What is a redundancy?

There is a redundancy situation if the business as a whole, or the particular workplace where the employee works, needs to close down, or if there has been a reduction in the size of the workforce needed to do work of a particular kind.

Who can claim redundancy pay?

Any employee can claim redundancy pay if they have been employed for at least two years and are being made redundant. Redundancy pay is calculated in the following way with up to a maximum of 20 years eligible service:

• up to age 21 - half a week’s pay per year of service
• age 22 to 40 - one week’s pay per year of service
• age 41 and over - one and a half weeks’ pay per year of service

There is also a limit to the statutory basic weekly pay (currently £330), although employers may offer a more generous package under the terms of the contract.

Offering suitable alternative employment.

Employers have to take reasonable steps to find alternative employment that would be suitable for that employee. Otherwise the dismissal may be unfair. They do not, however, have to create a new job for them.

Any other vacancies in the company should be offered to the employees under threat of redundancy before being advertised to the general public.  If the employer owns a group of companies, then they should also look in those associated companies for alternative work. The job should be of similar status and pay, but even if is not, employers should still offer it.

Employees can have a 4-week trial at an alternative job without loosing the right to redundancy pay.  If they accept the job, then they are no longer at risk of being made redundant. 

Identify the selection pool.

Employers need to begin the process by defining the appropriate pool from which to select the redundant workers. If there is an agreement with the trade union which specifies the pool, they should follow that.

Setting selection criteria.

The selection criteria must be objective and non-discriminatory. The following can be used:

Skills and knowledge. These have to be assessed objectively, so ambiguous terms such as "attitude to work" should be avoided. In most situations, this will be the most critical criteria.  Employers will want to retain the employees with the best skills and knowledge.

Attendance records. These should not be the sole criterion for redundancy, as one long (but legitimate) period of absence may distort an employee’s otherwise unblemished record. Employers also have to discount disability-related sickness absence when assessing attendance as a reasonable adjustment, and employers cannot include breaks for maternity, paternity or adoption leave.  It is recommended that the Bradford Factor is used to measure absence. 

Consultation. 

Employers have to consult with trade unions and individual employees. Tribunals will decide whether it was adequate or not on the basis of the facts before them.  The length of consultation period depends on the number of employees at risk of being made redundant.  There is no legal requirement for collective consultation for under 20 redundancies, however, it is best practice to consult for 30 days. 

Employers with over 50 employees now also have to take into account the Information and Consultation Regulations 2004.

Can employees see the results of their assessment?

Yes, they are entitled to see their own assessments, prior to a final decision being made. However, they will not be allowed to see the assessments of others.  If the employee does not agree with the assessment and subsequent redundancy, they do have the right to appeal.

Did the employer act reasonably?

Even though redundancy is a potentially fair reason for dismissal, an employee may still be able to bring a claim for unfair dismissal if the employer acts unreasonably, say, in terms of the selection criteria that they adopt. The courts have said that:

• employers must give as much warning as possible of impending redundancies;
• employers should agree with the union (if there is one) the criteria to be used in selecting employees;
• employers should agree criteria that can be objectively checked against evidence such as attendance records, annual reviews etc;
• employers should ensure that the selection is made fairly in accordance with the criteria;
• employers need to consider if they could offer alternative employment;
• employers must ensure the proper consultations are followed and the right of appeal is given.

If you require assistance with possible redundancies in your company, please click here to contact us.  Our consultants have experience in this area and will guide you through the whole process to make it as fair and simple as possible.