Redundancy Advice for Employers

Redundancy advice can be complex as the redundancy process is backed by a raft of legislation and related case law judgments with which employers must comply. The redundancy advice below is an indication only of some of the things that an employer needs to consider. Seek redundancy advice from an appropriately qualified person before embarking on the redundancy path.

Redundancy advice - redundancy the legal definition

Redundancy, as defined in legislation, occurs when an employee is dismissed and the reason for dismissal is wholly or mainly attributable to the fact that:

the employer has ceased, or intends to cease, to carry on the business for the purposes of which the employee was employed; or has ceased or intends to cease to carry on that business in the place where the employee was so employed or there is a reduced need for employees of the same category as that employee to carry out work of a particular kind in the place where that employee is so employed.

This means that, provided sound commercial grounds exist and the redundancy is not a smoke screen to hide some other issue, such as poor performance, an employer may:

Remember, redundancy is still a form of dismissal. It can be fair or unfair depending on how you handle matters and advice and guidance by someone qualified is essential to mitigate the risks of an unfair dismissal claim.

Redundancy advice - consultation process

Consultation must be meaningful and the purpose is to explore ways of avoiding the dismissals, reducing the number of staff involved and how the consequences of dismissal can be mitigated.

Consultation on redundancy is required on two levels:

Collective Consultation

Legislation sets out specific circumstances under which you must “Collectively” consult with appropriate representatives, and the minimum periods of consultation dependent upon the number of employees at one location proposed to be dismissed as redundant.

During collective consultation you have a statutory duty to provide a written disclosure of certain specified information. This includes but is not limited to an explanation of the reasons for the proposed redundancies and detail of the numbers and descriptions of the employees who are proposed to be dismissed as redundant.

Appropriate (elected) representatives are allowed to be present at individual meetings with any of the employees who may be affected by the proposed dismissals or by any measures taken in connection with those dismissals.

Failure to comply with collective consultation procedures can result in an employment tribunal making a protective award to those dismissed. In addition, those dismissed may be awarded compensation due to being unfairly dismissed.

Individual Consultation

Case law has clearly established that you must always consult with employees at risk of redundancy on an individual basis. Whilst you should consult individually as part of collective consultation it is specifically more important when the obligation to collectively consult is not engaged, otherwise any redundancy dismissal may be held to be an unfair dismissal. 

Redundancy advice - other considerations

Notification to the Secretary of State

The Secretary of State must be notified if you propose a redundancy exercise involving 20 or more employees. Written submissions and a special form HR1 is provided by the government for this purpose and timescales must be adhered to depending on the number of employees to be made redundant.

Re-deployment to Alternative Employment – Trial Period

As an alternative to being dismissed on grounds of redundancy, employees will often accept another position. When this occurs it usually means they also accept the terms and conditions of the new job. The employee is entitled to a four-week trial period in the alternative job, during which both you and the employee can see how things go. You can agree a longer period with the employee if you wish.

If the employee feels the job is not suitable and they resign from it, then providing the resignation is during the trial period they retain the right to be treated as redundant and to receive the appropriate severance pay.

Once the trial period has expired the employee is deemed to have accepted the new position.  You will have no obligation under these circumstances to make any redundancy payment to them, even if they leave shortly after the end of the trial period.

If you make an offer of suitable alternative employment and the employee refuses it without reasonable grounds to do so, then they forfeit the right to redundancy pay. A tribunal claim can be made if there is a dispute in this area. Amongst the matters the tribunal will address will be the "unreasonableness" of the employee’s refusal and the "suitability" of the new position.

Formal Notice

If, after consultation, it is decided that the redundancy should go ahead, the employee or employees should be given formal notice in accordance with the notice period set out in the principal statement of terms and conditions of employment. You should always confirm this in writing including relevant discussions from the consultation process. The employee has a right to appeal against a decision to make them redundant.

Time Off to Look for Work or Arrange Training

Employees with a minimum of two years’ continuous service and who have been declared redundant are entitled to “take reasonable time off during working hours before the end of his notice in order to look for new employment or make arrangements for training for further employment”. On a practical basis this is usually taken to mean two days without loss of pay. However the final consideration will be what is “reasonable”.

Redundancy advice - payments

An employee whose job is redundant is entitled to receive a redundancy payment providing they have over two years’ service. The amount of pay due is calculated in two steps. Firstly, you determine how many weeks’ pay are due. This is done by reference to the period of continuous employment and the age of the employee as at the end of their notice period.

The calculations can be complex, especially for older and longer serving employees. It is important that you take advice when calculating redundancy pay.

Step two takes the numbers of weeks’ pay multiplied by either the employee’s average pay for a normal week or the prevailing statutory maximum whichever is the lower amount.

There are certain circumstances where there is no entitlement to redundancy pay. These include but are not limited to where the employee:

Redundancy advice - how Sentient can help

The advice and comment in this article is not meant to be an authoritative statement of law. The articles and summaries should not be applied to any specific set of facts and circumstances without seeking further advice. Whilst every care is taken to ensure that the content is correct Sentient cannot accept responsibility for the accuracy of statements made nor the result of any actions taken by individuals after reading such.

Redundancy advice is complex. There are many pitfalls for the unwary employer. Sentient have HR professionals with enormous experience of redundancy issues and have given advice to hundreds of employers. Call us now on 03456 446006 to see how we can help with redundancy advice for your organisation.