Redundancy is one of the five potentially fair reasons that an employer can dismiss an employee, so please have a look at the unfair dismissal section to understand the context. Redundancy scenarios can cause distress and as practical employment solicitors we always try to make the process as easy as possible with the best redundancy advice.
Redundancy is defined by statute and occurs when the dismissal is wholly or mainly attributable to,
" the fact that his employer has ceased or intends to cease-
to carry on the business for the purposes of which the employee was employed by him; or
to carry on the business in the place where the employee was so employed; or
the fact that the requirements of the business-
for employees to carry out work of a particular kind; or
for employees to carry out work of a particular kind in the place where the employee was employed by the employer,
Have ceased or diminished or are expected to cease or diminish".
If an employee is dismissed by reason of redundancy, the employee may still be able to bring an unfair dismissal claim if they have been employed for at least one year (FAQS: Unfair Dismissal). For an employee to receive a redundancy payment they must have at least two years continuous employment.
The employer should take the following steps:-
- give as much warning as possible
- be objective
- ensure that the selection criteria chosen is fair
- the selection procedure
- seek to make offers of alternative employment
Apart from when an entire business is closing down with mass redundancies, the employer should follow the usual pattern of the calling the employees into a meeting, telling them their jobs are at risk and that they are in a "pool of selection" from which the employer will be making redundancies.
Employers should follow any procedure from the employment handbook and utilize the ACAS Code of Practice.
Redundancy - five main obligations for an employer.
If you are an employer, the closer you adhere to your obligations the smaller the risk that you will face a claim and having to instruct unfair dismissal solicitors. If you are an employee then you should be aware of your employer's obligations. Both employers and employees would be wise to seek specialised redundancy advice to ensure they understand the law and procedure.
(1) Employers should only dismiss for redundancy if there is a genuine redundancy scenario. If you are an employer and have a problem with a certain employee then consult specialized employment solicitors to determine the correct procedure instead of pretending there is a redundancy - if in doubt seek advice.
(2) Take care in determining if there is a pool for selection and, if so, chose selection criteria that is objective and fair. Questions about the selection criteria and how it operates are common for employment solicitors from both employees and employers. The selection criteria should be told to the employee. Most criteria are acceptable as long as they fall within a band of what the Employment Tribunal would consider to be reasonable. There are all sorts of criteria - from "last in, first out" to a points based system using for instance performance, disciplinary record, etc. The employee should be given their points score. Employees can use this in negotiations - it may be evidence as to the validity of the potential redundancy and the correctness of the selection, which can affect the amount of money that is offered in the severance package.
(3) The employer should consult with the employees. Where there are large scale dismissals of 20 or more employees, the consultation period can be over a 90 day period involving the employee's trade union or employee representatives. The employer throughout must keep an open mind and the final decision should not have been predetermined at the outset. Clearly, it would be grotesquely unfair to prejudge the final decision at the beginning without the benefit of consulting the employees at risk. The objective of the law is to make sure that no stone is left unturned before making such a critical decision.
(4) The employer must consider alternative employment for the employees in the company. Whether the proposed redeployment is suitable follows both an objective and subjective test.
(5) The employer must always follow statute and the law. Failure to stick to the letter of the law may result in the employer being subject to an unfair dismissal claim in the employment tribunal, resulting in wasted management time and costs when the purpose of the exercise was to improve efficiency.
Redundancy is one of the five potentially fair reasons for dismissing an employee. Employment solicitors would place the emphasis on "potentially", as it may be that discrimination, unfair criteria or subjective rather than objective criteria have been used and the dismissal is actually an unfair redundancy dismissal or discrimination has occurred.
In order to establish an unfair dismissal claim there are two additional issues that should be considered:
- Is the dismissal truly a redundancy?
- Is the redundancy automatically unfair?
A true redundancy means that a role disappears or the business needs less people in that role. It may be the case that steps have been taken to recruit a replacement, if so then there is obviously still a need for employees to carry out that work.
A redundancy will be automatically unfair if the reason for the redundancy dismissal is due to the employee's trade union membership or activities. This does not necessarily have to be a deliberate act. It can extend to include a shop steward unable to achieve maximum workload because of the time he spends on trade union matters.
Automatic unfairness also applied if selection for redundancy dismissal has been based on pregnancy or whether the employee had asserted their statutory rights.
It is therefore, important that an employer acts reasonably at all times when carrying out redundancies.
Statutory redundancy payments are relatively low and to qualify the employee has to have been employed for at least two years. The formula is half a week's pay for each year between 18 and 21; one weeks pay up to and including 41; and one and half weeks pay for anyone older. The length of service is capped to a maximum of twenty years and the weeks pay does not mean the actual weekly wage, as it is also capped, in 2009, at £350. So this can dramatically reduce the redundancy package for an employee who earns a high salary.
Unfair Redundancy Compensation
The same as unfair dismissal (see unfair dismissal compensation).