Employment and pensions
What is Redundancy?
Redundancy is a form of dismissal from your employment and can occur for the following reasons:
- The employer's business, or part of business has ceased to operate and/or intends to cease to operate.
- The employer's business has moved to a different place.
- The business's need for work of a particular kind to be done has ceased or diminished or will cease or diminish.
- The business needs to reduce the number of employees.
- Your role or job has been replaced by technological advancements.
Redundancies usually occur when there are changes in a business, perhaps as a result of a restructure, a loss of a major contract, a site or business closure.
Am I Entitled to a Payment?
You will qualify for a redundancy payment if you have worked for your employer continuously for at least two years at the date of dismissal.
What will this Payment be?
The amount you receive depends upon:
- Your length of service with your employer
- Your age
- A multiplier
- The amount you earn (you should note that a week's pay is currently capped at £475 per week).
The amount is calculated as follows:
- 0.5 week's pay for each full year of service where your age is less than 22 years of age;
- 1.0 week's pay for each full year of service where age is 22 or above, but less than 41; and
- 1.5 week's pay for each full year of service where age is 41+
What Are My Rights?
Your employer should deal with your potential redundancy in a particular way. There are certain procedures that must be followed if your employer proposes to make more than 20 redundancies - this is known as the collective redundancy procedure and is a topic in itself.
Where there are fewer than 20 people at risk of redundancy there are still procedures which your employer should follow.
Best practice from your employer's perspective is to be open with employees and continually consult with them from the moment that the employer considers redundancies as an option. In any event, employers must follow the statutory disciplinary and dismissal procedures.
Your employer should write to you setting out that there is a risk that you may be made redundant and the reasons, which have led to this and invite you to a meeting to discuss this.
Your employer should hold a meeting to discuss the redundancy, at which you are entitled to be accompanied by a colleague of your choice or a trade union representative.
At this meeting you should discuss with your employer options for avoiding redundancy including any suitable alternative employment.
You should be informed that you have a right of appeal against the decision that is made.
It is best practice for your employer to have at least two meetings with you.
Your employer should then write to you to communicate the outcome of the meeting.
Hold an appeal meeting (if you wish to appeal) you again have the right to be accompanied by a colleague of your choice or trade union representative. You should be informed of the final decision.
Can I Look for Another Job?
Yes, your employer must allow you reasonable time off on full pay to job hunt or to arrange training.
What Should I Expect of My Employer?
During this time your employer should be looking at all possible alternatives to avoid redundancies. These might include: -
- reviewing existing recruitment plans and perhaps putting these on hold
- natural wastage (e.g. retirement, people moving on)
- whether there are vacancies in other departments or associated businesses
- the possibility of voluntary redundancies
What is Suitable Alternative Employment?
Your employer should be looking for suitable alternative employment perhaps in another department or with an associated employer. If there are options available, you should be given full details to enable you to decide whether to accept the offer and if you think it is suitable. It may be that there are a number of employees who would find this offer suitable and therefore you may find that you will need to go through an interview process for the suitable alternative employment.
The factors that might be taken into consideration when looking at whether the offer is suitable alternative employment are:
- how your role differs from your previous role
- travel time
- job description
The offer must be made before the expiry of the existing contract and the new job must commence immediately following the end of the old job or no more than 4 weeks after.
If you unreasonably refuse an offer of suitable alternative employment, you may lose your entitlement to a redundancy payment. This may occur in circumstances where the new position offered is very similar and would not cause you any inconvenience. For example, it may be reasonable to refuse an offer if it required you to travel further and this impacted upon you collecting your children from school.
What is a Trial Period?
If you are offered a position which might be suitable alternative employment when you are under notice of redundancy you are entitled to a statutory trial period of 4 weeks in the new role. This will give you the opportunity to try out the new position. If you are still in your new role at the end of 4 weeks you will be considered to have accepted the role. If the new role is not a suitable alternative, for example, due to differences in location, and you decide not to accept the position before the expiry of 4 weeks, you will be considered redundant from the date your original employment ended.
You should note that if you refuse an offer of a job that is deemed to be suitable alternative employment, and you do not have a good reason for refusing such an offer you would not be entitled to a redundancy payment.
Have I Been Fairly Selected for Redundancy?
Your employer should have adopted selection criteria to assist them in the selection process. If you feel you have been unfairly selected for redundancy you may have a claim for unfair dismissal and possibly a discrimination claim if the reason for you selection can be proven to be related to, for example, your sex or race.
Fair reasons for selecting employees for redundancy include:
- skills, qualifications and aptitude
- standard of work and/or performance
- disciplinary record
Some selection criteria are automatically unfair. Your employer must not select an employee for redundancy based on any of the following reasons:
- pregnancy, including all reasons relating to maternity
- family, including parental leave, paternity leave (birth and adoption), adoption leave or time off for dependants
- acting as an employee representative
- acting as a trade union representative
- joining or not joining a trade union
- being a part-time or fixed-term employee
- their age, disability, gender reassignment, marriage and civil partnership, pregnancy and maternity, race, religion or belief, sex and sexual orientation
- pay and working hours, including the Working Time Regulations, annual leave and the National Minimum Wage
We recommend that you read our unfair dismissal factsheet for further information, if you feel that you may have a claim then you are advised to seek legal advice immediately. There are strict time limits and therefore dealing with the issues immediately is crucial.
How Can We Help?
Our experienced employment department can help you in all aspects relating to your employment, from dismissal through to redundancy and discrimination claims.
For information of users: This material is published for the information of clients. It provides only an overview of the regulations in force at the date of publication, and no action should be taken without consulting the detailed legislation or seeking professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material can be accepted by the authors or the firm.