Advice hub. Understanding redundancy.
Redundancy can take place when an employer needs to reduce its workforce, resulting in the dismissal of one or more members of staff. There needs to be a valid and lawful reason for redundancies to take place, such a downturn in business levels or the closure (or partial closure) of the company, sale of the company or the relocation of the company.
Whatever the reason for the redundancy, the employer must ensure that it follows a fair and lawful process. Employees, for instance, cannot be selected for redundancy on the basis of their sex, sexual orientation, race, disability, religion, pregnancy or for being a member of a trade union. Failure to observe the necessary requirements could lead to a claim for unfair dismissal.
Anyone who is at risk of redundancy is entitled to statutory redundancy pay if they have worked for their employer for two years or more. This amounts to half a week’s pay for each full year worked under the age of 22, one week’s pay for each full year worked between the ages of 22 and 40, and one and a half week’s pay for each full year worked at the age of 41 or older. Length of service is capped at 21 years. From 6 April 2022, the maximum statutory pay for a week is £571, with the maximum total statutory redundancy pay standing at £17,130. To calculate statutory redundancy payments, visit: www.gov.uk/calculate-your-redundancy-pay. Bear in mind that some contracts of employment will entitle staff to more enhanced redundancy payments.
A fair and lawful redundancy process should ensure:
The creation of a redundancy plan which should include the reasons for the redundancies, the number of job losses being considered, the consultation process and details of the appeals process.
Clear communication with staff to outline the process that is being followed, allowing staff the opportunity to ask questions. Anyone at risk of redundancy should be informed in writing.
The identification of a selection pool when a company intends to reduce a certain number of employees who all undertake a similar role. More than one pool may be needed if a number of different roles are under threat. For instance, a pool to consider the number of hotel chef losses should be created if restaurant bookings are down, which would not include housekeeping staff if room reservations remain strong.
A reasonable and objective method of selecting staff for redundancy. This could be by asking for voluntary redundancies, selecting the employees with the shortest length of service, or considering disciplinary records, attendance, timekeeping, measurable performance levels and experience. The method or methods chosen should be measurable and objective.
One-to-one consultation meetings with every member of staff under threat of redundancy to discuss the reasons for the job loss. Employees should be allowed to be accompanied by a companion at the meeting for support. If 20 or more members of staff are to be made redundant, collective consultations should take place and involve a trade union or employee representative. There is no time limit for the length of the period of consultation, but the minimum is 30 days before the date of dismissal for 20 to 99 redundancies and 45 days for 100 or more redundancies.
The opportunity for the employee to appeal against the redundancy decision within a reasonable timescale. The employee should outline in writing the reasons for the appeal before the holding of an appeal meeting, which ideally should be attended by an independent consultant to ensure a fair outcome is reached.
Where possible, the offer of a suitable alternative position within the company should be made to the employee who has been selected for redundancy. The role must be different from the one the employee is currently doing and the employee will be allowed a four-week trial period in the new job to determine its suitability. If the employee has a valid reason to turn down the job, such as the job being on lower pay or it is in a different and inconvenient location, then they will be entitled to redundancy pay.
Employees on maternity leave be involved in the redundancy process in the same way as employees in the workplace. If a suitable alternative role is available, the employee on maternity should be offered that role in preference to a colleague.
Support is given throughout the redundancy process via counselling, the provision of financial advice, and allowing time off during the notice period to look for another job or undergo training. Help in finding new jobs following redundancy is available via the Jobcentre Plus Rapid Response Service in England, Partnership Action for Continuing Employment (Scotland) and Working Wales.