When it goes wrong - How to handle making staff redundant

Every business owner who employs people has to face the horrifying possibility that at some point they may have to make someone redundant.

Sometimes it’s inevitable. No matter how much you care about your team and want to look after them, if times are tight, you must reduce the cost base of the business or it will go under. And that would put your entire staff out of a job.

In tough times you might have to make staff redundant

For most businesses, the wage bill is the biggest expense. So cutting back on marketing and other expenditure may help to keep the wolf from the door, but losing a member of staff may be the only way to get through the tough times to the other side.

Businesses also face having to change staff when they exit a market and enter a new one, requiring a whole new set of skills.

Redundancy is unpleasant for everyone. And it’s legally complicated. So the first thing to do when you spot the signs that your business is in trouble is to get advice and make changes quickly.

Look at alternatives to making redundancies

You may be able to head off the need to make anyone redundant by restricting overtime, or temporarily shortening working hours. Most employees would be happier taking a small pay cut than losing their job altogether.

Another option is to introduce a recruitment freeze or look at whether you can re-train staff and move them around the business to remove the need to fill vacant positions. If you only have a small number of employees, can they share the workload of an empty position?

If redundancy is still inevitable, you must get legal advice before going any further. While redundancy is a legal reason to dismiss someone it must be done in the right way, or you will find yourself in front of an employment tribunal.

Compulsory or Voluntary redundancy

There are now two options open to you: compulsory or non-compulsory redundancy. This is often called voluntary redundancy, and is less demoralising for your staff. It can also be less disruptive, with fewer steps to check the process is being followed legally.

However you may also find it more expensive. People who have been with the business longer – and so will be entitled to a higher payment – tend to volunteer first. If you get more volunteers than you need redundancies you may find those who volunteered leave anyway.

And the biggest downside is the loss of control. Your business may be badly affected by losing some of its key people.

Compulsory redundancy gives you that control back. You have to set out a number of criteria that are used to select employees. These normally include:

• Skills and qualifications: So you can ensure you keep the skills your business needs to survive
• Performance at work: To use this effectively you will need objective evidence, such as that provided by regular staff appraisals
• Adaptability: It’s reasonable to ask your employees to change as your business does. But you must be careful not to be seen to be discriminating
• Attendance and discipline: Keep accurate records and be aware when absences are authorised, i.e. for paternity or maternity. You must be 100 per cent consistent in applying the same attendance or discipline rules to all of your staff.

Your employees may be legally entitled to a payment if they have worked for the business for at least two years. Your legal advisor will confirm this and help you work out payments due. This will be based on their age, the amount of continuous service they have done and their weekly pay.

You must have a period of consultation before making redundancies

Once you have picked your employees you must then start a period of consultation. Tell your employees what’s going on, why redundancies are necessary, and how they will be selected.

It will be tempting to keep this news just to those who are up for redundancy. But workplace gossip means everyone will soon know anyway – so you might as well tell them all in one go.

It’s hard telling people they have been selected for redundancy. Handle it sensitively and ensure you give all the information they will need. Put yourself in their shoes, and imagine how it would affect you.

In one to one sessions, you must tell them why the job is being made redundant, the selection criteria, the timing, how much they could get and any alternative positions in the business they may be suitable for.

You can also offer support, such as time off to attend interviews or re-training to help them acquire new skills.

As long as you take and follow solid legal advice, and treat your staff with respect at all times, you should find this unpleasant process can be dealt with efficiently, giving your business the best chance to get back on the right path.

Get professional advice from a qualified person before taking any action. Don’t rely purely on information contained in this article.