Employers have to make several tough decisions and one of them is making redundancies. As an employer, you should be mindful of several things when making redundancies. The most important is having knowledge regarding redundancy law and following a proper redundancy process.
Part of the process is about issuing redundancy letters to your employees.
In this article, we will understand redundancy letters, their types, templates, and how to write one for both an employer and an employee.
What Is a Redundancy Letter?
A redundancy letter is a formal written notice that explains why an employee is being dismissed from their current job. The letter goes on to explain the reason for the involuntary turnover, specifies the next steps that an employee should take, and details the benefits or compensation that they might receive.
Types of Redundancy Letters and Their Roles
A redundancy letter is required to inform employees at various stages of a redundancy process:
- Job at risk of redundancy letter: Notifying individuals that they are at the risk of being redundant
- Redundancy consultation letter: Inviting or notifying an individual to be a part of the redundancy consultation process
- Notice of redundancy letter: Informing employees that they have been selected for redundancy
What Does a Redundancy Letter Contain?
A redundancy letter should be given with a clear purpose. Whether the objective is to terminate an employee or ask them to attend a consultation meeting, it should be stated clearly in the letter. Following are a few specifics that must be mentioned in the letter.
Ambiguity leads to confusion. Sending out a redundancy letter without giving a proper reason can get you in trouble. So make sure that you explicitly mention why are you making an employee redundant. Again, whatever the reasons, they have to be fair and just. Some of the reasons that qualify include:
- Organizational changes such as relocation or closure of a business
- The current role of the employee is no longer needed or has been replaced by the advent of new technology
- Attempts to reduce business costs
- Handing over the business to a new employer or going for a merger
Now, these were some of the reasons for making a certain role redundant. An employer should also set why a certain individual has been chosen for redundancy. And as mentioned earlier, the reasons have to make sense. Let’s have a look at a few of them:
- Lack of skills
- Fewer qualifications
- Absence record
- Lateness record
- Disciplinary issues
- Inability to perform well
Next, the letter should notify the employee of the next steps they should take. It should also mention the final date of employment and details of any entitlement.
You must also ensure that you give a sufficient amount of notice of their redundancy. In most cases, a minimum statutory notice period applies. This depends on the amount of time an employee has worked in a company:
- No statutory notice period is given if an employee has worked for less than a month
- If an employee has served for up to 2 years, then a notice of one week is given
- For working between 2 to 12 years, a notice of one week is provided for each complete year they have worked for
- Someone who has worked for more than 12 years gets a notice period of 12 weeks
The notice period begins a day after the employee receives redundancy news. The notice should also discuss how a company will treat accrued annual leaves if not utilized before the last day of employment.
Payment in Lieu of Notice (PILON)
Another important thing to include in the redundancy letter is the redundancy pay. The letter must state how much and when can they expect redundancy pay.
Depending on the employee’s contract, an employer can also offer them payment in lieu of notice. This means that employees upon agreeing to PILON do not have to serve the notice period.
If an employee’s contract doesn’t allow PILON, then you can seek the employee’s permission for it. However, you can’t force employees to agree to PILON.
Another important to keep in mind is you cannot force an employee to leave before their statutory period ends. Doing so can put you in troubled waters.
Other small yet important details to include in a redundancy letter are:
- Confirmation that the redundancy has been given due consideration before giving into it as a last resort
- Inform employees of their right to appeal
- Provide details of any alternative roles if available
- End the letter with a personal note thanking employees for their work and service to the organization
How to Write a Voluntary Redundancy Letter to Employees?
Voluntary redundancy is different from involuntary redundancy. It is when you inform staff about required redundancies and offer a redundancy package to those who accept them.
The benefits of offering a voluntary redundancy are that it helps you cut down costs, ensures staff leaves on good terms, and reduces the risk of discrimination claims.
When you offer voluntary redundancy, you have to inform employees via a voluntary redundancy letter. It should contain the following:
- Redundancy package offer
- The consequences of taking a voluntary redundancy
- Details regarding the notice period and if, and how much will they receive PILON
- Eligibility to receive any additional pay such as bonuses or commission pay
Redundancy Communication to Staff
This section will cover how to communicate with employees who are at risk of redundancy and those who are not. How and when you communicate depends considerably on the nature of an organization.
Smaller companies will have a different approach than larger ones where redundancies may happen in a specific department. You can choose what suits you the best.
Communicating With Employees at Risk of Redundancy
Employees who are at risk of being redundant should be dealt with properly. Here are a few tips that you can implement in such a situation.
Plan Beforehand About What You’re Going to Say
Such situations can make you anxious. it is important to maintain your calm so we recommend that you prepare a few opening sentences beforehand. The ideal situation would be to have the entire announcement script ready as it will keep you on track and focused.
It is possible that while navigating through a redundancy process, you might appear awkward or behave unusually with your employees. This will make employees equally awkward and uncomfortable. Watch your words and behavior carefully. Try to be you. Speak as normally as possible.
Always be kind and empathetic towards those at risk of redundancy. You may find going through the entire redundancy process cumbersome but you don’t have to let your employees know about it. They’re and will be in a far worse situation when they find out that their positions are at risk of going redundant.
Keep It Short and Crisp
In your first meeting where you will make an announcement for redundancies, try to keep your speech as short as possible. Employees at risk will not be in a situation to absorb any more of what you will say.
You can provide all other details in the next few meetings and during the redundancy consultation process.
Make a Wise Choice of Words
Consulting employees on matters of redundancy is crucial. Before you go all in and make a final announcement about having redundancies, you need to consult your employees on these decisions. A consultation will help you explore alternatives that could prevent redundancies from happening.
The announcement should be more along the lines of highlighting the problem that you need to address such as cost reduction or a need to change the structure of the company. You must assure employees that you will be holding consultation sessions to find viable solutions to the problem. You may mention that the change may result in redundancies but again assure them that the consultation meetings will explore other alternatives.
Collaborate With Employees
The main idea behind holding consultation meetings is to include employees in the decision-making process. It is a two-way conversation and not one way where you set the tone of the meeting. Keep it a collaborative as possible.
Communicating With Employees, Not at Risk of Redundancy
Letting the rest of the organization know about potential redundancies is equally important. How you do it depends on the culture, size, and scale of the change in the company. Here are a few things for you to remember:
Communicate in the Early Stage of the Process
If you’re a large company and making changes in a certain department then making company-wide redundancies will only cause panic. However, the changes that you’re going to make will affect a larger percentage of the workforce than letting the entire company know to make sense. It will prevent unnecessary rumors from spreading.
You can simply circulate an email letting a certain department or as a matter of fact entire organization know that some employees will be going through the redundancy consultation process. This will allow employees to be sensitive towards other colleagues.
Only Communicate as and When Needed
If you’re only making minor changes and few redundancies then making an announcement is not advisable. Feel free to answer any questions that employees come up with but don’t go for an announcement.
Abide by Your Duty of Confidentiality
People react differently when put at risk of redundancy. Some employees might be comfortable sharing it with their colleagues while others may not. In case you make a company-wide announcement, let those at a risk know beforehand so that they can gear themselves up to answer questions that may come their way.
Be Ready to Answer Questions
When you make a redundancy or change-related announcement, employees are going to have a long list of questions. The top of which will be ‘are there going to be any redundancies?’. Your answer should not be a straight no. This is because if in the future something unexpected happens resulting in redundancies then you’re going to be accused of that.
Hence, choose your answers wisely.
Communication at the End of the Redundancy Process
At the end of the redundancy consultation process, if someone has no choice but to leave then do you let the whole organization know about it?
Well, it depends. If your company has been in the practice of shooting an email on the last day of a certain employee then it makes sense to send out an email in a redundancy situation as well. However, you don’t have to mention the reason.
Instead, thank that person for their hard work and effort and encourage others also to do the same.
You can also take them out for a lunch or drink. It’s always great to end things on a good note.
Redundancy Letter-Use It Wisely
Making redundancies is hard. It hampers your relationship with good employees and also leaves a negative impact on those who are staying with the company. However, if you are mindful when communicating and drafting redundancy letters you can end things on a good note.
Redundancies happen and will continue to happen in the future. But what matters is how well did you handle the situation and those at risk of being redundant. The aim is to help employees leave their job with dignity.