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- 2nd Apr 2025
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Facing redundancies at the end of the tax year? Here’s your must-know guide from face2faceHR
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As we approach the end of the tax year and rising National Insurance contributions, many of us small businesses will face difficult decisions – including the challenging prospect of redundancies.
Even though it’s something we all dread, understanding the legal frameworks and best practices that govern redundancy processes is essential, particularly if you’re managing smaller teams or businesses with fewer than 20 employees.
To help navigate these tricky times, we sat down with Kathryn Rodgers, our HR Expert in Residence at face2faceHR. She reveals everything you need to know about redundancies, providing clarity and insight to ensure your business stays compliant while maintaining a respectful and supportive environment.
WHAT EXACTLY IS REDUNDANCY?
Redundancy is a situation where an employee’s role is no longer necessary, often due to changes within the business.
This can happen for several reasons, including:
- Business closure: When a company ceases operations entirely
- Workplace closure: If a specific location is no longer needed
- Diminished need for staff: This can occur if technology or external contractors replace certain roles
Kathryn highlights that understanding the nuances of redundancy is critical for managers. For example, while the closure of a business due to financial struggles is clearly redundancy, a restructure where roles remain unchanged may not qualify.
THE REDUNDANCY SELECTION PROCESS
When it comes to selecting employees for redundancy, it’s crucial to follow a fair and transparent process. Kathryn outlines the key steps…
Identify the pool for selection
The pool refers to the group of employees who may be affected. In straightforward cases – such as the closure of an entire business – it’s easy. But when only certain roles are impacted, managers must carefully define the pool.
Set objective, evidence-based selection criteria
The selection criteria must be fair, consistent and evidence-based.
Some examples include:
Performance: Scoring should be based on clear, documented evidence to avoid bias.
Skills and knowledge: Particularly important if the remaining roles require new or different skills.
Attendance: Be mindful of absences related to pregnancy or disability to avoid discrimination.
Disciplinary records: Ensure that disciplinary records are used within a reasonable timeframe and consistently across the board.
Kathryn notes that while “Last In, First Out” may seem like a simple solution, it can open the door to potential age discrimination claims and should only be used cautiously.
Consultation with employees
Consultation is not just a best practice – it’s a legal requirement. You must engage with employees before issuing redundancy notices, allowing them to ask questions, express concerns and suggest alternatives. Failing to consult properly can result in an unfair dismissal claim.
MANAGING REDUNDANCY VOLUNTARILY
Kathryn also emphasises the role of voluntary redundancy. While not a legal requirement, offering voluntary redundancy can help avoid the emotional and practical challenges of compulsory redundancies. But it’s important to ensure that any volunteers are assessed based on what’s best for the future of the company.
OFFERING SUITABLE ALTERNATIVE EMPLOYMENT
You are legally obligated to offer suitable alternative roles within the business, where possible. Kathryn explains that what counts as “reasonable” depends on the specific circumstances, but it’s essential to offer all available vacancies – regardless of changes in location, pay or job status. If an employee rejects a reasonable offer of alternative employment without good cause, they may lose their entitlement to a redundancy payment.
It’s also critical to note that any changes to job terms should include a trial period of up to four weeks, allowing employees to test the new role and ensure it’s a good fit.
NOTICE, TIME OFF AND REDUNDANCY PAY
When it comes to redundancy, employees are entitled to notice periods, typically outlined in their employment contracts. You may choose to pay employees in lieu of notice if you don’t require them to work out the period.
Employees with two or more years of continuous service are also entitled to reasonable time off to find new employment or attend interviews and this time is usually paid, up to a maximum of 40% of one week’s pay.
So how much is redundancy pay? In terms of redundancy pay, Kathryn explains that the statutory amount is based on an employee’s age, length of service, and salary.
For example:
- Half a week’s pay for each year under 22.
- One week’s pay for each year between 22 and 40.
- One and a half weeks’ pay for each year over 41.
You can may choose to offer enhanced redundancy payments to help employees through the transition. If you do offer enhancements, it’s crucial to clearly communicate the terms to avoid confusion or legal challenges down the line.
A TAKE AWAY
Kathryn Rodgers from face2faceHR reminds us that transparency, communication and fairness are vital to ensuring that what is often a difficult process for both employers and employees is handled in the most dignified and respectful way possible.
For more insights into managing redundancies and ensuring your workplace remains compliant, feel free to reach out to Kathryn and the team at face2faceHR. They’re here to support you every step of the way.
Rachael Ellis
Creative Solutions Manager
After gaining a first in her BA Media and Journalism degree at Northumbria University, Rachael worked at Newcastle’s leading regional newspaper with her stories being picked up in national and global newspapers. She spent two very successful years giving a voice to those communities across the North East who otherwise…
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