If your business no longer needs or cannot afford to keep employees, you can dismiss them by making them redundant. Redundancies should always be a last resort for businesses and if you do decide to make them, you need to use appropriate redundancy letter templates to make sure you follow the correct procedure. Our Redundancy Toolkit contains a pack of relevant template redundancy letters and other documents your business is likely to need, which can be customised to your redundancy situation.
Redundancy letter template
What is a redundancy letter template?
A redundancy letter template could be one of many letters used throughout a redundancy process; for example it could be a letter warning your staff about proposed redundancies within your business, or it could be a letter notifying an employee that they are being made redundant following a consultation process.
Why do I need a redundancy letter template?
If you are carrying out a redundancy process, it’s important that you comply with key employment law obligations and ensure that you carry out a proper and fair process. Using the template letters in Sparqa Legal’s Redundancy Toolkit will help you to do this. Read on to find out more about the process you need to follow to make employees redundant.
Create your own redundancy letter template
Our Redundancy Toolkit takes you through the key steps you’ll need to take to make an employee redundant and contains a pack of relevant letter templates that you are likely to need. It also provides other relevant documents, such as a redundancy selection criteria form and agendas to help you run consultations meetings.
Carrying out a redundancy process
What process do I need to follow to make employees redundant?
If it becomes necessary to make employees redundant, you must follow the correct procedure; this is particularly important if the employees you are likely to make redundant have been continuously employed by you for two years or more. If you do not follow the correct procedure, these employees could bring unfair dismissal claims against you.
However, it is best practice to conduct a fair and transparent process even if your staff have been employed for under two years, as doing so will better maintain company morale, and generally help your business preserve structure and good practice during a difficult period.
The process you should follow is:
- inform your staff that the business is about to go through a redundancy process and continue to consult with them throughout the process;
- make a provisional decision about which employees are to be made redundant by using a fair, objective and transparent system, making sure not to discriminate;
- inform employees who have been selected for redundancy and give them a genuine opportunity to challenge their selection and consider alternatives, including considering them for other suitable jobs within the business;
- if redundancy cannot be avoided, ensure you give appropriate notice, and respect the employee’s right to look for alternative work during the notice period; and
- ensure that those employees who are entitled to them are paid the appropriate redundancy payments.
Our Redundancy toolkit contains a how-to guide and all of the relevant documents you may need throughout your process.
How should I tell employees that I am making redundancies and consult with them about it?
You should ensure that staff who have the potential to be affected by forthcoming redundancies are made aware of the situation as soon as possible. Affected staff will include not just those who might be made redundant, but also those who will be impacted by the process. For most small businesses, this will usually mean all staff in the company should be notified. Our Redundancy Toolkit contains a template letter to help you do this.
Thereafter, it is important that you keep those employees who have been selected for redundancy as up to date as possible at each stage of the process and ensure that you actively consult with them and listen to their input, even if your business is very small. If you do not consult properly, you run the risk that the process will be deemed unfair and this could lead to legal claims being brought against you by employees. On a more practical level, consulting with staff at an early stage can increase the chances of finding alternative jobs within the business for redundant employees and will also help you identify whether any of your employees wish to volunteer for redundancy.
Consultation must be meaningful (ie you should get feedback from your staff on your proposals and consider any suggestions they put forward). You should therefore discuss alternatives to redundancies, how the impact of any redundancies could be reduced, any restructuring plans and what your selection process will be. ACAS recommends that your consultations are one-to-one, rather than in groups. In addition to helping employees feel heard and giving you the chance to spot (and tackle) problems early on, these consultations can be a useful way to get ideas about alternative ways of dealing with your situation, other than redundancy. There is no requirement for consultation to take place in person, so provided your staff member agrees, you can conduct it remotely (eg if your staff are working from home during the coronavirus pandemic).
If your business is proposing to make 20 or more employees redundant within 90 days, you are required to inform and consult with the employees’ trade union or employee representatives, in addition to the normal requirements of consulting with staff individually. The rules surrounding such large-scale redundancies are outside the scope of this guide.
How do I decide which staff to make redundant?
If you are closing a whole workplace, you can simply make all the employees who work there redundant. However, where (as is common) you do not need to make all employees redundant, you must consider creating a pool of employees from which to choose. You cannot usually simply select a particular employee for redundancy at the outset. If you fail to think at all about how to make a pool for redundancy, it is highly likely that any subsequent redundancies will amount to unfair dismissals and you may face claims from your former staff for compensation as a result.
How do I create a redundancy pool?
It is very important to take care in creating your redundancy pool. If you fail to think at all about how to make your pool, it is highly likely that any redundancies will amount to unfair dismissals and you may face claims from your former staff for compensation as a result. If you already have a redundancy procedure or policy in place, you should normally adopt the approach that has been set out in that for creation of a redundancy pool. If you do not have a policy in place, there are no hard and fast rules about how to create the pool; you must simply make sure you apply your mind to the matter and genuinely try to create a pool from which you can make a fair and reasonable selection. This gives you the flexibility to create a wide pool from which you can draw less capable employees, allowing you to keep key employees where appropriate. See our Q&A on redundancy processes for guidance about what groups of employees to include in your redundancy pool.
How do I choose which staff from a redundancy pool to make redundant?
Once you have created a redundancy pool, you will need to apply selection criteria in order to choose who from that pool should be made redundant. If you have a redundancy agreement or policy, you should first check this to see whether it contains pre-agreed selection criteria. If it does, you should use these criteria. If you do not have pre-agreed criteria, you will need to come up with some in order to select individuals for redundancy. You should be honest and open with employees about the criteria you are using from the beginning of the process. Do not add extra criteria or change criteria part way through the process. You can choose what criteria you want to apply, but there are considerations to bear in mind when choosing them; see our Q&A on redundancy processes for further guidance.
How should I apply selection criteria to employees in a redundancy pool?
The most common approach is to use a scoring system (for example, marks out of 5 per criterion), whereby you apply the selection criteria and give each pooled employee a numerical score. The employees with the lowest scores are then usually selected for redundancy. Fairness is crucial when marking. Even if your criteria are beyond reproach, you can still apply them to individual employees in a way which makes the redundancy selection process unfair. If you do this, you run the risk of unfair dismissal claims from redundant employees. Our Redundancy Toolkit contains a selection criteria form you can use when scoring employees.
What redundancy letter template should I use to tell staff they have been selected for redundancy?
After you have carried out your scoring of the redundancy pool you should select the employee or employees with the lowest scores for redundancy. Our Redundancy Toolkit contains an appropriate redundancy letter template you can use. Employees need to be given a genuine chance to challenge their selection, so you should arrange private meetings with them before the redundancy has been officially confirmed and go in with an open mind about avoiding making the particular employee redundant.
How do I run a first individual consultation meeting during a redundancy process?
Our Redundancy Toolkit contains an agenda you can use to guide the meeting. Bear in mind:
- During the meeting, you should give the employee as much information about the process as possible, including their redundancy scores, and a fair and genuine opportunity to express their views on the situation and challenge their scores and the selection.
- As part of the meeting, you should discuss the potential of any alternative jobs within the business which may be available. If the employee suggests during the meeting that they would be interested in alternative jobs within the company in a specific area, take some time to pursue this option, then call another meeting to discuss your findings.
- It is important for you to take written notes of the meeting as evidence of the discussions, to show that you have followed the redundancy procedure correctly and fully considered any points raised by your employees.
How do I make a final decision about whether to make an employee redundant or not?
You should follow up your first individual consultation meeting by writing to the employee to confirm what was discussed and set up the next stage of your consultation. What this next stage looks like depends on what follow up points came out of the first meeting. Our Redundancy Toolkit contains letters you can use whether you need a second substantive meeting to discuss further points, or you want to set your final consultation meeting.
What redundancy letter template do I need to inform an employee that they will be made redundant?
Once you have decided which employees you are going to make redundant, send a notice of dismissal to each employee which confirms that they are being made redundant, tells the employee what their notice period is and confirms whether or not the employee will be entitled to a redundancy payment, and if so how much and how it has been calculated. Our Redundancy toolkit contains an appropriate redundancy letter template for you to use. Keep a record of the date on which the letter was sent and when the employee’s employment is due to end.
You should ensure you are happy with your selection, because once the employee has been given formal notice of dismissal, it cannot be withdrawn unless the employee also agrees to the withdrawal.
Do I have to give an employee the opportunity to appeal a decision to make them redundant?
No, unless you have an existing redundancy policy that includes an appeals process. However, ACAS recommends that you allow your employees a formal opportunity to appeal. Information about the right to appeal can be included in the redundancy letter template in our Redundancy Toolkit.
What happens if I offer my employee an alternative job rather than making them redundant?
If an employee accepts a job offer to return to your business after redundancy and continues in the new job after an initial trial period, you will not have made them redundant and they are not entitled to a redundancy payment. The job offer must be made as soon as possible after the employee has been given notice of redundancy and before the employee actually leaves your business. The new job must begin no more than four weeks after the end of the employee’s notice period, and it should include a trial period of four weeks (although you can agree a longer one). Our Redundancy Toolkit contains an appropriate redundancy letter template you can use to offer alternative employment.
See our Q&A on redundancy processes for guidance about making alternative job offers.