A Detailed Guide to Redundancy

A Detailed Guide to Redundancy

When could a redundancy situation arise?

A redundancy situation can arise where, for example:

  • Your workplace is closing or moving, or your employer is ceasing trading altogether.
  • Your employer has a reduced need for employees to carry out a particular kind of work.

Detailed-Guide-to-Redundancy

Selection for redundancy – selection criteria and selection pools

  • Your employer should begin the selection process by identifying the group of employees at risk of redundancy, known as the “redundancy selection pool”.
  • Usually an employer will keep the selection pool narrow, but the employees in the pool may want to argue it should have been wider.
  • The selection criteria, and the weighting given to each particular criteria, should be considered to determine whether they are objective and suitable in the circumstances.
  • Consideration should also be given as to whether the criteria have been applied correctly, and by an appropriate person, or persons, using accurate and appropriate information or documentation.
  • Your employer will then need to apply suitable selection criteria to decide which of the employees in the pool will be retained and which will be provisionally selected for redundancy. The selection criteria should be objective, rather than subjective, otherwise any redundancies that follow are likely to be unfair. Objective selection criteria may include:
  •  Performance.
  • Skills, qualifications and training.
  • Attendance record.
  • Timekeeping.
  • Disciplinary record.
  • Redundancy selection criteria that discriminate on the grounds of sex, race, age, disability, sexual orientation, gender reassignment, marriage or civil partnership, pregnancy or maternity or religion or belief, or on the grounds of fixed-term or part-time status should not be used. If you consider that you have suffered any discrimination on any of these grounds in the redundancy process you should contact us for further advice.
  • Your employer may attach different weighting to each criteria, reflecting their relative importance. However, your employer will need to be able to justify such weighting as fair in the circumstances. The selection criteria must be applied in a fair way, by an appropriate manager, or managers, with reference to accurate and up-to-date information and documentation.

Consultation

  • The extent of the consultation undertaken, and the appropriate length of the consultation period will depend on the circumstances, the size and resources of the employer, the reason for the redundancies and the number of redundancies involved.
  • If you have been provisionally selected for redundancy, your employer should consult properly with you before reaching a final decision on whether it needs to make you redundant. This will usually mean your employer will hold meetings with you to discuss the situation in more detail. You should use the meetings as an opportunity to:
  • Discuss the basis for your selection, terms of the selection pool, selection criteria and the way in which you were scored.
  • Provide your employer with any other information that may influence its final decision.
  • Put forward any suggestions to your employer of ways to avoid your redundancy.
  • Consider any alternative employment positions that may exist.
  • Address any other matters or concerns that you have.
  • At the end of the consultation period, your employer will confirm whether you are being made redundant, or whether an alternative to redundancy has been found. In some cases, the consultation period will be extended for a further period of time in order to explore any potential alternatives to redundancy. If you are dismissed for redundancy, you will usually have the right to appeal that decision.
  • If your employer fails to adequately consult with you, or fails to offer you the right to appeal the decision to dismiss you for redundancy, you may have a claim for unfair dismissal, depending on the circumstances.

the appropriate length of the consultation

Collective consultation

  • If your employer is considering making 20 or more employees redundant within a 90-day period, it will also have a duty to undertake “collective consultation” with representatives of affected employees, rather than just meeting with you and each other affected employee on an individual basis. The representatives will be either elected employee representatives or trade union representatives. If the collective consultation requirements apply, your employer will also need to begin the consultation process at least 30 days before any dismissals take effect (or 45 days if the employer is contemplating dismissing 100 or more employees) and notify the Secretary of State that it is contemplating making large-scale redundancies.
  • If your employer does not comply with the collective redundancy requirements, the employee representatives can apply to the employment tribunal who can order your employer to pay compensation of up to 90 days’ pay to each employee affected.

Alternative employment

  • Disputes sometimes arise as to the suitability of an alternative role offered to an employee. The purpose of the trial period is for both the employer and employee to assess the suitability of the alternative role. An employee should be careful before rejecting an alternative position. If they do so unreasonably, they will lose their right to a statutory redundancy payment and could also limit the amount of any compensatory award for unfair dismissal.
  • During the consultation period and at any time before your dismissal takes effect, your employer is obliged to consider you for any suitable alternative vacancies that become available in the business or in any associated companies. Any employee on maternity leave or shared parental leave has the right to be offered any suitable alternative employment first. Otherwise, if an employer has more than one other potentially redundant employee interested in an alternative role, it can undertake a competitive interview process to decide who to offer the role to.
  • You can accept an alternative role on a four-week trial basis to decide whether it is suitable for you. If you decide during or at the end of the trial period that the role is not actually suitable, you can accept redundancy and will not lose your right to a statutory redundancy payment. However, if you unreasonably reject an offer of suitable alternative employment, you will lose your right to a statutory redundancy payment. If the trial period is successful and you and your employer agree that the new role is suitable, you will no longer be entitled to any redundancy payment as your employment will not be ending.
  • If you have at least two years’ service with your employer, you will also have the right to take a reasonable amount of paid time off work to look for alternative employment, or to arrange training to assist you in finding alternative employment.

Your financial entitlement if you are made redundant

  • It is good practice to double-check the employer’s calculations as errors can be made, particularly in large-scale redundancy situations.
  • If you are made redundant, you may be entitled to certain payments, depending on how long you have been employed and the terms of your employment contract:

  • Statutory redundancy pay. If you have worked for your employer for two years or more, you will usually be entitled to a statutory redundancy payment (SRP). The amount of your SRP will be calculated using a set formula that takes into account your age, length of service and weekly pay, subject to an upper limit.
  • Enhanced redundancy pay. You may be entitled to an additional redundancy payment (or a redundancy payment even if you have not been employed long enough to qualify for an SRP) if your employer has:
  • entered into a collective agreement with a trade union setting out enhanced redundancy terms, which has been incorporated into your employment contract;
  • a redundancy policy that sets out your contractual entitlement;
  • an established custom and practice of making enhanced redundancy payments which it has consistently followed, or there is an established custom and practice in the industry in which your employer operates; or
  • offered you an enhanced redundancy payment conditional on you entering into a settlement agreement with it.
  • Notice pay. The amount of notice you will be entitled to will depend on the terms of your employment contract, and is subject to a statutory minimum which depends on your length of service – broadly one week per year of service up to 12 years. Your employer may not require you to work all or part of your notice period and may make you a payment in lieu of notice. Alternatively, it may allow you to stay at home during your notice period (known as “garden leave”) and will pay you on your usual pay dates.
  • Pay in lieu of accrued but untaken holiday. If you have accrued but untaken holiday entitlement as at your last day of employment, you will be entitled to a payment in lieu of that holiday. Alternatively, if you have taken more holiday than you have accrued as at your last day of employment, your employer may be entitled to make a deduction from your final salary payment. In some cases, your contract may provide that you must take any unused accrued holiday during your notice period.

If you are made redundant, your employer should write to you setting out the payments you are entitled to. If you believe your employer has incorrectly calculated any payment due to you, you should let them know as soon as possible.

Unfair dismissal

For a dismissal to be fair, the employer must have:

  • A potentially fair reason for dismissing the employee.
  • Acted reasonably in treating that reason as sufficient to justify dismissing the employee.

If there is a genuine redundancy situation and your employer follows a fair procedure in selecting you for redundancy, it may be able to fairly dismiss you for that reason, despite the adverse implications for you. However, if you believe that this is not a genuine redundancy situation, or your employer has not followed a fair procedure in selecting you for redundancy, or that the decision to select you for redundancy was one which no reasonable employer should have made, then you may have a claim for unfair dismissal.

Unfair dismissal claims can generally only be brought by employees who have worked for at least two years.

There are also circumstances in which a redundancy dismissal will be classed as automatically unfair, regardless of how long you have been employed (for example, if your employer selects you for redundancy because you have made a flexible working request, or because you are pregnant or are a trade union member).

Unfair dismissal claim

Before bringing a claim for unfair dismissal in the employment tribunal, you would have to contact ACAS (the Advisory Conciliation and Arbitration Service) under rules for mandatory early conciliation. ACAS is an impartial organisation that will try to resolve any dispute with your employer without the need to bring proceedings in the tribunal. Unfair dismissal claims must usually be brought within three months less 1 day of the date your employment ends. However, extra time is allowed if you contact ACAS to request conciliation.

If your employer does make you redundant and you think it’s unfair, we might be able to help you.

Credit to I Polyakova Senior Employment Law Solicitor
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