Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.
With the number of UK redundancies during December 2022 having doubled compared to the same period during 2021 and a number of high-profile layoffs being announced daily, more businesses will likely have to make difficult decisions regarding potential reductions in their workforces in the coming months. This Insight highlights some of the legal and practical issues to consider when making reductions in force in the UK.
The UK does not have a direct equivalent of the U.S. WARN statute. Instead, even small-scale RIFs involving as few as one employee require individual consultation and can often take at least 14 days to implement. Collective consultation with elected representatives (even in non-unionised businesses) will be required if 20 or more employees are impacted and can require 45 days to implement.
The more time spent planning, the more likely that the process runs smoothly and without claims or unsettling remaining colleagues. Begin by assembling a multi-disciplinary team that includes not just HR, legal and business management, but also payroll, benefits and internal/external communications specialists. The following issues are some of the key strategic points for consideration by HR teams and employers in anticipation of a potential RIF.
Timing is key
Planning at this stage must account for certain legal requirements in the UK, including minimum consultation periods and the requirement to notify the Secretary of State for the Department for Business, Energy and Industrial Strategy (BEIS) of the proposed redundancies where an employer is proposing to dismiss 20 or more employees at one establishment in a 90-day period:
- 30 days before the first dismissal takes effect for 20-99 redundancies; or
- 45 days before the first dismissal takes effect for 100 or more redundancies.
Failure to notify BEIS is a criminal offence.
- How will the redundancy process be structured? This question feeds importantly into the timing of the process, for example, will the redundancies be phased?
- It is also important to take some time to understand your workforce demographic – for example:
- Do you have lots of employees with under two years’ service for the purpose of unfair dismissal claims?
- Is there a particular risk of discrimination with some potentially in-scope employees which might necessitate a disparate impact analysis?
- What types of roles are likely to be in scope of the RIF?
- How many redundancies will need to be made to achieve the business’s aims?
What level of consultation is required?
- Individual – individual consultation is required in all redundancy processes that involve a risk of unfair dismissal.
- Collective – collective consultation is required in all large-scale redundancy processes in which an employer proposes to make 20 or more employees redundant in a 90-day period.
- Although there is not a minimum consultation period, there is a minimum period of time that must elapse after the consultation has started before the first dismissal can take effect. The consultation must commence 30 days before the first dismissal takes effect for 20-99 redundancies and 45 days before the first dismissal takes effect for 100 or more redundancies.
- Failure to collectively consult can result in redundant employees being awarded a “protective award” of up to 90 days’ gross pay.
Employers can expect similar consultation obligations across the UK and EU, however, each jurisdiction has specific obligations with little uniformity and local advice is required for each jurisdiction involved in any RIF.
- How will the potential RIF be communicated to employees?
If your business operates in multiple jurisdictions, you will need to consider how a RIF will be communicated at a global level as well as local, whilst also complying with any stock exchange obligations. It is also important that any proposed announcements or communications are reviewed by local counsel before being shared with employees to manage legal risk and, in the UK, to mitigate the risk of unfair dismissal claims.
Once the RIF has been scoped and the relevant obligations identified, you will need to consider the following implementation issues:
Pooling and selection criteria
- What is an appropriate pool for selection in order to achieve the proposed RIF?
- What selection criteria should apply to the redundancy pool?
- These criteria should be objective, non-discriminatory, clearly defined and where possible, measurable.
- Criteria should be consulted upon with employees.
- How will you deal with specific employee questions raised during consultation meetings?
- In a collective consultation, will you need to engage with trade union representatives or other types of employee representatives?
- What information must you provide employees during the redundancy process?
- Are there any suitable alternative roles within your organisation that affected employees could apply for?
- Would it be appropriate to invite employees to volunteer for redundancy?
- Consider any other restructuring options that fall short of redundancies.
Once the consultation and selection processes are complete, you must give affected employees formal notice of the termination of employment. You will need to consider the following:
- Will you require employees to work during their notice periods?
- Would you consider placing affected employees on garden leave or making a payment in lieu of notice (if permitted by the employees’ contracts of employment)?
You may decide to offer enhanced redundancy payments to redundant employees to mitigate the risk of unfair dismissal claims. If using enhanced redundancy payments, most employers will look to enter into a binding settlement agreement with redundant employees to waive potential claims arising from the RIF. An employer that offers an enhanced redundancy payment may also consider truncating some of process discussed above.
In large-scale redundancy processes where many employees are dismissed as part of a RIF, the resolution process can be administratively burdensome involving a large amount of document production, particularly where multiple jurisdictions are involved. As these steps can be particularly complex, it is advisable to undertake this process after consultation with your employment counsel.1
1 We have developed a streamlined, fixed-price service to help employers manage legal risk, produce individualised redundancy documentation and prepare, negotiate and organise execution of a binding settlement agreement for each redundant employee. See here: https://www.gqlittler.com/what-we-do/redundancy-toolkit
For further details and to obtain a fixed price quotation within 24 hours, see our Redundancy Toolkit, contact our specialist team of lawyers at RedundancyToolkit@gqlittler.com or get in touch with your usual Littler contact.