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Sometimes, a business faces a decision whereby the best course of action to protect the business is to make redundancies.
If you find yourself having to make such a decision, it is best to gain legal advice before sharing this news with your employees. You need to be assured that your process for choosing employees to make redundant is legal and best prevents any claims of unfair dismissal or discrimination against you. Contact Helix Law to discuss issues surrounding redundancy to minimise impact to your business and employees.
Here are our FAQs regarding employment law and redundancy:
Redundancies entail a strict set of requirements which, if not properly observed, could result in claims of unfair dismissal brought against you. To reduce this risk, you should have a fair procedure in place for the event of making redundancies and follow it closely.
A redundancy procedure should cover:
- Identifying a reasonable ‘selection pool’ of employees considered for redundancy. Fair, objective criteria must be applied to all employees within the pool.
- Consulting with and warning the selected employees about the possibility of their redundancy.
- Consulting with and informing employee representatives where collective redundancy is an option.
- Fair and reasonable procedures for making individuals redundant.
- Seeking the opinion of any workers’ union involved.
- Considering alternative roles within your company for employees whose current roles are redundant.
- Allowing reasonable paid time for redundant employees to look for work or make other arrangements for gaining new employment.
For more information on redundancy procedures, see the Acas guide or contact Helix Law.
This depends on how many people you are proposing to dismiss.
- Fewer than 20 dismissals: it is obviously courteous to give as much notice as you can, and to observe notice provisions in your employees’ contracts.
- Between 20 and 99 dismissals: consultation must start a minimum of 30 days prior to the first dismissal.
- 100 or more dismissals: consultation must start a minimum of 45 days prior to the first dismissal.
Remember, when making collective redundancies, you are under statutory duty to consult and inform employee representatives about the proposals.
In cases of collective redundancies, you must disclose your proposals in writing to employee representatives. Included in your disclosure must be:
- Why you are making redundancies
- The number and roles of employees whom you plan to dismiss (e.g. 20 customer advisors)
- The total number of such employees currently working at your establishment (e.g. there are currently 50 customer advisors)
- The planned method of selecting people to dismiss
- The planned method of actioning the dismissals, along with the time period over which they will take place (e.g. ten notices to be issued in the next 90 days, and a further ten before the end of the year)
- The planned method of calculating the redundancy payments (not including statutory redundancy payments)
To help you construct your proposal to employee representatives, read the Acas guide or speak to Helix Law.
The amount of statutory redundancy payment for each dismissed employee depends on their age, pay, and length of service. Calculations can be made by following these rules:
- If the person is aged 21 or younger, they receive half a week’s pay for every full year served
- For ages 22 to 40, a person receives one week’s pay for every full year served
- For ages 40 and over, a person receives one and a half week’s pay for every full year served.
Employees must have served two years’ continuous employment at the date of dismissal to qualify for redundancy payment. Maximum length of service that can be taken into account is 20 years.
Age-related restrictions for redundancy entitlement and pay remain, despite the legislation which bans age discrimination.
The week’s pay has a statutory maximum of £508 per week up to a maximum of £15,240.
If you would like to encourage voluntary redundancy, you could consider offering a larger amount than the statutory redundancy payment. However, you may want to be careful not to create a contractual ‘right’ to enhanced payments. An employee once successfully argued in a Court of Appeal case that a mention of enhanced redundancy payment ‘entitlement’ in his company’s staff handbook meant that he should be paid over the statutory minimum. Also, be warned that your scheme could benefit older workers much more than younger ones – the latter could claim age discrimination unless you can show that the older workers’ benefit was a proportionate means of achieving a business need. Such needs or aims can be defined as encouraging motivation or loyalty or promoting a rewarding experience for some or all employees.
To clarify issues surrounding redundancy pay, contact us.
There are a number of situations you should consider in terms of employees claiming unlawful discrimination if they are chosen for redundancy. Many of these situations pertain to the fairness of your selection criteria for deciding who should be let go and why.
For instance, length of service is a criterion to be cautious of. Older employees are likely to have worked for you for longer, bringing about possible discrimination against younger employees. Men are also more likely to have worked at a business for longer, which can give rise to sex discrimination claims. It is recommended that you take legal advice before deciding your criteria – an employment lawyer will be able to point out possible angles for unfair dismissal or discrimination that you hadn’t considered.
Fair selection criterion suggestions by gov.uk include:
- Standard of work
- Disciplinary record
Unfair criterion listed by gov.uk are:
- Reasons relating to pregnancy; maternity, paternity, parental or adoption leave; and time taken off for dependants
- Acting as employee or trade union representatives
- Joining or not joining trade unions
- Being a fixed-term or part-time employee
- Marriage or civil partnerships
- Religious or other beliefs
- Gender reassignment
- Sexual orientation
- Working hours and pay, including annual leave, Working Time Regulations and the National Minimum Wage.
Always obtain legal advice before actioning potential criterion for dismissal. Even criterion considered legally ‘fair’ must be enforced in a way which eliminates possibilities for dispute.
Yes – some employees might happily take up the offer, while others might be faced with lengthy travel time and expenses or even having to move house. However, in an Employment Tribunal case it is likely that this would be considered a ‘suitable’ alternative employment offer, though it will depend on many individual circumstances.
If the new job offered is similar or the same as the former in terms of pay, working hours, content and prospects, it is considered a suitable alternative. However, you will have to give redundancy pay to those who turn down alternative employment within a reasonable radius if it is not suitable for them, or their refusal is reasonable.
The assessment for determining whether an employee may reasonably refuse it is dependent on their individual circumstances. For instance, if an identical job is offered twenty miles away, it would probably be seen as reasonable for the employee to refuse it if it posed problems with regards to travel time and expenses or domestic commitments.
Yes, but not based on the sole criterion that they work part-time. Part-time workers have the same employment rights as full-time workers, and there is legislation in place to protect them from being chosen for redundancy for that reason alone. Where part-timers are made redundant, it must be on the basis of other objective criteria.
This depends on why the redundancies took place – whether it was because business experienced a downturn, or whether there was reason to expect that it soon would. If you can prove to an Employment Tribunal that you made redundancies because of reasonable expectation that business would soon turn down, then you have a defence against the claims, even if you turned out to be wrong.
However, this depends whether the Tribunal accepts your proof as reasonable. It also depends on whether the former employees convince the Tribunal that a pretext of redundancy was used in order to get rid of them; in which case you will be ordered to pay unfair dismissal compensation.
This can be asked for by workers in cases where an employer fails to consult with employee representatives in time when planning collective redundancies. The award covers a protected period of up to 90 days in which the employer must pay dismissed workers or those proposed for dismissal full pay for the duration of that period. This is why employers should begin collective redundancy consultations as soon as possible.
Redundancy should be a last resort after trying other options to prevent their happening. These options could include:
- Reducing overtime
- Offering early retirement to those who volunteer
- Letting go of temporary employees
- Retraining or redistributing workers (even to roles with less responsibility and pay)
- Pushing back starting dates of new recruits
- Offering sabbaticals
- Arranging secondments (where one or a group of workers are temporarily assigned to different roles within the business or even different companies for a set time period).
You could also attempt to negotiate a reduction of workforce by offering compensation payments. In this case, you should ask employees to be willing to sign a settlement (formerly compromise) agreement, which prevents them from bringing a future Employment Tribunal claim. In any case, legal advice is highly advised.
Yes – but with caution. This is known as a ‘last in first out’ basis and is only valid when objectively justified. If it disproportionally affects a particular group of the workforce, such as young workers or women, it is likely to be judged as discriminatory.
It can also cause trouble if you make some new recruits redundant and not others, unless there were additional criteria used to select them that justifies the difference in treatment. For instance, you could choose to keep some new recruits on the basis that they have completed a training programme and let go of the ones who haven’t.
To use performance as a criterion, as much objective evidence for this must be collected as possible, such as productivity records, appraisals and sales figures, to demonstrate that the people dismissed make a relatively less beneficial contribution to the business.
With caution. For this you would need evidence that speaking and understanding English on a high level is essential to the job. Your assessment of this skill would need to cover all employees including native English speakers – for instance, you cannot make non-native speakers take a fluency test and not native speakers. Doing this is certain grounds for a race discrimination charge.
If you can’t meet your statutory redundancy payments, it will be paid from the National Insurance Fund. If the dismissed employees are entitled to more than the statutory payments, they join the pool of your other unsecured creditors to wait for whatever assets are released from the business.