Redundancy Factsheet

What is a "redundancy"?

A genuine redundancy situation arises in one of the following situations:

1. Where an employer has ceased, or intends to cease to carry on the business for the purposes of which the employee was so employed (business closure);
2. Where an employer has ceased, or intends to cease, to carry on the business in the place where the employee was so employed (workplace closure);
3. Where an employer has a reduced requirement for employees to carry out work of a particular kind or to carry out work of a particular kind at the place where the employee was employed to work (reduced requirement for employees).

Redundancy Procedure

The essential ingredients of a fair redundancy procedure should consist of the following:-

1. Notifying employees sufficiently in advance that redundancies may be contemplated.
2. Consult with employees over a reasonable period of time discussing ways of avoiding redundancy. Initial consideration should be given to whether it is possible to avoid the need for redundancies, for example, by restricting recruitment, considering alternative employment, voluntary redundancy, or restricting overtime.
3. Identifying the correct pool of employees from whom the redundancies will be chosen. This generally includes other groups of employees doing similar work to the group from which selections were made.
4. Drawing up objective selection criteria and allowing employees the opportunity to consider and comment upon the same, prior to it’s application.
5. Applying the criteria fairly and allowing employees the opportunity to challenge their scores.
6. Ensuring that any issues raised by employees throughout the consultation process are properly addressed.
7. Ensuring employees have advance notice of any individual consultation meeting and are notified of their right to be accompanied to the same.
8. Consideration of whether any alternative employment is available for those employees at risk of redundancy. Employers are not obliged to create alternative employment for redundant employees where none already exists. However, if an employer does not consider finding the employee another job, there is a risk that dismissal may be found to be unfair.
9. Giving proper notice of termination of employment and providing a right of appeal against selection.
10. Ensuring payment of statutory redundancy payments if employees qualify.
11. Providing assistance to redundant employees in obtaining training or alternative work.

Consultation - Legal Requirements

Employers who propose to dismiss as redundant 20 or more employees at one establishment have a statutory duty to consult representatives of any recognised independent trade union, or if no trade union is recognised, other elected representatives of the affected employees.

Consultation should begin in good time and must begin:

• at least 30 days before the first dismissal takes effect if 20 to 99 employees are to be made redundant at one establishment over a period of 90 days or less
• at least 90 days before the first dismissal takes effect if 100 or more employees are to be made redundant at one establishment over a period of 90 days or less.

Employers also have a statutory duty to notify the Department of Trade and Industry if they propose to make 20 or more workers redundant at one establishment over a period of 90 days or less.

If an employer fails to consult, a Tribunal has discretion to make a protective award of up to 90 days pay.

The Right to a Redundancy Payment

Employees who have at least two years’ continuous service over the age of 18 and under the age of 65 (unless the agreed normal retiring age is less than 65) qualify for a redundancy payment.

For each complete year of service (at the end of any notice period), the entitlement is as follows:

• age 18 or over but under 22 - half a week’s pay
• age 22 or over but under 41 - one week’s pay
• age 41 or over but under 65 - one and a half weeks’ pay.

A week's pay is that to which the employee is entitled under his or her terms of contract as at the date the employer gives minimum notice to the employee. The maximum statutory limit for a week's pay is currently £380. This figure is reviewed annually and employers may, of course, pay in excess of the statutory minimum.

The employee is also entitled to a period of notice or payment in lieu of notice by statute and their contract of employment.

Unfair Selection for Redundancy

An employee will be deemed to have been unfairly selected for redundancy for the following reasons:

• participation in trade union activities
• carrying out duties as an employee representative for purposes of consultation on redundancies
• taking part in an election of an employee representative
• taking action on health and safety grounds as a designated or recognised health and safety representative
• asserting a statutory employment right
• maternity-related grounds.

In addition to the above a dismissal made on the grounds of redundancy may be deemed to be unfair if there is not a genuine redundancy situation or even on procedural grounds such as lack of consultation or subjective selection criteria.