Legal Guide - Being Made Redundant
When is redundancy appropriate?
The redundancy situation arises if:
- the employer has stopped or intends to stop carrying
on the business in which the employee is or was employed
- the employer has stopped or intends to stop carrying
on the business in the place where the employee is or was employed
- the employer’s need for workers to carry out work of a particular kind
has reduced or stopped or is expected to do so.
The risks involved with redundancy
Employers who fail to follow proper procedure when dismissing
employees for redundancy expose themselves to the risk of successful unfair dismissal claims
eg An employee will succeed with an unfair dismissal claim if he/she satisfies an Employment Tribunal that he/she was unfairly
selected. In addition, depending in part on the process that was followed, they might also be able to claim that the dismissal
To reduce the risk of claims and the need to involve solicitors,
employers need to take the following steps when making workers redundant:
Consult employees about the potential situation at an early stage i.e. before notifying
them that they are to be made redundant.
Early consultation can result in a reduction in the number of compulsory redundancies eg by:
- offering voluntary redundancy or early retirement
- transferring to staff to fill existing vacancies elsewhere in the business
- offering to train staff to gain new skill sets which will be more pertinent to the future of the business, and/or
- offering the opportunity to job share
- 1 establishment, over a period of 90 days = statutory duty to consult with elected employee representatives
or with any trade union which is recognised for collective bargaining purposes
- 1 establishment, over the period of up to 90 days = the consultation period must
commence at least 30 days before the 1st dismissal takes effect
- 1 establishment, in a period of up to 90 days = the consultation must begin at least 45 days before the first dismissal
RISK: Employers who fail to comply with collective consultation obligations
are at risk of claims for a protective award. This award can be as much as 13 weeks’
pay for each affected employee.
- 1 establishment = not caught by the statutory obligations relating to collective redundancies
- good practice to consult employees at an early stage. Early consultation will allow alternatives to be
fully explored and thereby reduce the risk of claims of unfair dismissal
If having consulted the affected staff or their representatives, employers are still faced with having
to make compulsory redundancies, it is vital that they follow a fair selection procedure
if they are to reduce the risk of litigation.
In seeking to adopt such a procedure attention must be paid both to the choice of selection criteria and
how they are applied.
A variety of criteria can be used such as:
- disciplinary record
- relevant skills
Take care when choosing which criteria to apply eg if an employer does not have accurate
attendance and time-keeping records, using those criteria could give rise to claims of unfair selection if the employer
dismisses one employee in favour of another who has a poorer record.
Employers need to ensure that if they do choose criteria such as attendance,
that they do not take account of any absences that relate to a persons disability or which
occur as a result of maternity leave. If they fail to do so, any dismissal could be give rise to claims
of sex or disability discrimination.
In choosing criteria employers should also bear in mind the continuing needs of the business and aim to retain those employees
whose skills and experience will be most valuable to the business in the future.
Application of selection criteria
In addition to ensuring that selection is based upon accurate data, employers must ensure that the
criteria are applied both objectively and consistently.
Once an employer has selected those to be made redundant it must:
- Write to each person affected and invite them to attend a meeting to
discuss the situation and allow them to put their case against being dismissed
- If the employer’s decision to dismiss is unchanged it must write to the worker advising them of the
decision and of the their right to appeal against it
- If they exercise the right to appeal the employer should hold an appeal meeting with the
employee and advise them of the outcome of that meeting in writing. The employer should ensure that when they write
to the employee in respect of any meetings relating to the potential dismissal they advise
them of their right to be accompanied by either a work colleague or trade union representative.
Save for a very few exceptions all employers are obliged to pay statutory redundancy pay to workers who
have a least 2 years’ continuous service. Some employers pay enhanced redundancy terms but, for those
who do not, the amount that should be paid to redundant workers are set down in the Statutory Redundancy Payment Scheme,
which provides for:
- 0.5 weeks’ pay for each complete year of employment where during the year the worker is less than age 22;
- weeks’ pay for each complete year of employment where during the year the worker is more than age 22, but less than 41;
- 1.5 weeks' pay for each complete year of employment where during the year the worker is more than age 41.
In calculating statutory redundancy pay, a "week's pay" is capped. As at February 2008, the rate was £330.
The Department for Business, Enterprise and Regulatory Reform ("BERR") has a useful ready reckoner which can be used to
calculate the amount of statutory redundancy pay due to an individual:
Redundancy - We can help you
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will call you back or you can call us directly on freephone: 0808 129 3320.