Having to make your employees redundant is an unpleasant task to undertake – but, unfortunately, it’s a wholly necessary one. In fact, the survival of your business often depends upon it. In the event you need make redundancies, it’s best to follow the proper procedure, and this involves entering into a redundancy consultation period.

This post takes a look at the concept of a redundancy consultation and the best way to approach them.

What is a redundancy consultation period?

A redundancy consultation period is the time in which you have the necessary conversations and meetings with your staff about upcoming redundancies before you officially announce them.

The consultation period ensures that the redundancies don’t come completely out of the blue and (somewhat) softens the blow for your staff. It also gives those affected, or those who suspect they’ll be affected, a chance to assess their options and look for new employment.

Better still, by communicating with your staff, honestly and frequently, you can preserve as much goodwill as the situation will allow.

Things discussed during those meetings include:

  • What redundancies need to be made and why
  • Which employees are likely to be made redundant
  • How you’re going to decide who’s to be made redundant

If you’re making more than 20 people within 90 days, you’re legally obligated to have group consultations. However, it’s best to have group consultations regardless of how many employees you’re making redundant. Furthermore, you should also have individual consultations where you address each employee’s specific queries and concerns.

How long is a redundancy consultation period?

The length of a redundancy consultation period depends on how many redundancies you’ll be making.

  • 20 or fewer redundancies: No minimum time.
  • 20 – 99 redundancies: 30 days
  • 100 or more redundancies: 45 days

How much notice do you have to provide when making an employee redundant?

After the redundancy consultancy is finished, you still need to provide each employee with notice. The length of the notice period depends on how long an employee has worked at your company:

  • Between 1 month and 2 years: 1 week
  • Between 2 years and 12 years: 1 week for every year of employment
  • More than 12 years: 12 weeks

Again, as with the length of the redundancy period, these are statutory notice periods so you can increase them, if necessary.

What to do if you make an employee redundant

If you’re making redundancies, you’ll need to explain the following information to each employee, in writing:

  • The reasons for the redundancies
  • How they’ve been determined
  • The numbers of employees to be made redundant
  • Areas of the business that will be affected
  • How the redundancy process will work
  • How they’ll be compensated

Calculating final redundancy payments

After finalising which of your staff are to be made redundant and discussing it with them, you need to arrange the affected staff’s final redundancy payments.

This payment can be composed of up to three parts:

  • Redundancy payment
  • Payment in lieu of notice
  • Outstanding annual leave allowance

Redundancy payment

This is the payment each employee receives as a direct result of being made redundant. The amount is based on a person’s age, weekly salary and how long they’ve worked for the company. An employee will receive:

  • 22 years old or younger: 0.5 week’s pay for each year of employment
  • 22 – 41 years old: 1 week’s pay for each year of employment
  • 41 years old and older: 1.5 week’s pay for each year of employment
  • Employees only qualify for redundancy pay if they’ve worked at the company for a minimum of 2 full years.
  • Staff are only entitled to redundancy pay for every full year of employment. E.g., someone who’s been with the company for 2 years and 5 months is entitled to 2 years’ worth of payments.
  • An employee’s weekly pay is their average salary per week over the last 12 weeks before they received their redundancy notice

You can work out the amount each employee is entitled to with this redundancy calculator. Also, it’s important to note that everything outlined above only applies to statutory redundancy payments. You may pay your departing staff more (and for partially worked years, etc.), as per their employment contract.

Payment in lieu of notice

If it’s part of your company’s policy for employees not to work their notice period, i.e., if you don’t want them to handle sensitive information, you can arrange for them to receive payment in lieu of notice (pilon). This will be the entirety of the pay they would have earned during their notice period.

Note: Pilon is different than gardening leave, where the employee stays at home but is still contracted to the company. In this situation, they can seek employment elsewhere immediately.

Outstanding annual leave allowance

If an employee is working their notice period and not receiving pilon, they can still take annual leave during their notice period. However, if they have any outstanding annual leave at the end of their notice period, you’ll have to calculate the corresponding monetary amount and add it to their final salary payment.  This will be simple if you use a staff holiday planner that tracks and updates annual leave allowances for you. If, on the other hand, you have a system for booking annual leave that often relies on someone manually tracking outstanding holiday allowances, this could prove more difficult. In such a scenario, if you’re making a lot of redundancies, this could be particularly time-consuming.