Making people redundant: how much will it cost me?

Whether it is due to a change in the focus of the business, a new method that doesn’t require the same staffing, or even the business itself closing down, sometimes businesses must make the difficult call of making an employee, or employees, redundant.

However, in order to comply with the law there are procedures that must be followed, as well as the careful consideration of the costs involved.

The first and most obvious point to consider is: what is redundancy? Whilst a redundancy ultimately results in the dismissal of an employee, it should be remembered that it is the removal of a role and not just an employee. If the role, in any guise, will continue to exist afterwards, then redundancy is not the right option for a business.

It should also be considered that there are two types of redundancy. Where a business needs, due to increased costs or reduced revenues, to reduce the size of its workforce, it might prefer to consider voluntary redundancies. Offering employees the chance to take a redundancy package or early retirement can represent a more agreeable option for all parties.

The associated costs of redundancy must also be carefully considered. Making some employees redundant, depending on age and years of service, can be expensive. Statutory redundancy pay could be as much as £14,670, but selecting employees for redundancy based on what their package might cost you can constitute a breach of the law – and this could increase that cost exponentially.

Finally, there can be other costs to your business associated with redundancies. Will it impact the reputation of your business? Will it affect a skills drain as other employees become disillusioned? Careful consideration and planning should always be taken – doing so can help to protect your business in more ways than one.

Get in touch with us for more information: Email: wanttoknowmore@robson-laidler.co.uk tel: 0191 281 8191