Redundancy is well-established as a statutory fair reason to dismiss employees when a business is going through a difficult patch, but in order to avoid an unfair dismissal claim there are still a number of steps that should be taken before a decision to make redundancies is made. We would always recommend seeking legal advice for your specific situation, but we have set out a summary below to highlight some of the key considerations and questions to ask whether you find yourself having to take difficult decisions for your business or facing redundancy yourself:
Firstly, redundancy is a statutory reason and therefore has a specific definition attached to it. In the first instance, the employer will need to consider whether one of the three sets of circumstances, which can constitute a redundancy situation, applies. For example:
If the employer cannot answer yes to one of these questions, then there may not be genuine redundancy situation and they may need to reconsider their next steps.
Where a redundancy situation is identified, the employer will then need to consider carefully the number of employees affected and identify whether they should be included in different selection pools. The steps here will be different depending on the number of redundancies predicted and specific collective consultation rules apply where more than 20 redundancies are proposed.
As soon as there a risk of redundancies is identified, the employer should communicate this to the affected employees.
Employees must be selected for redundancy in a fair way. Selection criteria may be used to identify the employees provisionally selected and this must be based on objective and fair criteria, such as the standard of work, skills, qualification, experience, attendance and disciplinary records. It will be important to keep good records to justify decisions made.
Employers need to be aware of potential discrimination issues when selecting employees. For example, employees can not be selected for redundancy because of a particular “protected characteristic”, such as their age or sex or because they work part-time. The Equality Act 2010 provides protection in relation to protected characteristics and further details are available here.
Where 20 or more employees are being made redundant over a period of 90 days or less, special rules apply and the Secretary of State must be notified.
Be aware that an employment tribunal can award up to 90 days’ pay in respect of each employee where there has been a breach of the collective consultation duties.
Where fewer redundancies are proposed, the employer should consult with the individuals affected through a series of consultation meetings. It is important to use this process to put forward any ideas or suggestions of ways to avoid redundancies, such as reduced hours or pay cuts.
If no alternative to the redundancy can be found during the consultation, the employer will need to communicate this decision through a final meeting. It is also good practice to offer the employee the right to appeal.
The redundant employees would be entitled to the following:
Notice must be given of the leaving date, which is subject to statutory minimum requirements based on length of service:
The employer can also offer an immediate date with payment in lieu of notice or garden leave. If the employment contract gives a greater entitlement to notice, then this should be applied or the employee would have a breach of contract claim.
Where an employee has worked for an employer for at least two continuous years, they will be entitled to statutory redundancy pay calculated at the following rate:
A week’s pay is subject to a cap which is currently set at £538.
You can use the statutory redundancy pay calculator available on the gov.uk website here.
Employers would also need to consider whether any contractual redundancy entitlements apply, although this is increasingly rare.
The Government has announced that from 31 July 2020 employees on furlough will be entitled to receive redundancy payments at a rate of 100% of their normal pay, rather than at their reduced furlough rate. You can find the new legislation here.
Employees are also entitled to be paid in lieu of any accrued but untaken holiday outstanding as at the date their employment ends.
Employers can also encourage voluntary redundancies by offering Settlement Agreements, in which enhanced redundancy pay can be offered.
Pregnant employees and those on maternity leave can be made redundant but extra care must be taken. When consulting with staff regarding redundancy, employers will still need to include those on maternity leave as part of the process even if they are not physically at work or offer to delay their consultation until their return to work if possible. Employees on maternity leave are entitled to be offered a suitable alternative vacancy (where one is available) ahead of others also at risk of redundancy. This gives women on maternity leave first refusal on any vacant roles that may be suitable.
An employer should consider all other options before making an employee redundant. This could include reducing their work hours, cutting overtime or offering sabbaticals. You could also offer retraining or reallocating employees.
Sometimes there will be specific clauses in employment contracts entitling employers to reduce hours or lay off employees or it may be possible to agree with the employees to be laid off or work much shorter hours for a short period. However, once the employees have been laid off or kept on short-time working for at least four or more consecutive weeks; or a total of six weeks in any period of 13 weeks they are generally able to claim a statutory redundancy payment.
In addition, if the period goes beyond a reasonable length, the employee could also resign and bring a constructive unfair dismissal claim on the basis that this is a breach of their contract.
If the employer is looking to fill a role that may be suitable for an employee being made redundant, it should be offered to the employee as an alternative to redundancy. This offer needs to be in writing, made before their contract is terminated, different to the job they are currently operating, and start within four weeks of the previous job ending.
When considering making redundancies and going through the selection process it is essential to get advice from a redundancy solicitor. This will ensure that you treat all employees fairly and help to avoid any discrimination or unfair dismissal claims. Our solicitors are here to support you and ensure you follow the correct procedures.