Expert advice from redundancy solicitors
Written by our specialist redundancy solicitors, this factsheet sets out what needs to happen in a redundancy situation and what your rights are. It covers all aspects of redundancy, including transferred redundancy (often called redundancy bumping).
If you are being made redundant, you are entitled to be satisfied that redundancy is the real reason for your dismissal. Redundancy is a potentially fair reason for dismissal, but your employer must both ensure the process is fair and use the correct procedures. Specialist redundancy solicitors can advise on the legitimacy of any redundancy situation or redundancy process.
Any employee dismissed by reason of redundancy continuously employed for two years or more is entitled to a statutory redundancy payment. The amount is based on weekly gross pay, age and length of service. It is subject to a cap of £450 a week and 20 years’ service. Some employers provide for an enhanced redundancy payment contractually or on a discretionary basis.
All employees are covered by statutory redundancy provisions. An employee is defined as an individual who has entered into or works under a contract of service. Although employees need at least two years’ continuous employment to claim a redundancy payment, they only require one year’s continuous service to bring a claim for unfair dismissal. However, where an employer selects an employee for redundancy for a discriminatory reason, an employee can bring a claim of discrimination without any qualifying period.
An employee is regarded as redundant where a dismissal is wholly or mainly attributable to:
When a business moves from the place where the employee was employed, the distance between the old and new premises and inconvenience to the employee are used to decide whether the move is sufficient to warrant a redundancy. The test is where the employee worked, not where they could be required to work under their contract of employment.
This is where an employer has ceased, or intends to cease, the business for the purpose for which the employee was employed. It also applies where the part of the business where the employee works is closed, but the rest of the business continues.
Work re-organisation or new labour-saving devices can lead to redundancies where fewer workers or different skills are needed. Where fewer employees are needed for existing work or there is less work for existing employees, an Employment Tribunal will consider the work an employee could be required to do under the contract of employment, not simply the work they actually did at the time of dismissal.
An employee would not be regarded as redundant where a dismissal is wholly or mainly attributable to
Bumping in redundancy is where an employee, whose own position is redundant, is transferred to another position, making the holder of that second position redundant. Redundancy bumping is legally permissible provided the correct procedure is followed in respect of the bumped employee.
By linking a dismissal to a diminution in the need for employees, a redundancy situation arises for the bumped employee, notwithstanding that it may not be a diminution in the work which the dismissed employee carried out or could have been required to carry out.
Employers must follow the correct redundancy procedure or risk an Employment Tribunal ruling that a genuine redundancy is unfair dismissal. Employers will often consult specialist redundancy solicitors to ensure they are following a fair process.
Employees should be given sufficient warning of an impending redundancy situation and the fact it may affect them. Employees who are currently absent, for whatever reason, including maternity and disability, must also be contacted.
In most cases employers should identify a pool of employees from which to select those who are potentially redundant. However, where only one employee is potentially affected, for example where only their role is not needed, there is no need for a selection pool.
The pool must relate to the reason for the proposed redundancy so the type of work employees do is important. For example, it would be inappropriate to include canteen or administrative staff if the employer needed to reduce shop floor numbers.
Employers are entitled to choose the make up of the pool. This can be challenged if an employee does not feel that the pool is wide enough or if their role was not relevant to the pool. Sometimes there will be more than one pool to reflect redundancies being made in different parts of the business or at different levels.
Once the pool has been agreed, the employer will determine how employees will be selected from that pool. A list of criteria should be drawn up to reflect the employer’s business priorities in order to retain the best employees.
Criteria must not be discriminatory and must stand up to objective assessment or measurement. Care is needed to avoid indirect discrimination. If criteria have a disproportionate adverse effect on an ethnic or gender group or a disabled person, this could be found to be an act of discrimination. For example, criteria based on working hours’ flexibility might adversely affect single parents and, as most lone parents are women, this may constitute indirect sex discrimination.
Criteria must also make sense from a business perspective. They should not be created to enable the employer to select people unfairly. For example, ‘willingness to embrace change’ can be a difficult criterion to justify objectively, but could be fair if the business is in transition.
Last in first out, or ‘LIFO’ has previously been a popular sole selection criterion. While this method is both simple, and on the face of it fair, it may not produce the desired result for the employer. By using this method, employers may lose the employees best able to drive the business forward in the future. It may also indirectly discriminate against younger employees. Length of service should therefore only be used as one of a number of potential criteria and should certainly not be given the greatest weight. (Criteria can be weighted according to priority).
A dismissal is automatically unfair where the employee is selected for an inadmissible reason, for example because they are pregnant. In cases where an employee has been selected for an automatically unfair reason, no qualifying period of continuous employment is needed to bring a claim.
In addition, selection criteria which penalise a pregnant or disabled employee – for example, counting sickness related to disability or pregnancy – can be discriminatory. If this results in that person being selected for redundancy, it is not only unfair dismissal due to an unfair selection process but could also be discrimination. Redundancy solicitors can advise.
Common point scoring selection systems include:
Employers need to ensure proper and meaningful consultation with employees selected for potential redundancy. This two-way dialogue should aim to find ways of avoiding dismissal if at all possible. Options might include job sharing, sabbaticals or a reduction in hours.
Employers must make genuine efforts to find out if suitable alternative employment exists within the employing entity and in any associated company. If available, this should be offered during the consultation process. Finding out what transferable skills an employee has and what jobs they would consider is part of the consultation process.
Only after the consultation process is complete – 30 days if more than 20 employees are being made redundant – should an employee be given notice.
The employer should inform the employee of their decision and notify them of their right to appeal. Failure to do this might make the dismissal unfair on procedural grounds.
Where an employer is proposing to dismiss as redundant 20 or more employees at one establishment within a period of 90 days or less, they must follow a collective information and consultation procedure in addition to the redundancy procedures above.
The law requires employers to consult about the dismissals with all ‘appropriate representatives’ of those who may be affected by the proposed dismissals. The consultation should cover and seek to reach agreement about ways to:
In addition, employers should disclose in writing to the representatives:
Where special circumstances render it not reasonably practicable for the employer to comply with these requirements, they need to take all reasonably practicable steps in the circumstances.
The failure of an employer to follow collective redundancy consultation obligations leads to additional awards known as ‘protective awards’.
Our specialist redundancy solicitors can help if you believe your employer has not followed the correct redundancy procedure (including rules on transferred redundancy or redundancy bumping) or if you believe redundancy is not the real reason for dismissal or you have been unfairly selected for redundancy.