Making an employee redundant likely wasn’t an easy decision for any business owner, but if you’re now contemplating bringing that employee back on board, then it must have been especially difficult. It’s made more difficult still if you want to hire somebody else for the role and the previous employee finds out.
It’s important that you tread carefully as a business owner when you want to rehire a new employee after previously making another redundant, as you could face an unfair dismissal claim as the previous employee may still be disgruntled from the redundancy in the first place. Whether or not you made a voluntary or statutory redundancy payment to them could make the process easier or harder.
But if you want to hire a new employee after redundancy, how long do you have to wait? Well, there isn’t a set time, but you’ll want to consider whether the following criteria is met:
- The original redundancy was due to a genuine and demonstrable change in the company’s operational needs – not just to get rid of employees.
- A reasonable time has passed since the redundancy. The business must be able to demonstrate a change in circumstances that requires previous redundancy roles to be filled again.
- The new hire is for a different role with new duties and requirements from the role that was made redundant.
Making redundancies is always a difficult time for businesses. From the managers tasked with making the decisions and delivering the bad news, to the employees facing an unexpected end to their job, it’s a challenging process to navigate. Add re-hiring to the mix, and matters become even more complicated.
Read on to understand the process surrounding rehiring after redundancy to ensure you handle it with tact as a business owner.
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How Long Do You Have To Wait Before Hiring Again?
While the law doesn’t give an exact time, it’s best to take some time and reflect on the decisions made and let the business adapt to its new structure before making any new or rash hiring decisions. You must be mindful of the employee that has been made redundant.
If you don’t wait, it can appear to those affected that you let them go, just to replace them with someone else. That would be illegal and could lead to wrongful or unfair dismissal claims being brought against you under UK employment law.
Employment tribunal claims can be made within three months of the termination of a contract, so that is the minimum amount of time a business should wait before rehiring to prevent this.
In the case of a genuine redundancy situation, it’s extremely unlikely that circumstances would have changed enough within this time to consider rehiring anyway.
After making redundancies, the first priority should be to think about what went wrong and if there are any changes you could make in the future so that way, layoffs don’t need to happen again. This includes reviewing your business strategy and direction, recruitment process, training and development opportunities, team dynamics, and staff morale.
Before making the previous employee redundant you likely undertook a redundancy consultation with an employment law specialist. If you’re considering rehiring somebody new in the role within three months of the redundancy, it’s best to consult a lawyer again to find the best course of action.
How Redundancy Payments Can Impact The Situation
If you gave your previous employee a large redundancy payment by way of acknowledging their contribution to the company, then they may be able to accept you rehiring for their role a lot easier, especially if they’ve already moved on to new employment in that time.
However, as an employer you aren’t obliged to offer high redundancy pay. You could instead simply offer the minimum required in the statutory redundancy pay scheme. Here, the UK government set specific guidelines for employers as they consider redundancy.
Under the scheme employees are entitled to a statutory redundancy payment if they have worked for your business for 2 years or more. They’ll then be entitled to:
- half a week’s pay for each full year you were under 22
- one week’s pay for each full year you were 22 or older, but under 41
- one and half week’s pay for each full year you were 41 or older
The length of service is capped at 20 years and if the employee was made redundant on or after 6 April 2024, weekly pay will be capped at £700 and the maximum payment will be capped at £21,000.
A week’s pay is based on the average weekly payment over a 12 week period.
Ensuring an employee receives an adequate redundancy payment can be a good way to avoid potential legal issues down the line if you are able to fill their previous role again in the future with a new employee.
Tips For Re-Hiring After Redundancy
Rehiring for a role that has been previously made redundant is a complex part of employment law. Below are some of our most valuable tips to ensure you get it right and avoid the potential of any unfair dismissal claims.
1. Ensure The Role Has Changed Significantly
In order to fairly hire someone new for a role you previously made redundant, it’s important that you make sure the role is distinct. It could be that the new role takes on additional responsibilities within the business, and that the skillset required will now be significantly different. Making two roles redundant and combining the role into one is an example of how the role can evolve fairly.
2. Advertise The Job Properly
When hiring for a new role that features some responsibilities of the previous redundant role it’s important that you still advertise the role externally in your usual way. This prevents your previous employee from accusing you of hiring in an underhanded manner. Use sites like Indeed, your business’ social media and other obvious avenues to protect yourself. Mentioning the new role is due to previous redundancy is an honest practice, but you may notice a lack of applications due to candidate concern.
3. Focus On The Skills Needed
Make clear the skills that are required with the new role, as this might highlight to your ex-employee why they would no longer be the right fit and thus was made redundant. Focus on the new skills to attract the right candidate to the role.
4. Consider The Impact On Existing Staff
Remember that redundancies effect all employees, not just the individual being made redundant. Be considerate of this when rehiring after redundancy for a similar role. If colleagues feel their old coworker and friend were wronged by the redundancy, it could get back to them that you’re rehiring and an unfair dismissal claim could begin. Be transparent to all of your staff and explain the decisions to avoid upsetting employees further.
5. Ensure Fair And Transparent Processes
Ensure all recruitment and selection processes are fair and transparent – and provide equal opportunity to all candidates, including any application from the individual who previously held the similar role before redundancy.
6. Provide Support For New Employees
Whoever you decide to hire for the role, ensure you provide them with the best opportunity to succeed. Adequate training and support should be given to every new starter, even if they’re a returning employee.
Can You Rehire An Employee That You Previously Made Redundant?
So long as all hiring and selection processes are properly followed to ensure fairness, there’s nothing stopping you from rehiring the previous employee.
Be careful, though, as your previous employee may begin to see the original redundancy as unfair if you’re asking them to return to the company. This can result in an unfair dismissal claim if it’s within 3 months
The decision to rehire a redundant employee should not be taken lightly, and it is important to ensure that you are following the relevant regulations and procedures in order to protect your business from legal action.
Pros And Cons Of Rehiring Ex-Employees
Of course, there’s always going to be certain pros and cons to hiring ex-employees. You ought to consider the following:
Advantages
- Increased loyalty – Previous employees that have taken the time to re-apply for a role at the same company are demonstrating that they really want to work for the organisation. This can lead to increased levels of commitment and loyalty and therefore less chance of them leaving in the future.
- Cost savings – Whilst a role should never be filled on the basis of costs to do so, bringing an old employee back can save time and money on training due to their existing knowledge of the company and its culture. Depending on the time between their original role and new role, this may be diminished if things have moved on significantly.
- Retention of skills – Rehiring ex-employees can help retain valuable skills and knowledge within the organisation, which can be beneficial for business efficiency and development. You’ve already developed some of their skills the first time around, so it makes sense to utilise those skills again if they’re willing to return.
- Familiarity – Rehiring an ex-employee can be beneficial, as they will already have a thorough understanding of the company’s operations, processes and procedures. The company also already knows the strengths and weaknesses of the employee, so you know what type of person you’re hiring already.
Disadvantages
- Reputation – In some situations, it can be damaging to rehire employees that have previously been let go. It can look like the business strategy was ill thought out, which can lead to a lack of confidence in management going forward for the returning employee and their peers.
- Legal issues – When you rehire an employee that you previously made redundant, this could lead to other redundant employees arguing that their redundancy was not genuine and claiming unfair dismissal. You could potentially be opening a whole can of worms so be cautious if multiple redundancies have taken place.
- Reduced loyalty – This point was included in the advantages too, but it can also be a disadvantage depending on the person involved. If an individual holds a grudge against the company for their redundancy, they may not work as productively for them when rehired. Ensure they actually want to return during the interview process and get a feel for how genuine their interest in the position is.
There will always be pros and cons to every business decision and recruitment after redundancy is no different. If an ex-employee applies for a new role at your business, they should be treated equally and fairly in line with everyone else applying.
Justifications For Redundancy
Redundancy is a legitimate business decision that sometimes must be taken for very valid reasons. Often redundancy, whilst not pleasant for anybody involved, is a necessity to secure a business’ future and streamline operations and finances.
Common, justified reasons for redundancy include:
1. Financial Difficulties
Where there are redundancies there are usually financial difficulties for a business – the two often go hand in hand. Where profit is falling, debts are rising, and running costs are becoming a concern, one way to fix that is reducing the number of employees you have on the books.
Surplus roles may be cut and others combined to save the business money and streamline the operational efficiencies of your business.
2. Changes In The Market
Market changes impact all businesses. Where products and services are in less demand, a business may need to make certain roles redundant to protect running costs.
In order to stabilise a business in an ever-changing market, redundancies can be a justified course of action for business owners.
3. Technology Changes
Sometimes technology can develop to a point where it’s more efficient to opt for technological solutions rather than human ones. When this happens, it’s often cheaper long term to cut roles and invest in technology to complete the role more efficiently. Here, the original role is simply redundant as it’s no longer required.
4. Poor Performance
Where business performance is slipping, reducing the workforce might be your only option to help save money. It can be difficult letting people go in this situation but it is sometimes necessary.
5. Restructuring
Redundancies are common at the time of business restructures like acquisitions and mergers. In these cases, there may be several people doing the same job but only one version of the role is required. This would mean that a fair way of deciding who stays and goes is needed. Discussions here can often start with a request for ‘voluntary redundancy’, before moving to more performance based reviews.
Legal Risks When Making Redundancies
You have to be cautious when rehiring after a redundancy, as there are plenty of legal pitfalls you could fall down. You can face legal repercussions such as unfair dismissal claims and employment tribunal issues if you don’t handle things with fairness and transparency.
Remember the following points to protect yourself in future.
Genuine Redundancy
Whenever you make a redundancy in your business, ensure you do so for valid and genuine business reasons, and share those reasons with your employees. Refilling roles quickly could lead to unfair dismissal claims. When rehiring, ensure the new role is different from the last redundant role.
Unfair Selection
When making an employee redundant, ensure the process for selection is fair and transparent too. No discrimination based on age, race, gender or another protected characteristic can take place.
Failure To Consult
Consulting staff before redundancies is common practice, because if you do so in a way that is underhanded then you could be at risk of breaching the Employment Rights Act 1996. It’s important that you work with HR consultants to ensure the process is fair and above board.
Do HMRC Investigate Redundancies?
HMRC can investigate redundancies, and are more likely to do some when employees are rehired shortly after redundancies were made. This action is taken to help prevent businesses from tax avoidance or trying to reduce their tax liabilities unfairly.
In order to pass scrutiny from HMRC surrounding redundancies and rehiring, businesses must be able to demonstrate their compliance with fair procedures and employment law. If found to have fired and rehired employees without meeting these requirements, they will remain accountable for National Insurance Contributions.
Final Thoughts
If you are a business owner facing financial difficulties or going through a restructure, acquisition or merger, the topic of redundancy may need to be assessed. It’s a stressful time for all involved, especially employees who are suddenly let go.
If you decide to rehire in the future, you must be careful that this is done in a fair manner that will not result in unfair dismissal claims being made against you from the people that you have let go.
Following the correct notice/consultation period for a redundancy process, using fair and objective selection criteria when selecting employees for redundancy, communicating the processes clearly with employees and having a valid business reason for making redundancies will all ensure that you can successfully navigate the legal compliance needed when rehiring after redundancy.
