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Is 'Last In First Out' a fair method for selecting employees for redundancy?

View profile for George Sellers
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Is Last In First Out a fair method for selecting employees for redundancy?

Due to the rising cost of living, employers are noticing a squeeze on consumer spending and are likely to become under pressure to save costs over the next 12 months and may be forced to consider redundancies. The ‘Last In First Out’ (LIFO) method selects employees for redundancy based on their length of service, with those with least service being chosen first.

There may be a few cost incentives for adopting LIFO especially for employers struggling with profitability. Firstly, an employee with less than two years’ service is not entitled to  statutory redundancy pay. Redundancy pay is calculated based on the employee’s length of service, their weekly wage and their age. You can calculate the amount you would need to pay redundancy employees by considering the table below.

Statutory Redundancy Calculator

Age of employeeCalculation
Under the age of 220.5 x gross weekly pay x complete years’ service
Between the age of 22 and 401 x gross weekly pay x complete years’ service
Aged 41 and above1.5 x gross weekly pay x complete years’ service

Note: weekly pay capped at £643 per week. Maximum 20 years’ service. Maximum payment = £19,290. Applicable from 6 April 2023.

Secondly, you will also need to pay any employees made redundant their contractual notice period.  If there is no written contract or agreement, an employee is entitled to the statutory minimum notice, which is dependent on their length of service.  

Statutory Minimum Notice Periods

Length of ServiceMinimum Notice by EmployerMinimum Notice by Employee
Under 1 monthNoneNone
More than 1 month but less than 2 years1 week1 week
2 years or more but less than 12 years1 week for each completed year of service1 week
12 years or more12 weeks1 week

If you do decide to use LIFO as the method to select employees for redundancy, it is important to be able to objectively justify it.  If you do not, there is a risk that an employee could claim indirect discrimination and/or unfair dismissal.

The best way to avoid any such claims, is to not solely rely on LIFO and instead, include other objective criteria such as skills, qualifications, performance and disciplinary records.

For further information speak to our specialist Employment Law team.

Our articles are intended for general information purposes only and are not a substitute for professional advice tailored to your specific circumstances. We are always very happy to discuss any plans, issues or concerns you may have and to clarify how we might be able to help. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.