How to Deal with Redundancies in the Auto Industry

Due to economic factors, downsizing and job termination occur too often in the automotive industry. When it comes to redundancies, employers need to ensure they navigate them legally and ethically.

The government aims to pass legislative amendments which are set to change the rules on making redundancies. Without proper understanding, you could end up making unlawful redundancies, paying compensation, and causing major business disruptions.

For further advice, contact one of our expert HR advisors free of charge today. Now, let’s take a look at how to deal with making redundancies in your automotive business:

Why are redundancies high in the auto industry?

Research by Statista showed there were around 112,000 redundancies made within the auto industry in November 2024. Unfortunately, there are far too many factors that lead to high redundancy rates in this sector. For example:

Technological advancements: The auto industry is transitioning towards electric vehicles (EVs) autonomous driving, and connected cars, according to Automotive World. Technological advancements like these ones leave very little demand for traditional auto services and parts.

Market competition: Foreign manufacturers have a heavy impact on UK-based auto businesses. Chinese automakers have global dominance, according to Statista – resulting in a competitive and predisposition global market.

Government policies: The government has passed laws for auto businesses to sell more zero-emission vehicles (ZEVs). Their mandate states a percentage increase from 22% in 2024 to 80% in 2030; and 100% in 2035.

Industry costs: Auditing company RSM found that raw materials and auto parts account to 57% of the total production of a vehicle. This is a clear indication behind high costs and weak demands found in the automotive industry.

Economic tariffs: Unfortunately, foreign policies and political turmoil can have a serious impact on businesses in the UK – especially the auto industry.  Tariffs and taxations can affect UK automakers, particularly those with overseas factories.

Major impacts like these are what fuels high number of job losses and plant closure within the auto industry. Often, once a plant closes, there’s very little hope of recovery – for both workers and the employer.

What is the law on redundancies in the auto industry?

Auto employers must comply with several legislations before making redundancies. You can only make an employee redundant if you:

1. Have stopped (or plan to stop) doing what they were hired to do.
2. Don’t need a certain role/skill-set because it’s ‘ceased or diminished’ (or expected to).
3. Have no option but to relocate the business (resulting in an excessive commute distance).
4. You’ve ceased trade.

Under UK law, employers must check whether those selected for redundancy are eligible for certain rights. For example:

• Redundancy pay.
• Notice periods.
• Redundancy consultations.
• Suitable alternative employment.
• Time off to look for new jobs.

It’s important to note that the Employment Rights Bill 2024 outlines new laws on redundancy. The bill aims to get rid of service year requirements and provide day-one rights to all workers.

How to deal with redundancies in auto businesses

From economic fluctuations to statutory mandates – the auto sector faces numerous challenges. When plants are forced to make cuts or even close, they often face having to let staff go.

Employers must take practical, lawful steps towards understanding when and how redundancies can be made. With the right steps, you’ll be able to protect the business from future potential disruption and unrecoverable losses.

Let’s take a look at how employers can deal with redundancies in an automotive business:

Assess the situation

The first step employers should take is assessing their business situation. Redundancy should be considered as the last step in any business. That means exhausting other routes, like short-time working or lay-offs.

People often have specialised skill-sets and experiences in the auto sector. Most of these are transferable into alternative roles. You should assess these situations first before making permanent decisions like redundancies.

Offer alternative suitable employment

The last thing you might think about is upskilling workers during a redundancy process. However, it’s a considerable time to provide alternative suitable employment, especially for valuable employees you don’t want to lose.

With new laws on zero-emission vehicles and technological changes, the auto industry is constantly evolving. Offering alternative roles means employees can keep learning, expanding skills, and fuelling labour numbers – keeping the auto sector thriving.

Create a financial plan

Redundancies can cause all kinds of financial strains for businesses – big or small. That’s why it’s advisable for employers to create a financial plan during these troubling times.

Take a look at business savings, non-essential expenses, and considerations for temporary work. This might be a good time to reflect on spending habits and financial goals. The automotive industry is known to be recurrent, with fluctuations in demands and losses. So, planning ahead like this can provide financial security in the long run.

Be aware of business disruption

Singular and collective redundancies can cause all kinds of negative moods in a business. It can cause fears of job security, poor wellbeing, and even higher turnover in some cases. Some employees may take strike action; others may raise unfair dismissal claims against your business.

Employers need to be aware of business disruption that results from redundancies. These are hard to foresee and even harder to manage. Aim to keep open communication with your staff during these times. That way, you’ll be able to provide the right support to those leaving and remaining in your business.

Get expert advice on managing redundancies in auto businesses with Peninsula

The automotive industry faces incredible economic and social challenges – which can result in business closures. During such times, employers need to navigate around lay-offs, short-time working, or ultimately, redundancies.

Peninsula offers expert advice on managing redundancies in auto businesses. Our 24/7 HR advice is available 365 days a year. Want to find out more? Book a free chat with one of our HR consultants. For further information, call 0800 051 3685.

Sources

Estimated number of people made redundant in the United Kingdom from January 2000 to November 2024 | Statista

What are the top tech trends for 2024? | Automotive World

Automotive manufacturing industry in China - statistics & facts | Statista

Pathway for zero emission vehicle transition by 2035 becomes law | GOV

Automotive manufacturers see first increase in production levels for 11 months | RSM