There’s a lot of confusion around the different types of termination.
You might know what each type of termination is, but there are many rules to follow when dismissing staff or making redundancies.
Law can view the termination as unfair if you don’t follow those rules. This can lead to stressful and potentially costly consequences from unfair dismissal claims.
In this guide we will discuss the difference between dismissal and redundancy. We’ll also outline the steps employers need to take when making either staff change.
Dismissal vs termination
There are a lot of different terms to remember surrounding the end of employment contracts.
Two terms that people often get confused are dismissal and termination.
Termination refers to any approach to end, or terminate, an employment contract including dismissal, redundancy and retrenchment.
Mixing the two up could result in you making an unlawful dismissal.
The difference between dismissal, redundancy and retrenchment
Dismissal and redundancy are both types of termination, but refer to very different things.
It’s important to understand the differences. The different types of termination come with different rights for both parties and compensation for employees.
Dismissal
Dismissal is when an employee’s contract is ended by the employer. This includes redundancy but the redundancy process is different than dismissing someone for misconduct.
The key difference between other types of dismissal and redundancy is whether the employee is let go because of their actions.
In both cases, a fair process should be followed.
Redundancy
Redundancies are where a company can no longer afford to pay an employee. It can also refer to where the services provided by the company change and an employee is no longer required. We sometimes call this retrenchment.
Retrenchment
Retrenchment is similar to redundancy. It is when the business offerings changes and there is no longer a role available for certain employees.
The key difference between retrenchment and termination due to redundancy is that redundancy can affect just one employee. It’s unlikely that only one employee will be retrenched.
Whether making redundancies or dismissals, you must follow a fair process. You can be taken to an employment tribunal if an employee feels they have been unfairly dismissed.
The differences between the redundancy and dismissal process
Making both redundancies and dismissals requires you to follow certain steps. These steps are to ensure a fair process is followed.
However, the process for the different types of termination are very different.
Redundancy process
You are required to follow the redundancy process as legislated. However, the consultation stage might change depending on the number of employees being considered for redundancy.
It can also differ if any employees take voluntary redundancy.
The process includes:
- Creating a business case for redundancy: To explain the need to make redundancies and explore any alternative options. This should be completed before the decision to make redundancies has been agreed.
- Selecting employees for redundancy: This should include deciding which employees are being considered for redundancy and setting out a fair selection criteria.
- Holding redundancy consultations: Redundancy consultations are meetings with the employees being considered for redundancy. These meetings should detail the factors being taken into consideration and allow staff to provide feedback.
- Finalise redundancies: Meet with the affected employees to inform them that you have selected them for redundancy. Provide details of redundancy pay and notice periods and confirm everything in writing.
The consultation process differs depending on the number of employees facing redundancy.
Redundancy consultations are required for all employees being considered if there are between 1 and 19 employees at risk. However, it is advisable to hold consultations when more than 19 are at risk as it can protect you from unfair dismissal claims.
Our redundancy process guide covers all of these steps in much greater detail.
Dismissal process
The process of making dismissals for a conduct related reason is a lot less prescriptive than redundancies. There are many stages to ensure a fair dismissal process but you define your own disciplinary procedure.
You should take the following steps to make a fair dismissal:
- Follow a fair disciplinary procedure.
- Take notes and gather evidence through a fair investigation.
- Invite the employee to a disciplinary meeting.
- Adjourn the meeting to make your decision.
- Ensure you have a valid reason for the dismissal.
- Take care not to discriminate.
- Communicate the outcome to the employee.
- Remind the employee of their right to appeal.
- Follow up the meeting in writing.
- Consider the rest of the business.
- Stay consistent.
You should provide the dismissal procedure to staff as part of the employee handbook. This makes sure that staff know what is expected of them and is required when making a fair dismissal.
Expert support on redundancy and dismissal with Peninsula
There are a lot of rules to remember regarding the different ways you can terminate an employee’s contract. Getting it wrong can result in unfair dismissal claims and expensive tribunals.
Let our expert HR team help you. We can advise on the steps you need to take. We’ll make sure you know the necessary steps and remove the stress from what is an already difficult situation.
Peninsula clients get access to 24/7 HR advice to lay out the steps you need to take and make sure you have all of the paperwork in order.
And if you’re not yet a client, you can still enjoy a free advice call from one of our business experts. Simply call us on 0800 028 2420
