as an alternative to being made redundant.  As part of this process, it is often advisable to give those at risk of redundancy  details of all of your current vacancies and ask  the employee to indicate if they are interested in any of them. 

Sometimes as part of this process, the “at risk” employee may suggest that they should be offered a job that someone in your organisation is already doing.  In other words, they may suggest that someone else is “bumped” from their job so that they can do it instead!  Whilst this may sound unfair, you must not dismiss the request out of hand and should consider whether it would be appropriate to agree.  Relevant considerations (particularly if the job is of a lower grade than that of the employee at risk of redundancy) are:

  • Whether or not there are other vacancies in your organisation that the bumped employee can be offered;
  • How different the two jobs are;
  • The difference in remuneration between the two jobs;
  • The relative length of service of the two employees (although you need to be careful not to reach decisions that could be considered to discriminate);
  • The qualifications of the employee at risk of redundancy; and
  • Whether or not the other employee would take voluntary redundancy.

There is no rule that requires you to always consider bumping (either of your own volition or in response to a specific request) to demonstrate that you have acted fairly.

If you do consider bumping but reject it, keep a record of the reasons for your decision in case you are ever challenged about it.

Q7: Can we make a woman on maternity leave redundant?

Yes, but special conditions apply which, in effect, give such employees priority over others when it comes to alternative employment.  In practice, those on maternity leave “queue jump” and are entitled to be offered any alternative roles that you have available.    

Redundancy is a potentially fair reason for dismissing an employee.  However, in a redundancy situation, you are also required to show that you followed a fair procedure before making any employee redundant.  This will normally involve deciding who is in the pool and adopting a fair selection procedure.  You should pool all relevant employees and should not exclude women on maternity leave from the process. 

The selection process itself must not disadvantage employees on maternity, so for example, if absence is one of the selection criteria you use to score employees, you should disregard any absence that relates to pregnancy or maternity.  That is not to say that employees on maternity leave are entitled to have their scores “inflated” – they don’t and employers who automatically favour women on maternity leave may be vulnerable to a claim of sex discrimination by men.

However, if a woman on maternity leave is selected for potential redundancy, she has the right to be offered any suitable alternative vacancy that exists in your business. This means that she takes priority over every other candidate who is not on maternity or other relevant leave.  If a job is suitable, you have to offer it to the employee – you can’t simply invite her to apply for it.

These rights also apply to employees (of both sexes) taking shared parental leave or adoption leave, but not to pregnant women who have not yet started maternity leave.

Q8: Do our part time staff have the right to receive a redundancy payment?

Yes.  Part time staff that are made redundant should receive a redundancy payment if they meet the usual requirements. These are that they have worked for you for at least two years and are an employee not a worker.

Q9: Do we have to give employees the right to appeal against their selection for redundancy?

It is good practice to do so, and not allowing an appeal may render any dismissal unfair.

Even though you should already have met with “at risk” employees during individual consultation (and addressed any concerns they may have raised) giving them a change to appeal will give them another opportunity to raise any additional queries that you might not already have considered. You should allow the employee to be accompanied by a colleague or trade union representative at the appeal.

Do you have a question about redundancy we haven't answered?

Please contact our partner Melanie Stancliffe if you need any help to support your business through a redundancy or reorganisation.

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