Redundancy

When selecting employees for redundancy, the employer must take into account the following points to make sure the selection process is fair.

The employee can only be made redundant if:

• The employer has ceased to carry on the business, for which the employee was employed for;
• The employer closes the place of work in which the employee was employed;
• The employer has ceased to carry out the work the employee was employed to do;
• There is a diminishing need for employees to carry out work of a particular kind at the place they were employed for some other Economic, Technical or Organisational (ETO) reason.

An employer must show proof that one of the above has arisen. It is important to remember that in a redundancy situation it is the job that is being made 'redundant' not the employee.

Redundancy will only be considered fair if:

• The selection for redundancy is non-discriminatory and follows set criteria such as being based on skills, length of service, and job performance;
• The employer has carried out the redundancy in accordance with the Company's procedures.

Employers should make as much effort as possible to find suitable alternative employment for an employee facing redundancy.

The main statutory rights that an employee has on redundancy are:

•  the right to statutory redundancy pay (subject to having been employed for two years);
•  the right to bring a claim for unfair dismissal (subject to having been employed for two years);
•  the right to bring a discrimination claim. 

The employee's rights

• The employee has the right to reasonable paid time off to enable him or her to find alternative employment or to undertake training that may assist him or her in finding alternative employment;
• Employers must provide the employee with statutory redundancy calculations. Failure to provide these calculations is unlawful.

Consultation

If more than 20 people are being made redundant, the employer must consult with a trade union (if they recognise a trade union) or employees' representatives. The employer will have to inform the representatives of the number of employees being made redundant, the proposed method for selection of redundancy, timescales, and method of calculating redundancy pay etc.

The employer does not have to agree with or adopt any suggestions the representative may make. However they must still implement redundancies both fairly and in accordance with the correct procedures. It is also advisable to consult with the individuals that are going to be affected by the redundancies. If an employee is made redundant without such consultation, he or she may potentially make a claim for unfair dismissal even if the Trade Union or Employees' Representative(s) have been consulted. 

Employers have a statutory duty to provide representatives with the following information in writing concerning proposals for redundancies so that they can play a constructive part in the consultation process:

• the reasons for the proposed redundancies;
• the numbers and descriptions of employees it is intending to dismiss as redundant;
• the total number of employees of any such description employed at the establishment in question;
• the way in which employees will be selected for redundancy;
• how the dismissals are to be carried out, taking account of any agreed procedure, including the period over which the dismissals are to take effect;
• the method of calculating the amount of redundancy payments (other than statutory redundancy pay) to be made to those who are dismissed.

Guidelines for consultations are:

• The consultation must take place when the proposals for redundancy are being determined;
• The employer must provide adequate information to which the employee can respond;
• The employer must ensure that the employee has a reasonable time to respond;
• The employer must acknowledge the response put forward by the employee.

Consultation should begin:

• at least 30 days before the first dismissal takes effect if 20 to 99 employees are to be made redundant at one establishment over a period of 90 days or less; and
• at least 90 days before the first dismissal takes effect if 100 or more employees are to be made redundant at one establishment over a period of 90 days or less.

Redundancy pay

The employee's statutory entitlements are calculated with reference to:

• Length of service;
• Weekly pay;
• Age.

Current entitlements to statutory redundancy pay apply to employees with a minimum of two years' service (time served before the age of 18 is not included). Current rates of statutory redundancy pay are:

• Half a weeks pay for every completed year of service to the age of 22;
• One weeks pay for every completed year of service to the age of 41;
• One and a half weeks pay for every completed year of service to the age of 41 and over.

For the purposes of redundancy a week's pay is currently capped at £643.00.  The maximum statutory redundancy payment is currently £21,000.00.

In the event that the employee declines an offer to be kept on or declines a suitable alternative position that is offered he or she will lose the entitlement to redundancy pay.

N.B.

An employee who feels they were unfairly dismissed, or believes that there was an unfair selection process for the redundancies, may be entitled to an award equal to the redundancy payment plus compensation for unfair dismissal. In certain cases additional awards may be made against the employer.

If a redundancy is found to have resulted from discrimination because of the employee's sex or sexual orientation, race or religious belief, or disability the awards an employee can receive are without limit.