Franchising 101: Managing Redundancy Like a Pro

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Managing redundancies

No business owner wants to make staff redundant, but if worst comes to worst, you need to know how to handle the process efficiently, professionally and compassionately. We’ve listed the 12 steps you need to take when managing redundancy.

In any business, there are times when bosses need to make tough decisions about how best to manage their staff. This process is as much about hiring the right people to do the job as it is about being prepared to let employees go when the time is right.

Here are the 12 steps you need to take when making staff redundant.

12 key steps to managing redundancy

1. Be proactive and try to find alternative solutions

Before you start letting people go, take some time to find other possible routes. The best way you can do this is to monitor the health of your business proactively. While the COVID-19 pandemic has demonstrated just how quickly unexpected crises can negatively impact business, you should do all you can to protect your business day to day.

If you realise you need to make changes, consider the following options:

  • Stop hiring new employees
  • End the contracts of any temporary or contract staff
  • Offer training so existing employees can move into different roles
  • Wait for employees to leave in their own time
  • Stop employees working overtime
  • Temporarily reduce working hours
  • Ask employees to stop working temporarily
  • Introduce flexible working patterns
  • Offer sabbaticals or secondments
  • Offer voluntary redundancy or early retirement

2. Identify your redundancy selection criteria

If you have no other option but to make staff redundant, the first thing you should do is work out how you’ll decide on the workers you let go. You might choose to base your selection on whether certain employees lack specific skills, or whether they have a poor disciplinary record or track record of bad timekeeping.

Never discriminate against employees when it comes to their age, gender, sexual orientation, race, religion or other attributes. You should also disregard factors like relationship status, history of maternity or paternity leave, working hours and membership of trade unions.

3. Identify employees at risk of redundancy

Use your redundancy selection criteria to work out which employees you may have to let go. You can create a list, but this shouldn’t be final - workers have the chance to discuss the decision and appeal it if they want to.

4. Fill in an HR1 form

Before you discuss staff redundancies with anyone, you must notify the Secretary of State through the Redundancy Payments Service (RPS). You do this by filling in the HR1 form on the website. If you’re proposing between 20 and 99 redundancies, you must give RPS notice at least 30 days before the first staff member leaves. If you’ve planned 100 or more, you’ll need to give a notice period of at least 45 days. If you fail to do this, you can be fined an unlimited amount.

5. Organise redundancy consultations

You must schedule consultations with all employees you’ve selected for redundancy. It’s good practice to give them the opportunity to bring along a colleague or trade union representative too. This meeting doesn’t need to take place in person; you can discuss the situation over the phone if both parties agree.

If you need to make more than 20 staff members redundant within a 90-day period, you should adhere to the regulations for ‘collective consultations’. As part of this process, you meet with the employees’ chosen representatives, either from the business or a trade union. If this isn’t possible, you can talk with the employee directly.

When making between 20 and 99 people redundant, your consultation period should last for at least 30 days. If your redundancy plan involves more than 100 workers, you’ll need to allow for a 45-day consultation period.

6. Use your consultations to cover key topics with employees

When discussing redundancy with your selected employees, you must cover several important topics. You should talk about:

  • How you’ve selected the employees being made redundant
  • Why you need to make them redundant
  • The steps you’ve taken to try to avoid redundancy
  • How many redundancies you’re proposing and the jobs they cover
  • How many employees will be affected
  • How the redundancy process will work
  • How you’ll calculate their redundancy payment
  • Any vacancies within the business the employee could consider filling

You should also give employees the opportunity to suggest ways to avoid or reduce the number of redundancies. If they decide they’d like to try working in an alternative role, they have the statutory right of a trial period of up to four weeks. Within this time period, they can provide a reasonable reason for rejecting the role and be eligible for their redundancy payment.

7. Listen to employee feedback

It’s your duty to respectfully consider employees’ thoughts and suggestions. Give them the chance to comment on your selection criteria and choices. Also, make sure you provide prompt responses to any questions they have.

8. Send follow-up emails

It’s a good idea to send an email to employees after each consultation. Make a note of everything you discussed and list the answers to any questions raised. You could also give some information about the next steps in the redundancy process.

9. Send a redundancy confirmation letter

You should provide official notice of the redundancy in writing. Include key details such as:

  • The date the redundancy takes effect
  • The pay rate until the date of redundancy
  • Whether you’d like the employee to work during the notice period or whether they’ll be paid in lieu
  • How the employee may appeal the decision

10. Work out redundancy pay

Employees are entitled to a certain amount of pay, depending on their age and how long they’ve worked at the company. See below to work out how much they should receive.

  • If they’re under 22: half a week’s pay for every full year they worked at the business and were under 22
  • If they’re between 22 and 40: one week’s pay for every year they worked at the business
  • If they’re over 40: one and a half week’s pay for every year they worked at the business, up to a maximum of 20 years’ service

11. Give the employee the chance to appeal

Any employees facing redundancy have the right to appeal your decision. Follow the formal appeal process, acting with respect throughout. If the staff member is still serving their notice period, you may reinstate them in their old role. If they’ve completed the notice period, you can put them on their old contract and provide pay for any time they weren’t working. If this happens, the employee should give back any redundancy money.

12. Support staff as they leave

You can make sure the redundancy process runs smoothly by giving quality support to the affected employees. You should offer to write positive recommendations to future employers and ask workers about any other ways you can help them find a new job. If necessary, you could provide counsellors who can support them as they come to terms with their redundancy and enter the job market again.

Taking this step should also reduce the likelihood of staff members leaving with a bad impression of your business and potentially damaging your reputation in the future.

Tips for handling redundancy

Managing redundancy is always a tricky process, but there are a few extra tips you can use to make sure it runs smoothly.

  • Maintain regular communication with employees
  • Make sure your communication is clear and concise
  • Put yourself in your employees’ shoes and be compassionate - you need to find the balance between being professional and sympathetic
  • Rehearse your points so you can present your argument for redundancy coherently and professionally
  • Hold consultations in a quiet, comfortable place where you’re unlikely to be interrupted

Keeping these points in mind should help you increase the likelihood of parting with your employees on a positive note.

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