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Redundancy Law - The Definitive UK Legal Guide

The prospect of being made redundant can be very disconcerting. However, the law in this area has developed in such a way to ensure that employers considering making their staff redundant do so in a fair and objective way. There are rules governing how employers decide who among their workforce should be made redundant, and procedures that employers must follow before they actually make someone redundant.

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Employers will rarely consider making employees redundant without good reason, often because of difficult circumstances or changing business processes.

It is very important that you understand these rules that employers are required to follow, how they affect you and what rights you have in facing the prospect of redundancy.

What will this guide cover?

  • The meaning of ‘Redundancy’
  • The rules employers must follow
  • The reasons employers are considering redundancy
  • The rights of employees facing redundancy
  • The obligations of employees facing redundancy
  • The notice periods for likely redundancy
  • How employers should handle redundancy issues facing employees
  • What redundancy payment involves
  • How redundancy payment is calculated

What Questions Does This Guide Answer?

  • What is ‘Redundancy?
  • How do employers select people for redundancy?
  • Should I be consulted about potential redundancy?
  • When should I expect notice of redundancy?
  • Can I take on a different job with the same employer?
  • What if I refuse an alternative job offer?
  • Can I look elsewhere for a job?
  • Can I expect any compensation for being made redundant?
  • What if my employer does not make any redundancy payment?
  • How do I offset being made redundant?

What is ‘Redundancy’?

Redundancy is a kind of dismissal. Employers tend to explore the option of making members of their staff redundant when they need to reduce their workforce. There are lots of situations where an employer may consider reducing their staff numbers, but the most common include:

  • Reorganising the business

Increasingly the work traditionally being done by people is being taken over by computers. It is not unusual that an employer may consider making their staff redundant in order to improve efficiency in the workplace, replacing them with technology in an attempt to streamline a process and increase productivity.

  • Employees skills are no longer required

Employers must continually develop their business if they are to survive in the competitive business environment. Sometimes this means that an employer may diversify or change the technical nature of their work. As a consequence, this may mean that some of their employees’ skills are no longer needed as the business has been taken in a different direction.

  • The business is being taken over

It is a risk of operating a business that an employer could be taken over by a rival. Generally most employees positions would be safe in this situation, but sometimes the new employer may have genuinely no need for the skills that an employee offers in the new business.

It is important to be aware that ‘redundancy’ has a particular meaning in law that is often confused with other terms. There are some situations where an employer may claim that you are made redundant, but this is not actually the case. The most common instances where employers can use redundancy as a disguise are:

  • Unfair Dismissal

Some employers may attempt to hide an unfair dismissal under the heading of resignation, in the hopes that they do not have to pay out any financial compensation. You should consider the circumstances in which you employers claim that there is a need to make you redundant, as your loss of employment may be a potential unfair dismissal claim. Examples include:

  1. You are being made redundant but your employer has recently recruited other people to do similar work to you;
  2. You may have had a bad working relationship with your employer;
  3. You are one of only a few people in a large business being made redundant.

All of the above situations are examples where the reason you are being dismissed from your job may not always be due to a lack of work being available and you could have an unfair dismissal claim.

  • Discrimination

Employers must be very careful not to attempt to hide discrimination behind a claim that you are being made redundant. It is important to consider the circumstances of your being made redundant alongside your age, gender, sexual orientation or perceived sexual orientation or ethnicity. It may be that you are not being made redundant, but are in fact being discriminated against.

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How do employers select people for redundancy?

Employers need to be very careful in ensuring that the method they use in selecting people to be made redundant is fair and objective. Generally it is good practice for employers to have a written procedure for employees to inspect and to understand how the redundancy process is carried out. Also in some cases it may be that a particular method of selection has been agreed with a trade union. In either case, an employer must follow the terms of the redundancy process.

Examples of procedures used by employers in choosing employees for redundancy include:

  • Appraisal of staff disciplinary history

Employers may be able to identify individuals that do not demonstrate an acceptable history of professional behaviour, and have been the subject of disciplinary procedures in the past.

  • Last in, first out

Employers may operate a system that identifies employees with the shortest length of service with the business will be selected first for potential redundancy.

  • An appraisal of staff skills and expertise

Employers may consider the technical ability of staff members and the work that is required to be done by the business. Based on this analysis they will be able to identify who within the workforce lacks the necessary skills to do the jobs required.

Should I be consulted about potential redundancy?

As a matter of good practice, employers should consult with their staff in an open and objective manner on the likelihood of their facing redundancy. They should discuss with you the reasons why you are facing redundancy and what alternatives there are to making you redundant. If an employer fails to consult you on the likelihood of your being made redundant, it is possible that you may be able to claim for unfair dismissal even if you are being made redundant for valid reasons.

There are situations when an employer may need to consider making a number of people redundant. If an employer is considering making more than 20 people redundant, this is called collective redundancy. If this is the case, your employer must consult with you as an individual and also with trade union or employee representatives before issuing redundancy notices. The employer must detail why redundancies are being considered, if there are any ways to avoid them, how to reduce the number of potential redundancies and how to limit the impact on employees that are affected. If an employer fails to do so, then you may be able to claim for unfair dismissal given that the employer has not followed proper procedure in making you redundant.

When should I expect notice of redundancy?

If your employer is considering making you redundant, you are entitled to be given notice of this. However the length of notice you will be entitled to depends on how long you have been employed:

  • If you have been employed for one month, but less than two years you are entitled to two week’s notice; or
  • If you have been employed for at least two years, you are entitled to one week of notice for each year that you have been employed, up to a maximum of twelve weeks.

Your employer will normally have set out how much notice you can expect in your contract of employment. You should check this if you are unsure how much notice you are entitled to.

Can I take on a different job?

If your employer is considering making you redundant, then by law they are required to look at their business and see if there are opportunities for redeployment. If there are other positions available in the business that you would be capable of doing, then they should bring it to your attention as opposed to making you redundant.

Whether or not the alternative job available is considered suitable for you will depend on several different things including:

  • The nature of the job
  • The salary
  • Where the job is
  • Your skills, qualifications and experience

It is important to understand that your employer does not have to offer you a job that is identical to your old job, or even a job in the same workplace. Provided your employer offers you another job that you are capable of performing, they will have discharged their obligation.

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What if I refuse an alternative job offer?

If you refuse an offer of alternative employment from your employer without good reason, this may result in your losing your right to redundancy pay. It is possible to bring a claim before an Employment Tribunal if you believe that the job offered to you was unsuitable.

If you are unsure about the job that has been offered to you, you are entitled to a trial period. By law you have the right to a 4 week trial period to attempt to become familiar with your new role. It is advisable that you make use of this period, as it is also possible to extend the trial period in you require training in your new role. The need for training and any extension of the trial period should be agreed in writing between you and your employer before the trial starts.

If during your trial period, you do not feel that the job is suitable then you must inform your employer. This will not affect your employment rights or your right to a redundancy payment.

Can I look elsewhere for a job?

Depending on how long you have been in employment you may be entitled to time off of work to look for a new job elsewhere. If you have been employed for two years by the date that your notice period ends, you are entitled to a reasonable amount of time away from work to either:

  • Look for a job elsewhere; or
  • Arrange training to help you in finding employment elsewhere.

It is important to understand that you are only entitled to a reasonable amount of time away from work. How much time this is in practice will depend on your circumstances.

Can I expect any compensation for being made redundant?

If you have been made redundant, you will be entitled to redundancy pay. This is a kind of compensation that is given to you because the job you had no longer exists. There are two kinds of redundancy pay:

  • Statutory Redundancy Pay

Statutory Redundancy pay is set down by law, and is the minimum that employees who have been made redundant can expect to be paid by their employer.

The amount of money you will be paid for Statutory Pay depends on several things including (i) how long you have worked for an employer; (ii) your age; and (iii) your weekly pay.

Your entitlement to Redundancy Pay based on age and length of service is as follows:

  1. Half a week’s pay for each complete year of employment when you were below the age of 22.
  2. One week’s pay for each complete year of employment when you were aged between 22 and 40.
  3. A week and a half’s pay for each complete year of employment when you were aged 41 or above.

Generally speaking the Statutory Redundancy payment is tax free. However if your payment is in excess of £30,000 it will be taxable and you should speak with a specialist Tax Solicitor on how this is to be dealt with.

It is your employer’s responsibility to pay your Statutory Redundancy Payment either on, or soon after you cease to be employed. Your employer is also required to provide you with evidence of how they calculated your redundancy payment.

  • Contractual Statutory Redundancy Pay

Contractual Statutory Redundancy Pay is the compensation that you may be entitled to if your employer operates a redundancy scheme. This is normally set out in your employment contract.

What if my employer does not make any redundancy payment?

If your employer fails to pay the redundancy payment that you are owed, either statutory or contractual, there is a process to follow. Within six months of your being made redundant, you must write to your employer asking for payment. If they fail to do so, you will be able to bring a claim before an Employment Tribunal. You should speak with an experienced Solicitor on how best to deal with this. It is important to note that you only have three months in which you can bring this claim before a Tribunal.

Your employer may not have made any redundancy payment if they have since gone out of business and closed down. It this has happened an administrator or liquidator will have been appointed to organise the businesses finances. You should write to the liquidators head office and explain the situation to them. They will normally have records of employees and outstanding finances owed, and will be able to make any outstanding payments to employees that are awaiting redundancy payment.

How do I offset being made redundant?

Redundancy Pay is a kind of apology for the fact that your employer can no longer sustain your position, or that your position is surplus to requirements. However any sum of payment will not be able to replace the need for future employment.

You may need to seek financial advice on how best to organise your finances. Furthermore it may be advisable to consider whether you can take advantage of any Government benefits available for people who have been made redundant. Job Seekers Allowance can be very useful while you search for alternative employment.

Key points

  • The law is designed to ensure that employees being considered for redundancy are selected in a fair and objective manner.
  • You should be consulted by your employer if they are considering exploring making employees redundant.
  • You will be entitled to redundancy payments.
  • The level of pay you can expect depends on your age, length of service and level of pay.
  • Your employer is obliged to offer you suitable alternative work if it is available.
  • You are entitled to a trial period in the new job
  • If you refuse an alternative job offer, this will impact your redundancy payment.
  • Most redundancy payments are tax free.
  • You are entitled to time off to find alternative employment

Nothing in this guide is intended to constitute legal advice and you are strongly advised to seek independent advice on matters that affect you.

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Jurisdiction

UK

Last Updated

Thursday, 16 April 2015

Categories

Employment Law

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