HANDLING
REDUNDANCIES
CHARITABLE
LIMITED
COMPANIES
There are three
This Information Sheet will give you some basic information on identifying
the situations that may give rise to redundancies and how to handle them.
This is very important as dealing with redundancies the wrong way may lead
to a claim in an Employment Tribunal against the organisation for unfair
dismissal or for unpaid redundancy payments. It is aimed at organisations
who are not likely to make more than 19 staff redundant at any one time:
there are special rules on compulsory collective consultation and notification
where an employer proposes to make 20 or more staff redundant within a
period of 90 days or less.
What does redundancy mean?
The Employment Protection (Consolidation) Act defines redundancy as occurring
in any one of the following circumstances:
1. where the employer has ceased, or intends to cease, carrying on the
business that employs the employee
2. where the employer is closing down the workplace where the employee
has been employed
3. where the need of the business for the work that the employee has been
doing has reduced or disappeared, or is expected to
4. where the need of the business for the numbers of employees to carry out
its work has reduced or disappeared, or is expected to.
The two most common reasons for redundancies in voluntary or community
groups are a funding cut or a failure to get renewed funding after a grant or
contract has expired. These could result in any one of the four situations
described above, but usually involve 3 or 4. Under 3, a whole piece of work
might cease because of a funding cut, or the salaries budget might be cut so that
the piece of work continues but with fewer staff to do it (as in 4 above).
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Is a fixed term contract the answer?
Unfortunately no. If a fixed term contract expires without being renewed, the law treats this as a
dismissal of the employee.
If the reasons for the expiry and the procedures followed are not ‘fair’ within the definitions of the
Employment Rights Act, then the dismissal may be’ unfair’ and an employee with full
employment rights could claim compensation for unfair dismissal in an Employment Tribunal.
The Fixed Term Employees Regulations 2002 prevents employers from putting any waivers into
contracts entered into or renewed after July 2002 or from discriminating against fixed term
employees in other ways without objective justification. The Regulations will also enable employees
to claim permanent status after four years on fixed term contracts, with the four-year period
beginning on 10 July 2002.
Basic rights of employees facing redundancy
Employees are entitled to:
 reasonable periods of time off with pay to look for other work during the redundancy notice
period. It is good practice to extend this right to all staff.
 be offered suitable alternative posts if available within the organisation. A dismissal for
redundancy can be avoided if the employer offers the employee such a post during the
redundancy notice period. The employee must accept the offer before the date when her/his
contract is due to end and start work in the new post within 4 weeks after her/his contract
ends.
An employee who accepts the offer is also entitled to a 4 week ‘trial period’ in the new post.
However an employee will lose her/his right to a redundancy payment if s/he unreasonably
refuses an offer of a suitable alternative post or unreasonably terminates the new post during
the trial period.
The redundancy policy and procedure
One of the reasons for a potential ‘fair’ dismissal under the Employment Rights Act is redundancy.
As funding cuts or unsuccessful bids to continue funding are often likely to involve redundancies,
good employers should plan in advance how they will handle having to make staff redundant in these
situations. There are basically three ways to handle redundancies:



Ad hoc and informal arrangement varying with each situation (not recommended)
Formal policy agreed with trade unions
Formal agreement on procedure negotiated with the unions and workforce.
The advantages of a formal policy and procedure
 It avoids the likelihood of unfair dismissal claims
 It demonstrates the employer’s commitment to welfare of the organisation’s staff
 It reduces stress and fear in the workforce
 It promotes stability and security of employment
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The redundancy policy covers:
 A commitment to early consultation
 A commitment to minimising or avoiding compulsory redundancies
 A commitment to assisting employees to find retraining or alternative employment
 A commitment to fairness in developing criteria and procedures for selection for redundancies
 A reference to the ‘procedure’ document.
The redundancy procedure covers:
 Statement of policy
 Consultation arrangements with individual employees both individually and collectively (see
section below on consultation)
 Measures for minimising or avoiding compulsory redundancies:
– natural wastage
– retraining and/or assistance with relocation to another agency
– restrictions on recruitment
– reductions of hours
– seeking applicants for early retirement/voluntary redundancy
– non-renewal of temporary or fixed term contracts
 General guidance on the criteria to be used for selection in the event of redundancies
 Severance terms – in practice it must be the statutory minimum redundancy notice and
payments for staff who qualify for these
The principles informing the procedure
 The employer should balance the skills and experience of the workforce with the organisation’s
future needs
 The employer should consult on any change or departure from the procedure and notify
workforce immediately it is agreed
 The employer should negotiate changes to individual contracts separately with each employee
(eg. if offering her/him a suitable alternative post)
 The employer should comply with the following disclosure requirements
- reasons for proposals
- numbers of staff affected
- descriptions of posts affected
- criteria for selection
- method of implementation
- method of calculation of redundancy pay
 The employer should clarify whether employees may leave during the redundancy period or
postpone notice period without losing entitlement to redundancy pay
 The employer should allow employees time off to look for other work or training and provision
of counselling and advice
 The employer should recognise employees’ union representatives’ rights of access to union
members.
Guidance on consultation
When consulting with staff about who should be considered at risk of redundancy and about what
selection criteria should apply, employers should:
 have an open mind
 hear employees‚ views both individually and collectively and discuss particular implications
with individual employees
 try to provide as much information as possible and in an accessible form
 give staff reasonable time to consider the proposals and put forward alternatives
 give proper consideration to any proposals from staff both individually and collectively.
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Redundancy notice
All employees are entitled to a statutory minimum redundancy notice.
For employees with:
 less than 2 years’ service
 2 years but less than 3
 3 years but less than 4
 4 years but less than 5
and so on up to a maximum of 12 weeks
1
2
3
4
week
weeks
weeks
weeks
You may decide in your contract of employment to give longer periods of notice than the statutory
minimum but you cannot give shorter periods.
Redundancy payments
Employers of staff who have completed 2 years or more continuous employment are entitled to
statutory redundancy payments. These are calculated with reference to a week’s pay and cannot
exceed 30 times the maximum.
These rates depend on age and are:



For employees aged 18-21
one half week’s pay for each completed year of service
For employees aged 22-40
one week’s pay for each completed year of service
For employees aged 41 +
one and a half week’s pay for each completed year of service
You may decide to give more generous payments in your redundancy policy, but you cannot provide
for less generous than the statutory amounts. Statutory redundancy payments are paid free of income
tax and National Insurance contributions. Additional payments made under a policy or contract and as
long as the total amount does not exceed £30,000 it MAY be free of tax and NI.
Financial planning and redundancies
Organisations should build in minimum redundancy payments into their funding applications –
especially for projects likely to extend beyond two years. Where an organisation has ongoing ‘core’
funding, it should estimate its current liability to make statutory minimum redundancy payments and
create a contingency reserve to cover them. This obviously needs to be reviewed regularly as
employees gain longer service.
Generally accepted redundancy selection criteria
Automatically unfair selections
Automatically unfair selections will arise if the reason for selection is because, for example, an
employee:
 engages in trade union membership or activities
 makes a health and safety complaint
 asserts a statutory employment right e.g. the taking of paternity leave
 is pregnant or on maternity leave
Voluntary redundancies should be considered first. Then the employer can fairly proceed to apply the
compulsory redundancy criteria which include:
Present Capability
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Work performance, adaptability and aptitude based on current and existing appraisals:
Advantages
In theory, it could be relevant and easier to assess
Disadvantages
It ignores future needs of the organisation. Be careful to avoid sex or disability discrimination in
relation to adaptability
Conclusion
It may be useful in conjunction with ‘Future Needs’, but requires some careful thought.
Conduct
Attendance, timekeeping, sickness and disciplinary records.
Advantages
It is reasonably easy to calculate and apply
Disadvantages
The employer’s records must be accurate, and demonstrate reasons for absences. It requires
consistency of approach, taking into account patterns of absences and having clear rules about
standards are essential. It may give rise to disability discrimination claims if sickness or
time-keeping is affected by a disability.
Conclusion
May be useful if employer has kept careful and consistent records and has good supervision
Future Needs
Skills, qualifications and other aptitudes needed by employer to meet future needs of the
organisation:
Advantages
More relevant in a small organisation with professionally qualified staff
Disadvantages
May be difficult to assess these things objectively; employees selected on this basis may feel insulted
and devalued, even if they do not contest their selection
Conclusion Most logically useful, but can also be used in conjunction with ‘Present Capability’
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Organisations that can advise and help
Voluntary Action Sheffield
HR Advice Service (for employers)
The Circle
33 Rockingham Lane
Sheffield S1 4FW
Tel: 0114 2536633
Website: http://www.vas.org.uk/
ACAS (Yorkshire and Humber)
The Cube,
123 Albion Street,
Leeds, LS2 8ER.
Tel: 0113 205 3800
Website: http://www.acas.org.uk/
If you are an employee wanting advice, you can
consult your Trade Union or if you are not in a trade
union:
Sheffield Law Centre
Waverley House
10 Joiner Street
Sheffield S3 8GW
Tel: 0114 273 1888
http://www.slc.org.uk
Useful publications
BIS and ACAS produce a series of booklets
with guidance and information for employers on all
aspects of employment law.
ACAS:
Telephone: 08702 42 90 90
Fax: 01375 484 556
Email: acas@ecgroup.co.uk
BIS:
http://www.bis.gov.uk/policies/employmentmatters/rights/employers-charter
Tele: 020 7215 5000
Email:
Redundancy Handling – Booklet published by ACAS
Reader
http://www.acas.org.uk/media/pdf/4/7/B08_1.pdf
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INFORMATION SHEETS available from VAS:
Accessible Organisations
Acquiring and Managing Premises
Action Planning
Business Planning
Charitable Incorporated Organisations
Closing Down
Community Interest Companies
Constitutions
Contracts and Procurement
Data Protection
Disciplinary and Grievance Procedures
Due Diligence
Employing a Worker
Equality and Diversity
Guarantee Companies
Handling Redundancies
Health and Safety
Incorporated Charities
Insuring your Organisation
Involving Volunteers
Legal Structures
Management Committees
Monitoring and Evaluation
Parents and Carers at Work
Quality Assurance
Safeguarding Vulnerable People
Sickness Absence Management
Starting Up
Trading and Fund-raising
The Circle
33 Rockingham Lane
Sheffield S1 4FW
Tel: 0114 253 6600 Fax: 0114 253 6601
Email: info@vas.org.uk
Website: www.vas.org.uk
Registered charity no: 223007
Company limited by guarantee no: 215695
Company limited by guarantee no: 215695
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