Redundancy Advice for Employers

What is Redundancy?

If you are considering having to make an employee redundant you firstly need to ensure that there is a redundancy situation which is either:
• Closure of the business in which the employee is employed;
• Closure of the workplace at which the employee is employed; or
• The company has a reduced requirement for employees to carry out work of a particular kind.

Minimising unfair dismissal claims

Although redundancy is a potentially fair reason for dismissal, an employer will need to show that they have acted reasonably in dismissing the employee.
Currently, an employee who has at least one year’s continuous employment is entitled not to be unfairly dismissed. In a genuine redundancy situation, in order to reduce the risk of an unfair dismissal claim an employer will need to ensure that they have:
• Consulted with individuals;
• Where a number of employees carry out the same or a similar role, identified the correct pool for selection and applied objective selection criteria to those in the pool; and
• Offered suitable alternative employment, subject to a trial period, where appropriate.
For step-by-step guidance please contact us so that we can ensure you follow a fair procedure.

Redundancy Payments

Employees who are dismissed by reason of redundancy are entitled to a statutory redundancy payment if they have at least two years’ continuous employment. If the company does not make the payment, for example, because it is insolvent, the employee may apply to the Secretary of State for payment out of the National Insurance Fund.
Statutory redundancy pay is calculated according to a formula based on age, length of service and pay. The maximum number of years that may be taken into account to calculate a redundancy payment is 20 years. A week’s pay is capped at the statutory maximum, which is increased in February each year and is currently £400.
In addition to a statutory redundancy payment, an employee may also be entitled to an enhanced redundancy payment. This may be expressly provided for in the employee’s contract or implied by custom and practice if the company has a practice of providing enhanced redundancy terms to its’ employees.

Alternatives: pay cuts, lay-off and short-time working

At the outset of a fair redundancy procedure, an employer will need to consider whether it can avoid making compulsory redundancies. This is likely to involve restricting recruitment, reduction or removal of overtime opportunities and not renewing the contracts of contractors and workers supplied by agencies. If these initial steps are not appropriate or insufficient, an employer may be able to reduce employees’ pay (with their freely given consent) lay off employees or put them on short-time working.
An employer should also consider requesting volunteers for redundancy or inviting employees to consider early retirement.
Before taking any of these measures please ensure that you contact us and obtain specialist Employment Law advice.

Making 20 or more employees redundant?

If you may need to make 20 or more employees redundant over a period of 90 days or less, an employer has a duty to:
• Inform and consult appropriate employee representatives.
• Notify the Secretary of State
A tribunal may award up to 90 days’ pay in respect of each employee where there has been a failure to inform and consult.
Whenever there is an obligation to consult collectively, the employer will also need to ensure that it has followed a fair procedure in relation to individuals, including consulting with them properly, so as to minimise claims for unfair dismissal.