What is a redundancy?
A redundancy is a situation where an employer decides to reduce the number of employees. This can be done in a number of ways i.e. reducing the number of employees in a particular function, job role, work site or the business as a whole.
Employers can decide to make redundancies for the following reasons:
- Relocation of business
- Internal reorganisation
- Closure of the business
Reduction in need for employees’ work i.e. a downturn in sales in that function of the business or business as a whole.
What procedure do we need to follow when making redundancies?
You have to follow a proper redundancy procedure in order to avoid the risk of an unfair dismissal tribunal claim. The best way to reduce this risk is to have a redundancy procedure in place and follow each step.
A redundancy procedure should include:
- Identifying a reasonable ‘pool for selection’, i.e. the group of employees from whom the employees selected for redundancy will be chosen
- Adopting objective selection criteria and applying them fairly to the employees within this pool
- Warning and consulting employees about the potential redundancy situation
- Seeking a view from the union (if any)
- Informing and consulting employee representatives in cases of collective redundancy
- Considering alternative employment for employees whose roles are redundant
- Giving employees reasonable paid time off to look for work or make arrangements for training for future employment
Please note that if you are making individual employees redundant you must follow fair and reasonable procedures. You can contact us for more guidance on redundancy and specific advice on fair and reasonable procedures in redundancy.
How much notice do you have to give when making redundancies?
- If you are proposing to dismiss under 20 employees, it is best practice to follow a fair procedure. I.e. issue a warning letter, hold individual consultation meetings with each affected employees and offer the right to appeal.
- If you are proposing to dismiss between 20 and 99 employees for redundancy at one establishment within 90 days or less, consultation must begin at least 30 days before the first dismissal takes place.
- If you are proposing to dismiss 100 or more employees for redundancy from one establishment within 90 days or less, consultation must begin at least 45 days (previously 90 days) before the first dismissal takes place.
- If you are making collective redundancies, you have a statutory duty to inform and consult employee representatives about your proposals.
What is bumping?
Bumping is the process of moving a potentially redundant employee into another role and dismissing the employee currently performing that role. It is best to seek advice when considering bumping employees.
Can an employee who does not have the two years continuous service bring an employment tribunal claim against my business if they are dismissed for redundancy?
- Yes, employees can still be able to bring employment tribunal claims if you do not give the right notice (called wrongful dismissal) or they believe they were dismissed because of their protected characteristic as they can make a discrimination claim. E.g. if you dismiss an older worker for redundancy.
- Protected characteristics include factors such as age, sex, race, pregnancy, disability, sexual orientation (please see our discrimination page for more information). If you are unsure, then contact us and we will talk you through your options and the risks.
How much do we have to pay in redundancy pay?
The amount of the statutory redundancy payment depends on the employee’s age, length of service and pay. It is calculated using the following:
- One and a half week’s gross pay for each full year of service in which the employee was aged 41 years or more
- One week’s gross pay for each full year in which the employee was between the ages of 40 and 22
- Half a week’s gross pay for each full year in which the employee was aged up to and including 21
- An employee must have two years’ continuous employment at the relevant date in order to qualify for a redundancy payment. The maximum length of service that may be taken into account is 20 years.
- The week’s pay is subject to a statutory maximum (£464 per week from 6 April 2015). Rates increase every April.
You would also need to refer to the employee’s contract of employment to see if they are due any enhanced contractual redundancy pay.
Is there a way to prevent an employee making a claim for unfair dismissal against me if I make them redundant?
Yes you can offer the employee a settlement agreement (formerly known as a compromise agreement). A settlement agreement ensures that the employee cannot bring any employment tribunal claims against you. We can help you with this, please refer to our settlement agreement page for further information or contact us.
If we are planning on taking over another business can we make some of their staff redundant?
This would depend on the circumstances of the takeover as it is possible the Transfer of Undertakings (Protection of Employment) Regulations (TUPE regulations) may apply which would make it difficult to dismiss employees for redundancy. It is best to seek legal advice as this is a technical area of law. If you need advice on whether TUPE applies then contact us, or for further information, see our TUPE page.
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