Making redundancies is never a pleasant experience, but it’s sometimes unavoidable and employers need to ensure they navigate the process with sensitivity and professionalism, and adhere to the law, or they may face employment tribunals and unfair dismissal claims.
A redundancy letter is a written communication from an employer to an employee that informs them of their job loss due to a reduction in the workforce. To help employers manage this process and ensure they provide employees with clear and concise information, we have compiled a selection of adaptable redundancy letter templates for the various stages of the redundancy procedure.
When would you need to write a redundancy letter?
Employers may have to write redundancy letters in the following circumstances:
During a time of economic decline or recession, businesses may experience a reduction in revenue, leading to reduced demand for their products or services. In such circumstances, businesses may look to reduce their workforce to cut costs.
Companies may need to restructure their operations, departments, or teams due to changes in the market, mergers and acquisitions, or changes in leadership, which could lead to redundancies.
With advancements in technology, businesses may require less manual labour, leading to a reduction in the workforce. Employers may have to make employees redundant where their jobs have been automated or outsourced.
What is the difference between voluntary and compulsory redundancy?
Voluntary redundancy is when an employer offers an employee the option to leave their job in exchange for a financial package, which could include a lump sum payment, extended notice period, and other benefits. Employees who accept voluntary redundancy do so voluntarily, and their decision is not influenced by their employer.
In contrast, compulsory redundancy is when an employer selects an employee to leave their job due to a reduction in the workforce, restructuring, or other reasons. Employees who are made redundant involuntarily do not have a choice in the matter and may be entitled to statutory redundancy pay and other benefits.
What are the stages of a redundancy process?
The redundancy process can be broken down into stages and logical steps that employers can follow. The stages are: preparation, selection, individual consultations, notice of redundancy, appeals (if applicable), and termination.
Stage one: Preparation
During the preparation stage, you will assess whether redundancy is the only option and is completely necessary before beginning the process. If you are concerned with your employee’s performance or behaviour, then you should go down the disciplinary route instead.
Redundancy is a type of dismissal where the employee’s job is no longer required. Ensure that you have covered all alternative options and if you have concluded that redundancy is essential, establish a time frame and prepare the relevant documentation.
Stage two: Selection
At this stage, you will be selecting the people who are under consideration for redundancy. You’ll need to determine the criteria for selecting those employees which should be objective and fair across the workforce.
Additionally, now is the time to inform employees of the upcoming redundancies. This should also include those who are not under consideration. You should explain that there is the risk of redundancy, the reason why it’s necessary, roughly how many redundancies you're considering, and what will happen next.
Stage three: Individual consultations
The consultations stage is a hugely important part of the redundancy process, and it’s essential that employers look at this as an open discussion with the employee, rather than using this time to just inform them of their potential redundancy.
You should explain why they have been selected and discuss alternative employment in the company. Employees will have the chance to make suggestions as to how the business can retain them and these suggestions should be considered fairly, or the employer may face unfair dismissal claims.
Note: there are legal time frames regarding consultations, so make sure you adhere to these.
Stage four: Notice of redundancy
Once you have finished consulting with everyone and made your decision, you should meet with each at-risk employee to discuss the outcome. Ideally, do this face to face, but if this is not possible, organise a phone call.
Those who have been selected for redundancy should also receive confirmation in writing, by letter or email. We have included a redundancy notice letter template for your ease.
Stage five: Appeals
If an employee feels they have been unfairly chosen for redundancy or if they think there were discriminatory issues in the process, it is essential to offer them the opportunity to appeal within a reasonable time frame after they have received their redundancy notice. This could be, for instance, five days. The employee should submit their reasons for appeal in writing. Once you receive an appeal, you should arrange a meeting with the employee as soon as possible.
If it becomes clear that the employee was selected unfairly but you still need to make the role redundant, you must manage the situation with great care. This could mean ending the employment of another employee who was informed their job was secure. It is important to communicate clearly and openly with your staff, rectify any issues with the process, and ensure a fair selection procedure is carried out. If serious problems are identified, you may need to repeat the entire redundancy process.
If you decide to reject the appeal, the employee's redundancy dismissal, notice, and pay will continue as before.
Stage six: Termination
This is the final stage of the redundancy process where the employment contract is terminated. During this stage, you should be supportive and give your employee reasonable time to find another job while they work their notice period.
All employees who have been with the company for more than two years qualify for a statutory redundancy payment. Provide the employees with a written record of how the statutory redundancy payment has been calculated and what they will receive.
What should be included in a redundancy letter?
The redundancy letter to the employee should clearly state the reasons for the employment termination and the terms of their departure. Here are some key pieces of information that should be included in a redundancy letter:
Reason for redundancy: The letter should clearly state the reasons for the redundancy, such as economic downturn, restructuring, or technological advancements.
Selection criteria: Employers should explain the selection criteria used to determine which employees are being made redundant. This could include factors such as length of service, skills and qualifications, and job performance.
Notice period: Employers should provide details of the employee's notice period, including the start and end dates, as well as any entitlements to pay in lieu of notice.
Redundancy pay: The letter should provide information on the employee's entitlement to statutory redundancy pay, as well as any additional redundancy pay provided by the employer.
Benefits: Employers should explain what happens to the employee's benefits, such as healthcare, pension, and life insurance, after they leave.
Support: Employers should offer support to the employee during this difficult time, including assistance with finding new employment opportunities and access to training programmes.
To help you navigate this challenging process, we have put together a selection of redundancy letter templates that can be used at various stages throughout the process. These include:
Redundancy consultation letter
Redundancy consultation outcome letter
Invitation to redundancy outcome meeting letter
Notice of redundancy letter