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Redundancy policies for small businesses
Employee redundancy - the termination of employment of members of your staff because you have a reduced need for employees doing a particular kind of work - is an unpleasant but sometimes necessary part of running a business. Some of the essential elements of redundancy law are summarised below.
It’s important to have a redundancy procedure in place so that your employees know what to expect if you have to let some of them go, and so that you can do this without facing accusations of unfair dismissal or discrimination. When the time comes to make the redundancies, it’s also highly advisable to get redundancy paperwork together: to draft a robust termination letter template that includes information like the redundancy termination date and details of redundancy compensation, for example.
It’s important that your employees know that you will do everything in your power to keep them on where possible. While you may wish to retain flexibility over the process, your redundancy policy should list, as far as possible, the steps you will consider taking to reduce costs and avoid redundancies.
From the concrete, such as reducing overtime and restricting recruitment, to the more nebulous, such as a promise to explore all other options before beginning to make redundancies, having strategies in place to avoid redundancies will reassure your staff and give you a roadmap if your business goes off course.
In addition, before making any employee redundant you must consider suitable alternative vacancies – otherwise the redundancy dismissal will be unfair in the eyes of the law and could leave you open to legal action. And if you offer an alternative position, you must allow them a trial period in that position.
Selection, consultation and voluntary redundancy
Of course, even if you do all you can to avoid redundancies, you may still find that you have to let go of some of your staff. You should use clear and objective selection criteria when selecting the potential candidates for redundancy. You may wish to set this out in the policy, together with more details on the consultation process you will follow. However, this policy is drafted to set out key principles only so as to allow the employer flexibility in the process.
You may find that there are those who wish to take voluntary redundancy, and it’s helpful to have a section in your policy that explains how those who wish to volunteer for redundancy should go about doing so.
Statutory redundancy pay is a legal requirement for employees who have been with you for two years or more (though you are free to pay more than the minimum required).
You may wish to outline how your redundancy package will be calculated (for anyone who is eligible) in your redundancy policy. However, where there is a clear formula (communicated to employees) to demonstrate how enhanced redundancy pay will be calculated, there is a risk of this becoming an implied term of their contracts and so, for this policy template, pay is referred to but clear calculations have not been provided.
Your redundancy policy could be made available as part of an employee handbook, or over your company’s intranet, but employees should know how to find it if they need to. You can download our redundancy policy template, which you may then amend to suit your business. If you are unsure about edits, consult your legal counsel or the Citizens Advice Bureau.
Redundancy policy - free Word document for download
If you would like to make changes and don’t have Adobe Acrobat, you can also download our redundancy policy sample in Word format.
This document has been produced by Clarkslegal so we can’t take responsibility for its contents. We’d recommend you take professional advice before making any important decisions based on its contents