Redundancy Rights & Advice

Redundancy is defined by law as a situation where a business needs less people or is closing a workplace or is closing totally.

It often happens where an employer has streamlined processes due to developments in technology and / or way of doing things. It can often happen where costs savings are necessary, but financial savings don’t have to be the driving force – they just often are.

Where an employer is proposing to change how things are done, but still needs the same number of people to do the work, this isn’t a redundancy, this is what is known as a restructure.

This can be made up of many criteria, but it is advisable to ensure that any criteria adopted can be justified objectively. Common examples include:

• Performance and ability
• Length of service (often referred to as Last In First Out (LIFO))
• Attendance records (ignore disability related absences)
• Disciplinary records

Despite some views that LIFO is unfair and shouldn’t be allowed, it is still permissible to use this as part of the overall criteria, but it wouldn’t be fair to use this as the only or main criteria.

You can also use weighting for the criteria if particular criteria is more important, but you need to be able to justify its use.

Part of a fair redundancy process is actually considering ways of avoiding dismissals altogether. It is likely that a dismissal will be unfair if an employer gives no consideration to whether there is a suitable alternative role within its organisation. This may even involve looking at whether there are any suitable vacancies in other group companies. It does not however mean that an employer has to create a vacancy where none already exists.

Essentially a fair process is one where:

• the employer warns and consults employees or their representatives about the proposed redundancy
• adopts a fair basis on which to select for redundancy – this involves identifying an appropriate pool from which to select potentially redundant employees and using proper, fair and object, selection criteria
• considers suitable alternative employment -  this means that an employer must search for and, if available, offer suitable alternative employment

This very much depends on the circumstances. If there are less than 20 redundancies proposed within a 90 day period, then consultation probably won’t last more than a week or 2. However, if there are 20 or more, then there is a minimum consultation period of 30 days. This rises to 45 days where there are 100 or more within 90 days. Where there are more than 20 people affected, then there is also an obligation to consult with employee representatives. If these don’t already exist and have a remit for such consultation, then consultation will be further delayed until the employee representatives are appointed – as consultation can’t start without them.

By law, and provided you have 2 years’ service, you are entitled to a statutory redundancy payment. This is calculated as follows:

• half a week’s pay for each full year you were under 22
• one week’s pay for each full year you were 22 or older, but under 41
• one and half week’s pay for each full year you were 41 or older

Length of service is capped at 20 years and the amount of a week’s pay is capped. The cap changes each year in April, so you will need to check this.

Statutory redundancy payments can be paid free of tax and NI deductions.

If you don’t think that the process was dealt with fairly, you should consider appealing the decision. If this still doesn’t resolve matters, then take some advice about whether you may have a claim for unfair dismissal.

It’s worth noting that you only have 3 months less 1 day from the date your employment came to an end to issue a claim for unfair dismissal in an employment tribunal. You have to contact ACAS before you can issue your claim, and this time limit can be extended to take account of the time you spend dealing with ACAS, but it is really important not to miss this deadline – if you do, you may not be able to bring your claim at all.

They aren’t the same thing. However, settlement agreements are often used in redundancy situations – either as an alternative to going through a full redundancy consultation process, or after conclusion of the redundancy process, perhaps where the employer feels that they might be at risk of a claim.

Settlement agreements are basically contracts that enable an employee to give up their rights to pursue legal claims that they may have against their employer. If an employer wants to offer an enhanced severance to an employee at the outset of a redundancy consultation process, as an alternative to going through that process, then getting the employee to sign a settlement agreement means that the employer won’t have to worry about the employee coming back and trying to claim unfair dismissal because the employer didn’t go through the full redundancy process.

If your employer goes into administration and no one steps in to buy the business from the administrator, you will normally be made redundant. Your employer would usually be insolvent at that point, meaning that there may not be any funds available to make redundancy payments. In this situation you can claim payments from the National Insurance Fund within 6 months of your dismissal. The National Insurance Fund is operated and managed by the Redundancy Payments Service, to whom employees make their application for repayment.

These are the types of payments that can be claimed, with the payment cap currently standing at £571 per week (£544 if you were made redundant before 6th April 22).

• Up to eight weeks’ wages
• Arrears of holiday pay for a period of up to six weeks
• Payment for any statutory notice period that was worked but not paid (up to 12 weeks maximum)
• Unpaid pension contributions
• The basic award for unfair dismissal

You can find out more about how to make a claim on the GOV.UK website.

If your employer has decided that your role is redundant and has served you with notice to terminate your employment, then you are entitled to a reasonable amount of paid time off to seek alternative employment, including attending interviews, or to arrange training for future employment. However, you must have 2 years’ service to be able to take advantage of this.

There is no definition of reasonable, but the amount of pay an employee can receive for taking this leave is 40% of a weeks’ pay – so essentially 2 days for a full time, 5 day per week, employee.