Compulsory redundancy is where you make one or more of your staff redundant based on certain criteria.
It’s a sad truth that sometimes a company has to make cuts. Demand for your product or services falls, a larger organisation acquires your company, or certain roles in the business become obsolete—whatever the reason, having to let staff go is unfortunate.
If you need to make compulsory redundancies in your business, you must not discriminate when you identify which employees will be leaving.
You must use fair criteria, such as:
- Skills or aptitude.
- Lateness record.
- Disciplinary record.
You can use a staff member's length of service as a criterion, too. But don’t make it the sole reason for choosing one person over another—if you do, you risk being at fault for age discrimination.
These selection criteria are automatically unfair:
- A reason to do with the employee's family, such as parental leave or time off for a dependant.
- If an employee acted as a colleague's representative, such as in a disciplinary hearing.
- If an employee joined or didn't join a trade union.
- Being a part-time or fixed-term employee.
- Pay and working hours, such as requesting at least the National Minimum Wage.
- An employee taking annual leave.
All nine protected characteristics are also automatically unfair reasons to select someone for compulsory redundancy:
- Gender reassignment.
- Marriage and civil partnership.
- Pregnancy and maternity.
- Religion and belief.
- Sexual orientation.
Compulsory redundancy pay
In most cases, your employees will be eligible for statutory redundancy pay when you make them redundant. These compulsory redundancy payments are:
- Half a week's pay for each full year they worked for you under the age of 22.
- One week's pay for each full year they worked for you between 22 and 40 years old.
- One and a half week's pay for each full year they worked for you while 41 or older.
There’s a cap of 20 years’ maximum service for statutory redundancy pay.
Redundancy is a large, critical subject. As such, we have more guides for you. Read about alternatives to redundancy.