Redundancy Myths and Facts

Summary

An employee may be dismissed as redundant when a business closes down, or if the need for employees to carry out work of a particular kind has ceased or diminished or is expected to cease or diminish. When redundancies occur, the employer has a number of statutory duties towards employees, including the duty to consult them and to pay redundancy pay to those who are eligible.

Employers’ Duties

Employers are under a duty to ensure the following

Notify the concerned government body of any proposal to make 20 or more employees redundant at one establishment.
Consult collectively if more than 20 jobs are proposed to be made redundant within 90 days at one establishment, following the specific procedures laid down in law.
Give employees whose jobs may be made redundant as much warning as possible.
Consider whether there are alternative solutions to the proposed redundancies, such as alternative employment.
Act objectively and reasonably in determining which employees are to be included within the pool for redundancy selection.
Use objective criteria for selection.
Give redundant employees proper notice under their contracts of employment.
Try to find suitable alternative employment elsewhere within the organization for employees whose jobs are to be made redundant.
Grant reasonable paid time off work to redundant employees to help them seek new work or make arrangements for training.
Ensure that a fair procedure is implemented in carrying out any dismissal of employees by reason of redundancy.
Pay redundancy pay to employees who have two or more years’ continuous employment.
Not lay employees off without pay or place them on short time workingeven in circumstances where the amount of available work has diminished, unless employees’ contracts contain an express clause authorizing the employer to withhold or reduce pay in these circumstances.
Keep any relevant documentation that explains why redundancies were necessary, in case the decision should need to be justified at a later date.

Employees Duties

Employees are under a duty to ensure the following.

Take an active part in any consultation process set up by an employer.
If offered, consider the possibility of volunteering for redundancy.
Consider carefully offers of alternative employment as an unreasonable refusal of suitable alternative employment may disentitle the employee to a statutory redundancy payment.
Make use of paid time off to look for alternative employment or trainingwhile under notice of redundancy.
Take advantage of any support offered by an employer, eg help offered to find new work.
If a redundancy paymentis not made, make a claim at an employment tribunal within six months.

In Practice

Definition of Redundancy

There are two definitions of redundancy. One definition establishes entitlement to redundancy payments and the fairness of redundancy dismissals. The other establishes the right to be collectively consulted. These two definitions are considered in turn below.

Redundancy — Statutory Redundancy Payments and Fair Dismissals

the employer has ceased or intends to cease carrying on the business either generally, or specifically in the place where the employee is employed
the requirement of the business for employees to carry out work of a particular kind has ceased or diminished, or is expected to cease or diminish.

This is the definition that is relevant to employees’ entitlement to statutory redundancy pay, and for the purpose of determining whether there is proper and potentially fair reason for dismissal. It provides for three main redundancy situations:

The closure of the business as a whole.
The closure of the business at a particular workplace or site.
A diminishing requirement for employees to perform work of a particular kind.

Mobility clauses

The closure of a single site can sometimes lead to difficulties if the employees have mobility clauses in their contracts of employment. If an employer wishes to enforce such mobility clauses (so as to avoid making the employees redundant), they must establish where an employee is employed to work. If the employee has not in practice been required to work at other locations, the safest approach is to treat the situation as a redundancy and offer work at the other location as suitable alternative employment.

Work of a particular kind

A reduction in the need for employees to perform work of a particular kind may occur for a number of reasons, for example the loss of a contract, a restructuring exercise, the introduction of new technology or a reduction in the volume of available work.

In order to decide whether or not there has been a genuine redundancy, the tribunal will ask, first, whether the requirements of the business for employees to carry out work of a particular kind have diminished; and second, whether the dismissal is attributable, as a matter of causation, wholly or mainly, to that state of affairs.

In these circumstances, it is not necessary for there to be a reduction in the amount of work in order for the redundancies to be genuine. Instead, the test is whether the number of employees that the employer needs to perform work of a particular kind has reduced or disappeared.

Bumping

Management may sometimes see advantage in proposing that a potentially redundant employee should move into another job and displace the present holder of that post, who will then be dismissed. Provided that the dismissal is attributable to the diminishing requirements of the employer for employees to carry out work of a particular kind, the employee “bumped” out in favor of the employee whose job is disappearing will nevertheless be dismissed for redundancy. This can also be known as a “transferred redundancy”.

The following factors that an employer should ask when considering bumping:

whether or not there is a vacancy
how different the two jobs are
the difference in remuneration between them
the relative length of service of the two employees
the qualifications of the employee in danger of redundancy
other factors that may apply in a particular case.

Avoiding Redundancies

Employers should try to avoid redundancies by developing a formal approach to potential staff reduction requirements.

Alternative ways of dealing with a need to cut costs or cut back staff numbers could include:

reducing overtime
terminating the engagements of any temporary agency staff
ceasing sub-contract work
freezing recruitment or secondments
retraining and redeploying staff
reducing hours of work (but only with employees’ agreement)
offering sabbaticals.

Volunteers for Redundancy

A voluntary redundancy is regarded in law as a dismissal (rather than a resignation), and so statutory redundancy pay will be payable in the usual way.

It is good practice (although not a legal requirement) for the employer to ask for volunteers for redundancy. The logic is that no one should be made compulsorily redundant when someone else is prepared to leave voluntarily.

This does not mean that employers must accept every volunteer. The employer may legitimately decline to accept a particular volunteer, eg if they are a vital member of staff, or have special skills that the employer does not wish to lose.

The employer is not obliged to pay an enhanced redundancy payment to volunteers, but may choose to do so if it wishes.

Obligations of an Employer when Contemplating Redundancies — Summary

An employer has a variety of obligations if it proposes to dismiss employees as redundant. Employers are under a duty to:

provide formal notification to the Secretary of State for Business, Energy and Industrial Strategy where 20 or more employees are proposed to be made redundant within 90 days at one establishment
give employees as much warning as possible of proposed redundancies
consult collectively if 20 or more employees are proposed to be made redundant within 90 days at one establishment
(where not all employees are to be made redundant) establish a “pool for selection”
use objective criteria for selection and apply the criteria fairly and consistently
consult with individual employees to ensure dismissals are fair
give redundant employees proper notice under their contracts of employment
try to find suitable alternative employment elsewhere within the organization for employees whose jobs are to be made redundant
grant reasonable paid time off work to redundant employees to help them seek new work
pay redundancy pay to those who qualify for it.

Department for Business, Energy and Industrial Strategy Notification

An employer proposing to dismiss as redundant 20 or more employees at one establishment within a period of 90 days must notify the Secretary of State for Business, Energy and Industrial Strategy of its proposal at least 30 days before giving notice to terminate any of the relevant employees’ contracts of employment.

Where an employer proposes to dismiss as redundant 100 or more employees at one establishment within a period of 90 days, it must give the Secretary of State for Business, Energy and Industrial Strategy at least 45 days’ notice of the proposals.

This notice should be given on Form HR1.

Failure to comply with the notification requirements is a criminal offence, which can render the employer liable on summary conviction to an unlimited fine. Additionally, any senior manager who knowingly commits this type of offence or who acts negligently may be charged and held personally liable.

Collective Redundancy Consultation

This topic is dealt with in more detail in Collective Redundancies. The following is a very brief summary.

An employer will be under a duty to conduct collective consultation whenever it proposes to dismiss as redundant 20 or more employees at one establishment within a 90-day period. The minimum consultation period is 30 days, but it is 45 days if 100 or more employees are proposed to be made redundant at one establishment. Employers cannot lawfully issue notices of dismissal until the minimum consultation period has elapsed.

If fewer than 20 employees are proposed to be made redundant at any one establishment, the duty to consult collectively is not activated in respect of those employees but it will still be essential to consult each affected employee individually if the subsequent dismissals are to be fair

The consultation must be with trade union representatives if a union is recognized or otherwise with employees’ representatives elected for that purpose.

The duty to consult collectively applies per employer, i.e. different companies within the same group stand to be treated separately.

If an employer does not properly fulfill its statutory consultation obligations, the representatives can apply to an employment tribunal for a “protective award” in favor of each of the affected employees. This can be up to 90 days’ pay per employee, with no statutory cap.

Definition of the Pool for Selection

If not all employees are to be made redundant, the employer will need to identify a “pool for selection”.

Where an employer identifies a single post to be removed and automatically selects the occupant of that post for redundancy without consultation as to whether there should be a wider pool for selection, the employee’s dismissal is likely to be unfair.

Factors that should be considered when determining which employees should be within the pool including:

the reason for the redundancies
the type of work carried out by the employees
whether people are interchangeable
whether other groups of employees are doing similar work.

It is difficult for an employer’s selection to be challenged so long as the employer acts logically and reasonably in identifying the pool for selection.

Determination of Selection Criteria

If redundancy dismissals are to be fair, the employer will have to act fairly and reasonably when determining and applying selection criteria to the employees in the pool. Where collective consultation takes place, the criteria should be discussed and agreed with the employee representatives.

The criteria should be factors that can be measured objectively. Caution should be exercised with regard to the following criteria:

length of service – as this will discriminate indirectly against younger employees (Redundancy Selection and Age Discrimination)
attendance records – as this may discriminate against an employee with a disability (Redundancy Selection and Disability Discrimination)
flexibility – as this may discriminate against women who may not be able to work shifts or weekends due to childcare responsibilities; this criterion may also discriminate against people with certain disabilities
attitude – as this would be open to subjectivity and (possibly) the personal prejudice of a particular manager.

Giving preference to full-time employees could indirectly discriminate against women and would also be unlawful under the Part-Time Workers (Prevention of Less Favourable Treatment) Regulations 2000.

There is no prescribed legal list of selection criteria, but common criteria include:

skills and knowledge relevant to the job
relevant experience
relevant qualifications
job performance (as measured in a formal appraisal system)
length of service
disciplinary records
attendance records.

The most common approach to selection for redundancy is the “score sheet” or skills matrix method. This involves:

marking each employee in the selection pool against agreed selection criteria, weighting the criteria if appropriate
adding up the resulting scores
provisionally selecting for dismissal those whose total score is lowest.

Individual Consultation

A redundancy dismissal will be unfair if a fair procedure is not implemented in carrying out the dismissal. Indeed, procedure (or lack of it) is often the main cause of a finding of unfair dismissal at an employment tribunal.

Firstly, employees who are to be included in the selection pool should be given as much warning as possible of potential redundancy.

The next key requirement for fairness is that employees must be consulted individually about the redundancy proposals. Each employee should be told of the precise reasons why they have been provisionally selected for redundancy and given an opportunity to make representations. Any comments the employee makes should be taken into account, both on selection issues and on any suggested alternatives to redundancy, before any final decision is taken.

If a scoring system is used to grade employees against set criteria, each employee should be informed how their score was arrived at, and allowed to challenge the score. All this should take place before any final decisions are reached as to who is to be selected for redundancy.

If an employee’s dismissal was unfair because he had been denied an explanation as to the basis on which his scores were arrived at. The employer’s failure to provide adequate information about the employee’s scoring — even when it was requested — meant that he was denied the opportunity to make any meaningful representations about his prospective redundancy.

Redundancy Selection and Employees on Maternity, Paternity, Adoption or Shared Parental Leave

There is no reason why employees on maternity leave, paternity leave, adoption leave or shared parental leave may not be considered for redundancy. However, the fact that an employee is on maternity, paternity, adoption or shared parental leave and may not be able to work for some time should not itself be the reason for selection for redundancy.

When selecting employees for redundancy, the employer must take care not only to avoid unfavourable treatment of employees on maternity, paternity, adoption or shared parental leave, but must also avoid unwarranted direct favouritism of such employees. If the employer gave a woman on maternity leave the maximum notional score for one of the redundancy selection criteria because her performance under that criterion could not be measured due to her absence on maternity leave. As a result of this, she achieved a higher overall score than her male colleague by half a point and he was selected for redundancy. He claimed that his selection was discriminatory on the grounds of sex.

The Sex Discrimination section provides that “no account shall be taken of special treatment afforded to women in connection with pregnancy or childbirth”, i.e. men cannot claim sex discrimination as a result of special treatment afforded to women on account of maternity leave. This argument was rejected and ruled that the obligation to protect employees who are pregnant or on maternity leave relates only to what is “reasonably necessary to compensate them for the disadvantages occasioned by their condition”. The obligation cannot extend to any favorable treatment, but rather only to treatment that represents proportionate action to compensate women for the disadvantages caused by pregnancy or maternity leave. In this case, the female employee had been given an unfairly inflated score in the redundancy scoring exercise and this action went beyond what was reasonably necessary to protect her, and was therefore not proportionateAny failure to involve an employee on maternity, paternity, adoption or shared parental leave in the redundancy process (eg not consulting them about possible redundancy) can make their selection unfair. A failure to consult an employee on maternity leave will also constitute unlawful sex discrimination.

Employees on maternity leave, additional paternity leave, adoption leave or shared parental leave have the right — if their jobs become redundant while they are on leave — to be offered any suitable alternative vacancy in preference to other employees who are not on maternity/paternity/adoption/shared parental leave. This is the case irrespective of whether the employee is ready at that point in time to return to work. This means that such an employee in effect has first refusal over all other employees even if they are not necessarily the best candidate for the vacant post in question. Failure to offer an employee available alternative employment in these circumstances renders any redundancy dismissal automatically unfair.

It is also important to note that if an employer uses attendance records as a redundancy selection criterion, this should not include periods of absence due to maternity leave, paternity leave, adoption leave, shared parental leave, parental leave or sickness due to a pregnancy-related condition.

Redundancy Selection and Disability Discrimination

Selecting disabled employees for redundancy purely on the basis that they are disabled would be directly discriminatory and unlawful, with no justification defense available.

Using attendance records as a criterion for selection could also discriminate against people with disabilities who may have required regular or prolonged periods of time off work on account of their disabilities. If attendance records are used as a selection criterion, the employer should therefore consider whether it would be reasonable to discount any absences caused by or related to the employee’s disability.

The EAT decided that there is no absolute rule that disability-related absences must be discounted when calculating an employee’s total periods of absences. What is reasonable will vary from case to case and it does not necessarily follow from the Dunsby case that employers can always safely take periods of disability-related absences into account when assessing an employee’s level of absence for redundancy selection purposes.

The employer must also bear in mind the to make reasonable adjustments in respect of disabled employees when redundancies are being contemplated.

Redundancy Selection and Age Discrimination

Selecting employees for redundancy on the basis of their age (for example selecting those over age 60 first) would be directly discriminatory and difficult to justify.

Furthermore, using the criterion of “last in, first out” (LIFO) would be likely to discriminate indirectly against younger employees who are less likely than older staff to have long service.

LIFO may nevertheless be justifiable in some circumstances provided it is combined with other criteria when making the selections and provided it is designed to achieve a legitimate aim such as rewarding loyalty..

Selection for redundancy on the basis of length of experience may well be indirectly discriminatory against younger employees. Again this criterion could be justifiable if is combined with other criteria when making the selection. Using type and level (rather than length) of experience is better practice.

Application of the Selection Criteria

Managers responsible for implementing the selection criteria should consider and mark each individual against the selection criteria. Marking should be done objectively. Personal likes or dislikes and purely subjective opinions that cannot be backed up by facts must play no part in the selection process.

Each employee should subsequently be informed of their score and how it was arrived at, then allowed to make representations (as part of the consultation process). There is no obligation, however, to let employees see the scores of other employees.

Giving Notice

Notice Periods

There are minimum statutory notice periods that must be given to employees who are being dismissed by reason of redundancy. Briefly, an employee with one month’s continuous service will be entitled to one week’s notice; after two years’ service statutory notice increases to two weeks and thereafter by one week for each completed year of service up to a maximum of 12 weeks (after 12 years’ service).

Most contracts of employment contain an express term specifying minimum notice periods required by both the employee and employer in order to terminate the employment. If an employee’s contract provides for less notice than the applicable statutory minimum notice period, the statutory minimum will prevail. If the contract provides for longer notice, the contractual notice period will prevail. See the Wrongful Dismissal topic for full details of notice periods.

Suitable Alternative Employment

Once notices of redundancy dismissal have been issued, the employer is under a duty – until the effective termination dates – to seek to identify suitable alternative employment for the redundant employees. This duty extends not only to possible vacancies within the organization, but also to those in any associated companies (including companies outside the UK). There is no legal obligation on the employer to create vacancies, but it is important to be able to demonstrate that the employer has explored all possible redeployment opportunities with the affected employees.

“Suitable” employment in this context is work which the employee could reasonably be expected to do (in light of their qualifications, skills and experience) and on terms and conditions not substantially less favourable.

An employer should not discount any possibility on the assumption that an employee will not be interested, eg if the job is of a lower status or at a different location. The best approach is always to discuss all possibilities with the employee. A failure to do so may render the dismissal unfair.

An employee who accepts an offer of suitable alternative employment will not be redundant, and will therefore not be entitled to a redundancy payment.

Selecting for Newly Created Posts

Where redundancies are the result of an internal reorganisation, an employer may sometimes invite all the employees in the relevant department or section to apply for the remaining (or newly created) posts rather than going through the process of making selections for redundancy.

When the employer took this approach and, following the amalgamation of two departments which resulted in two senior posts disappearing and one new post being created, interviewed three internal applicants for the new post. Mr Morgan was unsuccessful in his application and was consequently made redundant. He claimed unfair dismissal, arguing that because the selection committee had not adhered to the job description or person specification, or to the planned interview format or scoring criteria in selecting the successful candidate, the appointment process was subjective and unfair.

The EAT drew a distinction between the process of selecting staff for redundancy and the process for recruiting into a new and different role in the context of a reorganization. In the latter scenario, the employer’s duty is simply to act reasonably in treating redundancy as a sufficient reason for dismissing an employee who is unsuccessful in their application for the new role. An employer is not bound by law to adhere precisely to a job description or person specification. An employer is entitled to assess for itself which candidate will best perform in a new role. Thus the claim was rejected.

Continuity of Service

Where an employee accepts an offer of new employment as an alternative to redundancy dismissal, continuity of service will be maintained provided that the offer of the new job is made before the old job ends and the new job starts immediately after the old job ends, or no later than four weeks afterwards.

In these circumstances there is no right for the employee to be paid a statutory redundancy payment because there will have been no dismissal.

Trial Period in the New Job

Where an offer of alternative employment has been made which involves a different type of work or different terms of employment, the employee is entitled to a four-week trial period in the new job. Where the new contract necessitates retraining, this period can be extended by written agreement between the parties.

If during or at the end of the trial period, either the employee or the employer gives notice to terminate the contract (on the grounds that the new job is unsuitable), the employee will be treated as having been dismissed by reason of redundancy on the date the original contract came to an end. In these circumstances, the employee will be entitled to a statutory redundancy payment.

The EAT ruled that a redundant employee who gave notice to terminate her new contract two weeks after the end of the statutory four-week trial period had lost her right to claim a statutory redundancy payment. The EAT was clear that the right to a statutory redundancy payment is available only where the employee gives notice to bring the new contract to an end during or at the end of the statutory four-week trial period.

The Effect of Refusing an Offer of Suitable Alternative Employment

An employee loses their entitlement to a statutory redundancy payment if they unreasonably refuses an offer of suitable alternative employment. In practice, however, this outcome is rare.

The question of suitability of the alternative employment is an objective matter. The reasonableness of the employee’s refusal, however, is subjective — ie it depends on factors personal to the employee. In determining this issue, the tribunal is likely to consider factors such as the training, qualifications and skills of the employee; their previous job and level of pay; hours of work; location; the nature of the work; and the job prospects.

The offer of a new job in a different location may involve suitable work, but it may nevertheless be reasonable for an employee to refuse it, for example if it would involve extra travelling time or if the move would cause personal difficulties in relation to family responsibilities. What is suitable will depend not only on the type of work that is available but also on the circumstances of the individual employee.

In such a situation, the employee, a nurse who had worked in community nursing for over 20 years, refused the alternative post of hospital matron offered to her when her own job (community modern matron) was made redundant. The Court of Appeal decided that, although the hospital matron position (which was in a small community hospital) was a suitable alternative for her as it did not involve any loss of status or financial loss, it was nevertheless not unreasonable for her to refuse it as she did not wish to return to work in a hospital setting.

This case confirms that the reasonableness or otherwise of an employee’s decision to refuse an offer of suitable alternative employment stands to be judged primarily from the employee’s point of view according to factors that are personal to them.

Paid Time Off to Look for New Work or Arrange Training

Employees who are under notice of redundancy, and who have been continuously employed for at least two years, have the legal right to take a reasonable amount of paid time off work to look for another job or to arrange training.

Redundancy Pay

Redundant employees who have a minimum of two years’ continuous service with the employer as at the date on which their employment ends have the right to a statutory redundancy payment. Statutory redundancy pay is calculated according to a fixed formula based on the employee’s age, length of service and rate of pay, as follows:

for years of service up to the age of 21 inclusive, the employee must be paid half a week’s pay for each complete year of service
for service between the ages of 22 and 40 inclusive, the employee is entitled to one week’s pay for each complete year of service
for service from the age of 41 upwards, the employee is entitled to 1.5 week’s pay for each complete year of service.

There is no upper or lower age limit for entitlement to Statutory Redundancy Pay.

Some employers choose to pay enhanced redundancy pay, ie a sum of money that is in excess of the statutory amount due. Employers are free to do this, but they must ensure that the formula for calculating any enhanced payments mirrors the statutory scheme, eg by using the same age bands and calculating the amounts payable to employees in different age groups in the same proportions as those used in the statutory scheme. If an employer’s scheme does not mirror the statutory scheme, there is a risk that it could be ruled as age discriminatory.

Where an employer chooses to make an enhanced redundancy payment to an employee, it may require him or her to sign a settlement agreement as a condition of payment of the enhanced sum. If such a policy is operated, it is advisable to make this condition clear in contracts of employment or in a policy that is incorporated into employees’ contracts.

Length of Service

Some absences — such as those due to sickness, injury or a temporary shortage of work — can count towards an employee’s period of continuous employment, even if the employee’s contract of employment was suspended at the time. Absences on maternity leave, adoption leave, paternity leave and parental leave must be counted towards an employee’s length of service for the purposes of redundancy pay.

Working days lost through industrial disputes will not count towards the employee’s period of continuous service. Any days that an employee was on strike will therefore be subtracted from their total length of continuous employment.

Employees will not be entitled to redundancy payments if:

they are dismissed for reasons of misconduct, with or without notice
at the date of the termination of the contract they have obtained suitable alternative employment with the same or an associated employer beginning no later than four weeks after the termination of their original contract
they unreasonably refuse to accept or apply for suitable alternative employment with the same employer or an associated employer
they leave their employment before the expiry of notice, except if it has been agreed that they are to be released early.

Enhanced Redundancy Payments

Employers may, at their discretion, pay redundant employees a sum of money in excess of the amount due as statutory redundancy pay. The discretion of local authority employers to offer enhanced redundancy pay is, however, strictly limited by the Local Government (Early Termination of Employment) (Discretionary Compensation) Regulations 2006, and it is unlawful for local authorities to exceed the limits on enhanced redundancy payments set out in these regulations.

For non-local authority employers, the position is that, where an employer wishes to operate a contractual redundancy pay scheme that enhances the payments made to redundant employees, the scheme must, by and large, mirror the statutory redundancy pay scheme. This means that the scheme must use the same age bands as those used in the statutory scheme, calculate the amounts due to employees in different age groups in the same proportions as are applied in the statutory scheme and not exclude any employee from benefit on the grounds of age. The reason for this requirement is to avoid acting in breach of the Employment Equality (Age) Regulations 2006.

Specifically, it is permitted for an employer to offer enhanced redundancy payments by doing any or all of the following.

increasing or disapplying the limit on a “week’s pay” £525 from 6 April 2019)
enhancing the multipliers used in the statutory scheme (½ week’s pay, 1 week’s pay and 1½ week’s pay), eg by multiplying them by a figure such as two or three
multiplying the statutory payments due to each employee by a defined number (so long as the same number is used for all employees irrespective of age).

A contractual redundancy pay scheme that bases redundancy pay on employees’ length of service alone (ie one that does not use the age bands and multipliers applied in the statutory scheme) would be indirectly discriminatory against younger staff (who on the whole would tend to have shorter service). Such a scheme would, if implemented, have to be objectively justified.

Since there is no statutory (and normally no contractual) obligation to provide any payment in excess of statutory redundancy pay, it is open to the employer to attach conditions to such payments.

Employees not Entitled to Redundancy Pay

There are various categories of employees who have no statutory entitlement to redundancy payment. The categories are listed fully in the Employment Rights Act 1996. They include members of the Armed Forces, Crown servants or employees in a public office and apprentices whose service ends at the end of their apprenticeship contract.

Employees engaged on fixed-term contracts who have gained two or more years’ continuous service and whose contracts expire without renewal are entitled to statutory redundancy pay in the same way as those engaged on permanent employment contracts (except those engaged specifically to replace another employee on maternity leave or one suspended from work on medical grounds, provided the replacement employee has been properly informed in writing that his/her employment will be terminated once the absent employee returns – see above).

If the Employee or Employer Dies

If an employer dies and the business stops trading, the personal representatives of the employer will be responsible for any redundancy payments. If an employee dies before receiving a redundancy payment, the payment must be made to their personal representative.

Where a Due Redundancy Payment is not Made

If an employer does not make a redundancy payment where one is due, the employee should take the matter to an employment tribunal within six months. Even if the employee does not make the claim within six months, a tribunal may still order that the payment should be made if the employee takes action within a further six months.

When an Employer Cannot Pay

If an employer is insolvent and cannot make a redundancy payment, the employee can claim the payment from the National Insurance Fund administered by the Secretary of State for Business, Energy and Industrial Strategy, who in turn will claim the payment back from the assets of the business.

To qualify for such a payment, an employee must have applied in writing to the employer for a redundancy payment within six months of the date of employment ending, or have applied successfully to an employment tribunal within six months of that date.

Unfair Dismissal Claims

An employee who has been dismissed by reason of redundancy may be able to present a complaint of unfair dismissal to an employment tribunal, provided they have been continuously employed by the employer for a minimum of two years as at the date of their dismissal.

Dismissal for redundancy may be unfair where:

redundancy was not the real reason for dismissal
the employer handled the dismissal unreasonably, eg by failing to give the employee adequate warning of redundancy, failing to consult the employee or failing to use objective selection criteria
an employee was unfairly selected for redundancy, eg where the selection criteria were applied unfairly
the employer failed to consider whether alternative employment was available within the organisation and/or to offer an available alternative job to the employee.

Automatically Unfair Dismissal

If the reason for an employee’s selection for redundancy is one of a list of prohibited reasons, the redundancy dismissal will be automatically unfair. See Automatically Unfair Reasons for Dismissal.

In most cases, there is no qualifying period of service required for an employee to bring a claim for automatically unfair dismissal.

Employees on Fixed-Term Contracts

An employee whose fixed-term contract expires and is not renewed will be considered as redundant and entitled to a redundancy payment, provided they have a minimum of two years’ continuous service (whether on one or more consecutive contracts).

An employee working under a fixed-term contract to cover for an absent colleague, however, will not be entitled to a redundancy payment as the non-renewal of the contract is not by reason of redundancy, but for “some other substantial reason”.

Dismissals Connected to the Transfer of an Undertaking

Under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE), an employee whose employment has transferred from one employer to another as a result of a business transfer or service provision change and who is dismissed by reason of an “economic, technical or organisational reason entailing changes in the workforce” (known as an ETO reason) is deemed to have been dismissed by reason of redundancy. The employee’s length of service for the purposes of calculating statutory redundancy pay in these circumstances will include the period of continuous service with the previous employer.

Remedies for Unfair Dismissal

Where a tribunal finds that an employee has been unfairly dismissed, it may order:

reinstatement to the employee’s original job
re-engagement into a comparable job

See Unfair Dismissal for full details.

Lay-offs and Short-time Working

In defined circumstances, employees may be able to claim statutory redundancy payments if they have been laid off work or placed on short-time working.

A lay off occurs where an employee is not provided with any work by the employer in any given week with the result that the employee is not paid at all for that week.

Short-time working occurs where, due to a reduction in the amount of available work, the employee works and is paid for less than half a week.

Under the Employment Rights Act 1996, an employer will only be entitled to lay an employee off or place them on short-time working if the employee’s contract contains a clause authorising the employer to do so, or if the employee expressly agrees to the lay-off or short-time working at the time.

An employee will be eligible for a redundancy payment if theye:

have been laid off or kept on short-time working for four or more consecutive weeks, or for a series of six or more weeks (of which not more than three were consecutive) within any 13 week period
give the employer proper notice to terminate their contract of employment
give written notice to the employer indicating their intention to claim a redundancy payment in respect of lay-off or short-time working.

The employer may, in defined circumstances resist a claim for redundancy pay by serving a written counter-notice on the employee within seven days of receipt of the employee’s notice of their intention to claim a redundancy payment. The circumstances in which the employer may do this are where the employer reasonably expects (within four weeks of the employee’s notice) to be able to provide the employee with full-time working, ie with no further lay-offs or short-time working, for a period of at least 13 weeks.

Guarantee payments

In circumstances where a lay-off is occasioned by a reduction in the type of work the employees are employed to do, they may be entitled to guarantee payments, subject to their having a minimum of one month’s continuous service. A guarantee payment is payable for a maximum of five days in any three-month period.

The guarantee payment for any workless day is currently £29 per day (as from 6 April 2019).

Training

Appropriate training should be provided within an organization for all managers who are likely to be involved in the redundancy process. They should have a good understanding of an employer’s obligations regarding:

consultation
the drawing up and application of selection criteria
suitable alternative employment
employees’ rights to time off during their notice periods.