Redundancy can be a scary and overwhelming time both for employees being made redundant, and for those that have to make the decision. It is important for both parties to know their rights and obligations in this time.
To help those going through this process, we are going back to the basics of redundancy law and procedure, and have put together some common questions about the process.
What is a redundancy?
Redundancy is a type of dismissal which occurs when a role is no longer needed. For this to be a genuine redundancy, all or part of the business is closing, changing the types or number of roles needed for certain work, or changing location.
What is the difference between voluntary and compulsory redundancy?
Voluntary redundancy occurs when employees agree to leave their job in exchange for a redundancy package. Compulsory redundancy is when the employer decides which roles will be made redundant. Many employers will try to avoid making compulsory redundancies by asking for volunteers, and will often offer a small enhancement to the package for those that volunteer. Employers do not have to offer this, or accept applications for voluntary redundancy.
What is consultation?
Consultation falls into two categories: collective and individual.
If employers are making 20 or more redundancies, they must conduct collective consultation with employee representatives or trade unions.
Individual consultation is required for all employees facing redundancy.
One of the requirements for a fair redundancy process is for the consultation to be meaningful. This means that employers should use consultation as an opportunity to discuss the reasons for redundancy, to explore alternatives to redundancy, and to consider any suggestions or concerns from employees.
What criteria should employers use for selecting employees for redundancy?
When determining who to make redundant employers should apply a selection criteria. This should be fair, objective and measurable. It should be based on measurable facts not opinions where possible. Examples of common criteria include: length of service, performance records, skills, qualifications, and attendance records. Criteria should be clearly communicated to employees and allow for their feedback.
Employers need to be careful that they are not discriminating against an employee based on a protective characteristic, and should be particularly careful of indirect discrimination. If you are in this process and concerned about discrimination, please contact one of our team for advice.
How is statutory redundancy pay calculated?
If an employee has been employed continuously by the employer for two years, they will be entitled to a statutory redundancy payment.
This is calculated depending on the employee’s age, length of service, and weekly wage. Employees will receive:
- Half a week’s pay for each full year of service aged 17 to 22.
- One week’s pay for each full year of service aged 22 to 40.
- One and a half week’s pay for each full year of service aged 41 or older.
Weekly pay is capped at a statutory maximum, and the length of service used for the calculation is capped at 20 years.
Up to £30,000 of a redundancy payment can usually be paid tax free.
What is enhanced redundancy?
Enhanced redundancy is a payment made by the employer beyond the statutory minimum they are required to pay.
Some employers offer enhanced redundancy to their employees as standard, if so this may be set out in a redundancy policy.
For some employees this will be offered by employers in return for signing a settlement agreement. If employees have concerns about the fairness of the process or decision, they may negotiate an enhanced package as compensation.
What notice should employers give for redundancy?
Employers are required to give either contractual notice, or statutory notice (whichever is the longer).
Some employers elect to pay their employees in lieu of notice, if their contract allows for this. In these cases employees will usually receive their notice payment as a lump sum.
Are employees entitled to time off to look for new work?
Employees who have been given notice of redundancy and have been continuously employed for at least two years are entitled to reasonable time off to look for new employment or arrange training. Employees should provide their employer with reasonable notice if they need time off, and employers do not have to pay more than 40% of a weeks’ pay for this time off.
What should employees do if they believe their redundancy is unfair?
Employees should be given an opportunity to appeal a redundancy decision if they believe the selection process was unfair or discriminatory. Employees may also consider raising a grievance with their employer prior to the decision being made if they are concerned about the process.
If an employee believes the process is unfair or discriminatory, they may also have a claim at the Employment Tribunal. We recommend seeking advice early in the process if you have concerns about the fairness, in order to take the right steps to protect your position. Please do reach out to our employment team if you are in this situation and we would be happy to help.