What is Redundancy?

By Abhishek Kathpal | Updated 04 August, 2022

Redundancy is one of the most contested and controversial aspects of employment, especially in economies with unfavorable economic climates. Many firms may occasionally confront the unfortunate task of making adjustments to their operations and business practices to cut operational expenses and being compelled to lay off employees as a result. The last thing an SME (Small to Medium Enterprise) wants in such a situation is to be forced to incur additional costs as a result of improperly carrying out the necessary redundancy measures.

What is Redundancy

Redundancy meaning and definition

"When it comes to employment law, the term "redundancy" describes a situation in which a company decreases its personnel as a result of a particular job or position becoming "redundant," or no longer needed. These situations may occur for a variety of reasons beyond the employee's control, including, but not limited to, the business closing down, the employer needing to reduce costs, the development of artificial intelligence (AI), or other technologies that have rendered that job unnecessary, the job no longer existing, or a change in the ownership of the business. As a result, redundancy is typically not a reflection of the employee's ability to perform their job, but rather it is a result of a situation that is beyond their control.

Redundancy process

Redundancy refers to the process when employers must fire one or more workers due to reasons unrelated to work performance or behavior. Most of the time, unless the company is shutting down, employers must give a valid cause for eliminating a position. Redundancy does not occur if an employee is merely replaced by a fresher employee; rather, it only occurs when the position itself is declared redundant.

In terms of how workers are let go from a company, redundancy can either be of a forced or voluntary character. Employers frequently provide rewards like severance compensation or garden leave in the case of voluntary redundancy. Employers do not have to decide which employees to fire when they opt for voluntary redundancy. If voluntary redundancies fail, forced redundancies are often implemented using the "Last In, First Out" (LIFO) method, which prioritizes letting go of workers who have been with a company for the least amount of time.

The standard of an employee's work performance, the employee's prior experience, or the employee's value to the organization as a whole may also be taken into consideration when evaluating the possibility of redundancy. It is now the responsibility of the employer to use the redundancy test and determine whether there is a need for fewer employees to do a particular task rather than merely reducing or ceasing that task altogether.

Possible reasons for redundancy

a) Economic recession:

Even if employees contribute positively to your organization, you could have to let them go if other forces like a recession start to have an impact.

b) Termination of operations:

Closing your operation because you desire to retire, start a new endeavor, or move on to a new position could also result in redundancies.

c) Termination of a working title:

If your company no longer requires a specific job title, this may result in redundancy. For instance, the position of a receptionist may become superfluous if your business switches to an electronic phone system.

d) Business relocation:

Moving your company to a new site or a different region, state, or even country could result in redundancies because there might not be enough money to assist every employee with relocation. To establish itself in a new location, your business might also need to downsize.

What is unfair dismissal?

When a company doesn't adhere to a fair redundancy process, it is considered unfair to fire an employee. The employee has the right to ask why he/she was chosen, and ask if there are any alternatives to redundancy, before accepting the offer. An employee could have been wrongfully fired if this hadn't happened. Additionally, there can be no unjustified selection criteria used by employers to choose candidates for redundancy, such as:

a) Age

b) Race

c) Gender

d) Religion

e) Disability

f) Pregnancy

g) Sexual orientation

The difference between redundancy, layoffs, and downsizing

Redundancy, downsizing, and layoff are all expressions that are frequently used in casual conversation. When an employer is unable to continue to offer their employees work, layoffs frequently occur. Depending on the company's situation, layoffs may be permanent or temporary. Similar to layoffs, redundancies can also happen as a result of a lack of work but they can also happen as a result of other contextual reasons like business closure or relocation.

A corporation cutting back on staff is known as downsizing. They might be doing this in anticipation of a merger or to balance their budgets in the wake of a downturn in the economy. In this respect, downsizing and redundancy are comparable; however, with downsizing, firms occasionally provide workers the choice to transfer to another company site.

About the Author

Abhishek Kathpal

Abhi is the co-founder at Longlist.io. Funded by US based OnDeck, Longlist is currently enabling 50+ businesses to increase their candidate and client reach outs, automating the workflow across stages.

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