As businesses face continuing economic uncertainty, the solution for some employers may be to streamline the workforce by making redundancies. If employees are willing to take voluntary redundancy, this can be a good way to avoid imposing redundancy on someone.
If you are considering restructuring or downsizing your business or you simply need to reduce your workforce because you have less work for them to do, then redundancy may be your only option.
Voluntary or compulsory redundancy
If you are considering asking employees whether they will take voluntary redundancy, it is usual to offer more financial remuneration than the basic statutory minimum by way of an incentive.
You can ask for volunteers, addressing your offer to everyone or only to a section of the workforce. If you narrow the field down, you must ensure that you do this fairly, using a transparent process and making sure that you do not discriminate against anyone on the basis of a protected characteristic, such as age, gender or disability.
The voluntary redundancy process
It is important to follow any procedure set out in your employee handbook as well as the normal redundancy rules. Firstly, you will need to consider whether there are any alternatives to making an employee redundant.
If you then decide to ask for volunteers for redundancy, you should set out your offer in a letter. This should be sent to all staff with roles the same or similar to the roles you no longer need. When selecting this group, you must apply your criteria carefully to ensure that you are not discriminating against anyone.
For instance, if you only include part-time workers you could inadvertently be selecting mostly women if they make up the bulk of your part-time personnel. For more information about fair selection criteria, see our article Selection criteria for redundancy. If you want to be able to refuse someone voluntary redundancy, you should specify that you are reserving this right in the letter.
If you have more volunteers than you need, you should use a redundancy selection matrix which will score people in respect of criteria such as performance, knowledge, skill level, qualifications, attendance and disciplinary record.
If you do not want to make a valuable employee redundant but they have applied for voluntary redundancy, you will need to be able to back up your decision with sound business reasoning, usually by setting out why they are critical to your organisation.
Once you have your volunteers, you will need to go through the normal redundancy process with them, to include providing statutory redundancy pay based on age, pay and the number of years worked, where employees have been at the business for more than two years.
Voluntary redundancy pay
Statutory redundancy pay is as follows:
For each full year an employee has worked, they must receive:
- Up to age 22 – half a week’s pay
- Age 22 to 40 – 1 week’s pay
- Age 41 and older – 1.5 weeks’ pay
The figures are capped at £538 per week and for a maximum of 20 years’ work. The calculation must be based on normal wages and not any reduced rate that may have been paid during furlough.
The government provides a Statutory redundancy pay calculator.
Settlement agreements
A settlement agreement is usually offered to an employee who is taking voluntary redundancy. By signing this they are waiving some of their rights, including the right to bring legal action against you or your business. They will also agree to keep matters relating to your organisation and in respect of their redundancy confidential. In return, they will receive an enhanced termination payment.
This is an important document and it is essential that it is correctly drafted to protect your business interests. It is also a requirement that your employee takes independent legal advice before signing as it is a waiver of their rights.
Contact us
At Witan Solicitors we have wide-ranging experience of dealing with both voluntary and compulsory redundancy and the drafting of settlement agreements.
If you are considering making employees redundant and you would like to discuss your options with an expert employment lawyer, email us at info@witansolicitors.co.uk or fill in our contact form. We have offices in Birmingham and Northampton.
