Redundancy: The essentials that retailers should know

Redundancy is a challenging but sometimes unavoidable part of running a retail business. If you’re considering making redundancies, it’s essential to follow the correct legal process to protect both your business and your employees.

Parradee/stock.adobe.com

Redundancies are among the hardest things to handle for a small business owner. For a number of independent retailers, redundancy now has to be considered part of ensuring financial security and survival within the current economic climate.

While the word itself can evoke a strong emotional response and the decision to carry out redundancies is always a tough one, there are key things that can be done throughout the entire process that will help make sure the way in which a redundancy is carried out minimises any additional impact on all involved.

This guide sets out the essential aspects of redundancy that you will need to understand, legal requirements to help you approach the redundancy process fairly, compliantly, and with confidence, as well as a brief FAQ section and a checklist to help identify the key details at-a-glance.

What is redundancy?

Redundancy occurs when an employee’s role is no longer needed in the business. This can happen when:

• A shop or site closes
• There’s a reduced need for staff in certain functions (e.g. fewer sales assistants needed)
• Technology changes how the job is carried out
• The business restructures or merges roles

A key point worth knowing is that redundancy is about the job, not the individual employee.

When is a redundancy considered genuine?

A genuine redundancy exists when there’s a legitimate business reason. This includes:

• Closure of the entire business
• Closure of a particular shop or department
• Fewer employees needed to carry out a specific kind of work

Your reasons should be clearly documented to demonstrate fairness and transparency.

Key steps in the redundancy process

1. Planning

Take time to carefully plan:

• Identify the business reasons and roles at risk
• Consider alternatives such as:
  • Voluntary redundancy
  • Reducing hours or shifts
  • Redeploying staff to other roles or locations

2. Fair selection

When more than one employee does a similar role, you must use fair, objective, and measurable criteria for selecting those at risk. Typical criteria include:

• Skills and experience
• Disciplinary record
• Attendance history
• Performance

Avoid using criteria that could lead to discrimination (e.g. age, disability, or part-time status).

3. Consultation

Wasan/stock.adobe.com

Consultation is a legal requirement and must be genuine. It should provide employees with an opportunity to understand the reasons, give feedback, and suggest alternatives.

For fewer than 20 redundancies:

• No set minimum timescale, but consultation should be “meaningful”
• Must consult with each affected individual

For 20 or more redundancies within 90 days:

• Must carry out collective consultation with elected employee representatives or a recognised trade union
• Timeframes:
  • At least 30 days before the first dismissal (for 20–99 redundancies)
  • At least 45 days before the first dismissal (for 100 or more)

What to cover in consultation:

• Why redundancies are proposed
• Who is at risk and how selection will be made
• Possibilities for avoiding redundancies
• Timeline of the process
• Support available for affected employees

Important: No final decisions should be made until consultation is complete. A pre-determined outcome can make the process legally unfair.

Notice and redundancy pay

Employees are entitled to notice and, where applicable, redundancy pay.

Statutory notice periods:

• At least 1 week’s notice for employees with 1–2 years’ service
• 1 week per full year of service (up to a maximum of 12 weeks)

Statutory redundancy pay (for employees with 2+ years’ service):

• 0.5 week’s pay for each full year under age 22
• 1 week’s pay for each full year between ages 22–40
• 1.5 weeks’ pay for each full year aged 41 and above

Redundancy pay is based on weekly pay (capped at £700 per week as of 2024), length of service, and age. Some employers offer enhanced packages—check contracts or staff handbooks.