Redundancy | Questions and Answers

What is a redundancy dismissal?

A dismissal for redundancy will normally be a consequence of one of three situations:

• The complete closure of a business. The closure of Woolworths is a good example.
• A workplace closure of one or more sites or premises operated by the employer. For example, this is where a company has three sales offices, and decides to close one office.
• The diminished requirements of the business for employees to do work of a particular kind. An example would be where the employer decides that it no longer needs six engineers but only three. Or it is where the employer decides he no longer requires any engineers and decides to dismiss all of them.

Each of the above are often referred to as a "redundancy situation" but it is always essential, in cases of doubt, to check the precise statutory definition of redundancy found at section 139(1) Employment Rights Act 1996, click here for the statutory definition.

When is an employee entitled to be paid a statutory redundancy payment?

Only employees with two years' service or more qualify for a statutory redundancy payment.

How is a statutory redundancy payment calculated?

Please click here for our Statutory Redundancy Payment Ready Reckoner.

What payments must my employer pay me when dismissing me for redundancy?

Regardless of length of service, all employees dismissed for redundancy have the right to contractual notice, subject to the statutory minimum notice periods. In addition, accrued holiday pay must be paid and any outstanding expenses, bonus or commission payments.

When is a dismissal for redundancy unfair and who is protected?

A dismissal for redundancy will be unfair if redundancy is not the true reason for the dismissal. For example, if the employer makes you redundant but you feel your dismissal was linked to concerns about your job performance than your dismissal will be automatically unfair.

In most cases, redundancy will be the true reason for the dismissal, but the employer can still dismiss unfairly if it has failed to follow a fair redundancy procedure. The core elements include the employer:

• engaging in meaningful consultation with the "at risk" employees before any final decision is made;
• identifying the correct pool of selection from which the redundant employees are to be selected;
• correctly applying objective selection criteria to those in the pool of selection;
• offering suitable alternative employment, subject to a four week trial period, where vacancies exist and after the employer has taken reasonable steps to identify any vacancies.

Employees with one year's service or more have the right not to be unfairly dismissed for redundancy (but they are not entitled to a statutory redundancy payment).

Is there any right to have time off to look for new employment?

Yes, all employees with two years' qualifying service have the right to time off to look for work or arrange training. Most employers will allow all employees, regardless of length of service, to have time off.

When is an employee entitled to an enhanced redundancy payment?

An employee is only entitled to be paid an enhanced redundancy payment if he or she has a contractual right to one, or if by custom and practice one can be implied. This is an issue which we regularly advise clients about because it is important to carefully review the express and implied rights which may exist.

What happens if my employer is insolvent and can't pay?

If the employer is insolvent, or refuses to pay, the employee has the right to apply to the National Insurance Fund for unpaid "employer's payments", including statutory redundancy payments and unpaid, wages (up to 8 weeks), holiday pay and statutory notice pay. Claims have to be made on Form RP1. Click here to go to National Insurance Fund.

What are the employer's obligation when 20 or more employees are being made redundant?

When 20 or more employees are being made redundant over a period of 90 days or less, the employer must collectively inform and consult with appropriate employee representatives and give formal notification to the Secretary of State on Form HR1.

A failure by the employer to comply with the regulations which govern collective consultation allows affected employees to apply to the employment tribunal for an award of up to 90 days' pay.

In addition to complying with its obligations to collectively consult, the employer must still ensure that it has followed a fair procedure in relation to the "at risk" employees. This includes consulting with them in good time and properly and making the selecting from the right pool of selection.

Are there any alternatives to redundancy which an employer can adopt?

Yes, it is hr best practice for employers to consider feasible alternatives to compulsory redundancy. Options, include asking employees to work reduced hours or days per week, or for employees to accept a temporary or permanent cut in pay or benefits. Volunteers can be requested, although an employer will not be under any obligation to accept all applications for voluntary redundancy because it may want to ensure there is the right mix of skills and experience between the remaining employees.

Can an employee object to the employer's decision to implement redundancies?

No. The employment tribunal will not look at the business decision to proceed with redundancy dismissals. It will not therefore look behind the facts to consider how a redundancy situation arose, whether it could be avoided or if there were any viable alternatives. Nevertheless, where the employee argues that redundancy was not the true reason for dismissal and that the employer is hiding the true reason for dismissing them, the background to the redundancy may be examined by the tribunal.
And in all cases, the employee can argue that his or her selection was unfair or discriminatory.