5 Things to Know When You're at Risk of Redundancy

Author:
Aneil Balgobin
Partner, Head of Employment Law
Date:
31/05/2019

Redundancy is a potentially fair reason for dismissal, so if you’re thinking of making a claim relating to a redundancy situation, we provide some essential points to note below.

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A redundancy situation arises when an employer proposes reducing the number of employees undertaking work of a particular kind, or at a particular workplace. Identifying a potential redundancy situation doesn’t mean that redundancies are inevitable and an employer can offer suitable alternative employment. There are technical rules in this area, including about when an employee might reject what appears to be a suitable alternative work offer, including in relation to working a 4-week trial period.

Rights associated with a redundancy situation benefit those who work in a business as an employee, so it wouldn’t include agency workers or the self-employed, for example. The right to receive a redundancy payment and to claim unfair dismissal or unfair selection redundancy only arises when an employee has at least 2 years of service.

A redundancy situation should involve consultation with employees as individuals, and there are formal consultation obligations associated with group redundancy dismissals. If an employer proposes to make at least 20 people redundant, consultation should take place for at least 30 days, and if 100 or more redundancies are proposed, the consultation should be for at least 45 days. Consultation should take place with recognised trade unions or representatives of the workforce, and a failure to do so can lead to a claim.

Redundancy selection should involve a fair procedure involving consultation and consideration of alternatives to dismissal. The starting point is to decide the work areas and number of redundancies involved. The employer should consider the individuals to be allocated to a selection pool and how selection will be conducted.

Managers with knowledge of those involved should avoid wholly subjective criteria and be as objective as possible. The employer should look to agree criteria with recognised trade unions, and employees should receive an explanation of selection and be allowed a proper appeal to challenge the decision. Alternative roles available within the business should be considered as an alternative to dismissal.

Individual claims for redundancy payments, unfair dismissal and relating to consultation rights can be pursued before an Employment Tribunal, and can lead to awards of substantial compensation. A redundancy payment is calculated by reference to age, length of service and pay.

Some employers pay higher levels of redundancy pay and enhanced payments can be a contractual entitlement in some work situations. Unfair dismissal claims can lead to awards for loss of earnings, and a failure to consult correctly can lead to payment of a protective award which can involve payments of up to 90 days of pay for each person involved. All Employment Tribunal claims involve strict time limits and claimants should always take prompt action to protect individual rights. 

Conclusion

Redundancy dismissals are a common situation at many workplaces. Employment law provides technical rules to determine the correct procedure to adopt and to assess the rights of those involved. Full consultation is a key element of the process, and when things aren’t dealt with correctly, employees and employers can usually progress their competing legal rights before an Employment Tribunal.

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